Richard Murphy: a moral code for accountants

The Accountancy Foundation, and its offshoots, are flawed, says Richard Murphy

In the last few weeks the Accountancy Foundation has come in for some serious criticism. First of all Nick Land of Ernst & Young called on the government to scrap self-regulation of the profession. Then the Institute of Chartered Accountants in Scotland called for the creation of an independent regulator for the auditors of listed companies. It looks like time is running out for the Accountancy Foundation. But what must not happen is that it be restructured or replaced, but the structures it has created be allowed to survive.

If the Foundation is structurally flawed, its offshoots - the Ethics Standards Board (ESB) in particular - have shown themselves to be intellectually flawed. It is essential that in any review a board that understands ethics, the broader issues facing accountancy and the public concern about what accountants do, and how they do it, replace this body.

Evidence of failure

To date the main publication of the ESB has been its consultation paper issued in May this year entitled Setting the Agenda for Ethics. This paper quite spectacularly failed to consult on, or set, such an agenda, and nor does it consider ethics. It does instead immerse itself in issues of operational minutiae, which quite specifically are not within the remit of the board. It would be difficult to imagine how any body could fail to deliver what had been asked of them until one looks at the composition of the ESB. No member is a professional ethicist. None appears to have any training in the subject. All members are male. All but one member seems to be intimately professionally involved with either accountancy or corporate governance, whether as an accountant or not. This means there is no representation of any other interest group that might be concerned with the work of the accounting profession e.g. the Inland Revenue, the TUC, investor groups, pensioner groups, The Charity Commission and so on.

It is interesting to note that in paragraph 12 of its paper the ESB notes that an accountant has a duty to the community as a whole. The composition of the ESB does not reflect that fact. Inevitably this is also reflected in the poverty of its thinking. So bad is that thinking that the best one can hope is that enough people will say so to make them start again, or that this board will be scrapped with the Accountancy Foundation.

What the ESB should do

If it was to fulfil its brief an ESB must set an entirely different agenda from that which is likely to emerge from the current consultation given the proposal document that was issued. First of all the ESB needs to create a moral code for accountants. I suggest a draft below. Next it has to define the accountant's duty of care. In that context it needs to review the relevance and meaning of ' independence' in the current complex commercial climate i.e. is it even possible, and if not, how can new and more relevant professional relationships be created?

Having done this it could issue guidance on all areas of a professional accountants work, and not just the minority aspect of audit. Then it is in a position to offer guidance on implementation of standards, suggest appropriate professional education on ethics, lay down criteria for accountants who have to actually solve ethical problems and suggest means to provide a true support service for accountants facing ethical problems. When it has done these things it should ensure a proper and universal disciplinary code on ethics is in place.

These things are possible, and to demonstrate it I suggest a draft moral code for accountants in the box below.


I believe the above is an appropriate agenda of work for an ESB to undertake. If it did so it might fulfil its brief. That would then demonstrate that it was itself trying to operate in accordance with the highest ethical principles. That in turn would allay public concern that accountants are a law unto themselves. It would also mean that the ESB would have addressed the concerns of the many accountants who are at present left entirely unsupported by any professional organisation when facing the problems into which their employment leads them. Unless this issue is tackled no standard will solve the problems of ethics within the profession.

The ESB was given a big agenda that it should have had the courage to enlarge. The existing board has already shown it does not understand that agenda, and does not wish to meet the challenge with which it has been presented. In that case a new board is needed within the structure of a new regulatory environment for accountancy which will take on this vital task in the interests of the profession and public as whole. And if that is what we need then we must also be willing to pay members more than £200 for each meeting they attend. Good ethics are worth more than that, as the poor quality of this report shows.

Richard Murphy FCA is a sole practitioner in Ely, Cambridgeshire

A moral code for accountants

•   An accountant assembles data and reports upon it.

•   In doing so the accountant must seek to be truthful and fair.

•   Truth is an objective measure. The information supplied should be as accurate as it is possible to prepare. If there is doubt as to accuracy, that doubt must be indicated.

•   Fairness is a subjective measure. Fairness requires that the information be presented in an appropriate context so that a user may properly appraise its usefulness.

•   In all their dealings an accountant should seek to put the user of the data they report in the position that they would wish for themselves if they were the user in question.

•   In so doing the accountant must at all times respect the law, the integrity of others and the higher than average standards of conduct expected of any expert within the society in which they live.

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