Have an ethics question or concern? Where you can go for guidance

Two AICPA & CIMA ethics managers discuss potential situations that could lead to members or students seeking guidance. The speakers also share information about resources that can provide starting points for making a decision.

This episode of the FM podcast is the continuation of an occasional series on the show called Beyond the Code.

That means taking a detailed look at the CIMA Code of Ethics.

Xose Lumor, manager–Advocacy and Professional Ethics–Management Accounting at AICPA & CIMA, talks with Samantha McDonough, another AICPA & CIMA ethics manager, who oversees the CIMA ethics helpline and email inbox.

In the episode, McDonough shares some of the questions received from CIMA members and registered students, general guidance for how some of those concerns can be addressed, and resources for members who might find themselves facing an ethics dilemma.

Resources mentioned in this episode include:

What you’ll learn from this episode:

  • An introduction of the topic and the focus of the Beyond the Code series.
  • Why McDonough advises members and students to give business advice in writing.
  • A hypothetical example of a potential conflict of interest.
  • One scenario in which an accountant might be asked to create a misleading financial report.
  • Resources available on the CIMA ethics page, including the email inbox address and the number for the telephone helpline.

Play the episode below or read the edited transcript:



— To comment on this episode or to suggest an idea for another episode, contact Neil Amato at
Neil.Amato@aicpa-cima.com.

Transcript

Neil Amato: Welcome back to another episode of the FM podcast. This is Neil Amato. Today’s episode is a conversation that continues an occasional series on the show. That series is called Beyond The Code, and its focus is the CIMA Code of Ethics. The conversation in this episode is hosted by Xose Lumor, manager–Advocacy and Professional Ethics at AICPA & CIMA. He’s speaking with another AICPA & CIMA manager with an ethics focus, Samantha McDonough, who manages the CIMA ethics helpline and email inbox.

On the FM page for this episode, we’ll include resources with more information. Thanks again for listening. Here’s Xose Lumor to start the conversation.

Xose Lumor: Hi, there, my name is Xose Lumor, and I’m here to talk about a series entitled Beyond The Code. It’s a series that will look to explore issues of ethics and professional conduct in relation to the accounting profession.

The goal here is to explore some of the nuances surrounding important discussions, such as, what is misconduct? Or what is the impact of trust on the perception of the profession? We’ll be exploring a range of issues with the aim of helping CIMA members unpack complex ethical issues to help them better navigate the day-to-day challenges of the profession.

In this episode, I’ll be speaking with Samantha McDonough, who is our resident expert on professional standards and ethics. She has a multitude of responsibilities within the Institute, including managing the ethics helpline and inbox, where members or registered students are able to get in contact and seek guidance on ethical dilemmas that they may be facing in the workplace and in their professional lives.

Her years of experience will allow her to have some excellent insights into ethical considerations members may wish to keep in mind while navigating the choppy waters of professional life. Let’s take a listen and head Beyond the Code.

Welcome, Samantha.

Samantha McDonough: Hi, Xose. Thanks very much for having me.

Lumor: No problem at all. Just as a starting point, can you tell us a bit about the ethics helpline and inbox and what their purpose is?

McDonough: Certainly. CIMA has a telephone helpline and dedicated email inbox, as you’ve already mentioned, for members and registered students, seeking to find the best solution to an ethical dilemma, while remaining compliant with the Code of Ethics.

This is anonymous if you want it to be and always confidential. We can’t tell you what to do. That decision will always be yours. But we can point you to the most relevant parts of the Code to help you decide what to do.

We can also give you some practical advice. You can find further details in the ethics resources section on the website. Whilst we’re not accountants or lawyers, we can certainly help with aspects of the Code, which can be complicated.

Lumor: What would you say are some of the most common queries we receive?

McDonough: I would say that the most common issue is misleading reporting. Under the Fundamental Principle of Integrity, you must not make a misleading financial report or allow your name to be associated with a misleading report. It’s important to remember that a report can become misleading through the omission of information and not just the presentation of incorrect figures.

Sometimes members and students are asked to amend reports to show accounts in a better light, which is false, and it can be difficult to push back when you’re being instructed to effectively breach your Code of Ethics by a senior person.

Another common issue is fraud. You might be asked to look the other way when someone in the organisation has done something wrong, and that goes from fiddling expenses right up to large-scale fraud. The problem here is that the member or student might uncover the fraud and then be told to ignore it.

Aside from these, another common issue is trading while insolvent. This has come up, particularly since the global coronavirus pandemic, where businesses have been struggling. I think it’s important for members to recognise that there are some bad actors out there committing fraud for their own personal gain, and there are some people in positions of authority that just might not be facing reality and hoping to bring in investment or new clients.

In these cases, members can help directors and boards understand the magnitude of a financial problem. Because you are the management accountant. The trouble is that you might only be able to advise, and if that advice is ignored, then you can’t help the business.

For members in practice, a common issue is how to disengage professionally. And the withholding of handover information on the cessation of an engagement. Or I should say, whether to withhold handover information.

A lots of dilemmas include more than one issue, and that’s where it gets complicated. For example, misleading reports can often be related directly to fraud. A lot of our work is helping members to look at the right sections of the Code. The requirement to behave professionally cuts across almost every dilemma. And if you’re pushing back, it’s helpful to tell your employer or client that you are required to behave professionally under the Code, and surely that’s what they would want.

After all, anyone can call themselves an accountant. The benefits of using a chartered management accountant is precisely that they do have an obligation to act ethically and to protect the business by doing so. Unfortunately, when the boss is panicking, this can be a difficult argument, but we always say it’s worth a try. It can be a useful introduction to [suggest] that they sit down with the boss and talk the issue through.

The Code contains both the requirement but also supporting material in the form of common examples and ways to approach a dilemma for the best outcome. I would say that the sections on responding to pressure from above and reducing threats to your compliance are especially helpful.

Lumor: It’s interesting. Out of those queries, what would you say causes the members the most amount of concern?

McDonough: It’s really quite general. Members may have only a suspicion around the motivation of the person instructing them to produce a misleading report. For example, a business or part of a business may be due to be sold, and the senior decision-makers want to inflate its value artificially, through the financial reports. Sometimes the accountant may not know the reasons, but they will just know that to amend a report is wrong.

The main concern is often fear for their job or being labelled as a troublemaker. This can be particularly problematic for registered students. CIMA students, for the most part, work in business whilst they complete their qualification, and they may be in junior positions at this time. That’s not to say they won’t spot problems in the business’s finances, but they may not be listened to or taken seriously.

Lumor: That is interesting. I want to go back to something you mentioned earlier. You mentioned the Fundamental Principle of Integrity. This is, of course, referring to one of the fundamental principles found within the Code of Ethics.

Why would you say principles found in the Code, such as integrity, are so important? What’s the practical importance or what value do they have?

McDonough: Well, I think the principles are the fundamental building blocks of the ethical code. They’re important because that’s exactly what they are. They should be applied to your own unique situation so that your decision on what to do is based on these solid ethical principles. This is because it’s impossible for any code to contain guidance and examples of every scenario that members might experience. You can’t find the answer in a book.

If you’re faced with a dilemma or a suspicion that something’s not quite right, you should apply the principles to understand your position and decide on a course of action. For example, the Principle of Professional Behaviour states that an accountant must comply with relevant laws and regulations, and they must also avoid any conduct that could discredit the profession. Because if you discredit the profession, you discredit yourself. You need to apply this to your particular situation, and it might be simply to try and deal with a rude client or an unpleasant boss courteously.

Sometimes it will be a combination of the principles that’s important. You need to understand all of them and how they might interact. This is why the CIMA qualification includes a test of your knowledge and understanding of the principles, to ensure that you have the basic tools for acting professionally and with integrity as you go through your career. We hope that the principles will become second nature to you so that you’ll be more instinctive in how to deal with things.

The principles can be applied at any time — helping you anticipate problems before you take on a role, helping you to navigate an ethical dilemma when you come across one, and to justify a decision that you’ve made.

At the very least, you should familiarise yourselves with the principles and see them as something that can help you. Then you can use the rest of the Code to do a deeper dive into your problem. I would also say that for an employer or client, the principles show the value of taking on a CIMA member for a role.

Lumor: I suppose with that being said the next thing might be to ask, what are some of the most common mistakes, or maybe missteps, that members or registered students may make when facing ethical dilemmas?

McDonough: I think before even facing a dilemma, and I think I touched on that earlier, I would say that failing to anticipate a problem can lead to problems later on and exacerbated problems. Then failing to act quickly enough is another mistake.

Lumor: Can you elaborate on that for us, please?

McDonough: As an example, there might be a clear conflict of interest for the member, which is apparent even before the job interview. If you anticipate your position before you take the job, you’re less likely to find yourself in a difficult position later on.

I can’t relate any real-life queries here because, as I’ve mentioned, the service is confidential. However, hypothetically, if you were an accountant in a business and you had a family member that might be a supplier to that business, you should consider whether this is a conflict of interest and make sure that your internal processes can protect you from an accusation of favouritism, when perhaps you’re considering supplier tenders.

Lumor: What would you say is the potential consequence of failing to act soon enough?

McDonough: I would say that, as in life, the longer you leave it, the more difficult it can be to solve that dilemma, and you’re in danger of appearing complicit, which could be a big problem for you.

We always tell members to give their advice in writing so that there’s an email trail and to keep copies of that advice so that they can take it with them if they leave. In this way, they can prove that they tried to act in the best interest of the business and were not complicit in, say, a fraud, for example, if there were to be an investigation later.

Lumor: There you’ve mentioned the risks associated with delays in solving dilemmas and failing to act quickly enough. Given the stress that can undoubtedly be caused by situations such as the ones you’ve described, are there any resources available that can help members and registered students decide how to go about solving the dilemma?

McDonough: Yes. Probably the best immediate tool is the ethics checklist, which is basically a flowchart to follow in navigating a dilemma and finding the best solution. The ethics section of the website has got a large number of articles which unpick the Code using hypothetical examples. And these are extremely useful. You could search these and see which ones are most relevant to your situation.

I’d also recommend that you read a selection of these in the course of your annual CPD so that you’re ready when a dilemma comes up.

Lumor: Why would you say these steps are so important?

McDonough: They’re important because, whilst we can’t tell people what to do, the resources do give direction as to possible actions that a member or student can take. For example, illegal activity should be reported to the authorities. But there are many instances of unethical activity which, whilst not specifically illegal, are still wrong and could lead to something illegal further down the line. So, to be associated with these is a breach of the Code.

Like I said before, there is bad business practice out there, and we hope you don’t encounter it. But your job is to help your employer or client run the business in the best way possible so that they don’t feel the need to commit fraud or hide the real business situation from their stakeholders.

In the course of my role here, I’ve seen businesses so close to bankruptcy that they’ve stopped paying their staff, but the decision-makers still insist they’re not insolvent. You, as the management accountant, are in the best position to warn of potential bankruptcy or insolvency and help your directors, your bosses find the best way through that situation.

Lumor: That’s really interesting. You’ve touched on there about the ability for members and registered students to be able to help advise decision-makers and businesses using these frameworks and these processes and these resources.

What would you say to those members about the importance of having such a framework?

McDonough: I think again, as I’ve touched on before, ethical dilemmas can be extremely complicated. There may be more than one section of the Code to be considered, and there may also be more than one possible solution. Because the Code is principles-based and the helpline can’t tell you what to do, you need to find the best solution for yourself.

The Code talks about threats to compliance and the way in which that threat can be reduced. It may not be possible to eliminate the threat entirely, but there may be ways to mitigate it to a level that you can live with. Going back to my first example, members may decide to keep a copy of their original report in case it’s amended by someone else.

Lumor: What would you say to members who may be thinking of withdrawing from the situation because, from their perspective, that’s the only way out?

McDonough: The Code does talk about disassociation. There are levels of disassociation. Some members and students go straight to thinking that they need to resign. Now that, of course, is an option. But CIMA understands that people need to work and have an income.

This is where the sections on pressure and threats come into play. They can help you work out a game plan for leaving if that’s what you want to do. Let’s face it. Why would you want to stay with an employer that wants you to do something wrong? I have had members saying to me, “I need to resign but I can’t leave until I’ve got another job.”

We understand that need to make a living. But there are things you can do while you are looking for another job and while you work your notice. For example, you can try to tighten up the internal processes and you can continue to give the best advice you can in writing. This proves that you continued to act ethically and to try to help the business.

If you do decide to resign, once you’ve left, you can consider making a report if that’s appropriate. For example, in the UK, you can report to HMRC or Action Fraud. You can even report to the police if you are convinced that there is some illegal activity going on, but you will need evidence for that, which is why we say take your advice with you. There are also various whistleblowing helplines, and there’s information about this on the website, or we can point you to it.

Lumor: That’s great. Thank you very much, Samantha. That was fantastic and really helpful. I know our members and registered students will be able to take a lot from that as well. Really grateful. Thank you very much.

McDonough: You’re very welcome. As I often say, I hope I never hear from you, because that means that everything is fine or that you’re managing any problems yourself. But we are always here to help.

I will say we can’t always answer a call immediately. If you do ring and get a voicemail message, please either leave a message yourself or, better still, email in and ask for a callback. Obviously, by emailing in, it’s less anonymous, but we always keep things confidential.

Finally, if you have a dilemma, don’t panic. You probably have the knowledge and the instincts to do the right thing. Take a deep breath, make yourself some notes, apply the principles, and contact CIMA if you need to.

Lumor: That was Samantha McDonough, and this was an episode of Beyond the Code. You can find more episodes on FM podcasts at https://www.fm-magazine.com/podcast.

If you want more information about the matters discussed here, please feel free to get in touch with us by contacting our ethics inbox or helpline, where we also offer free and confidential support for members and students. You can email us at cima.ethics@aicpa-cima.com, or you can call us on 0203-814-2303.

Don’t forget, however you found us, you can go to the CIMA website at https://www.aicpa-cima.com/resources/landing/ethics, where you can find all our ethics resources and more audio and a variety of information relating to this series and CIMA’s wider ethics work.

Thank you very much for listening. My name is Xose Lumor. Thank you for joining us as we went Beyond the Code.

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