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The Code of Ethics – What does being ethical mean? – Mario Galea

10 Feb 2020 14:55 | Deleted user
The Accountant – What's Next?  –  Winter 2020 (MIA Publication)
The current state of the economy of the world not least of Malta is suffering a lot from lack of ethical conduct.  Money is not the only measure of economic and social progress.
The reason for so much regulation is indicative of this problem.  The current level of regulation everywhere became necessary because man lost his sense of proportion and concern to others.  Principles are gradually being replaced by rules.
Apart from regulation many organs in the society considered it necessary to introduce a code of ethics.  There are two reasons for such a code, namely either to genuinely return an organisation and its staff on the path of common-good practice or simply to satisfy regulatory demand or expectations.
Indeed, man does not need codes and direction to be ethical.  Ethical behaviour should be second nature to man.  It is part of our being human and part of our upbringing and education.  But progress has been interpreted by some, as personal achievements rather than common achievement, that is achievement for all of us together.  The emphasis has been largely on personal advancement rather than societal advancement.
Because of the lack of attention to the world around us we are seeing the return of sufferings, wars, inequality, even damage to the climate.
A reversal is urgently required even if there is no sign of it even in the wake of so many manifestations around the world.  It can be a very discouraging exercise and it is likely that people in general will give up and continue down the same path.  Eventually nature and society will abound but not after a lot of us experience very damaging experiences.
Lack of ethical conduct is likely to lead to business failures.  It is no use then to blame our clients and make told-you-so claims; that is not what is required of accountants.  Starting from the official code of ethics, we are expected to be competent, objective, independent, confidential, suitable and lastly but not least, accept a duty to society.  We are also expected to share our profession and not muscle colleagues for personal gain.  Charity begins at home and if we are to be a guiding light to clients, we first ought to behave ethically amongst each other as members of the same profession.
When it comes to our interaction with clients we need to approach naturally.  In general, ethics is a matter of being natural, yourself, letting your conscience lead you.  We are lucky as human beings to have an inner voice which unfailingly tells us what is right and what is wrong.  We do not always listen to it because of the opportunity in front of us.  Opportunity may be very short lived if not well thought out and passed through the sieve of our conscience.  If only accountants all over the world work by conscience more than by opportunity.  We would not be in the dilemma that we are in now.  Look at the auditing profession, the state in which it finds itself, having lost its self-regulation because of major scandals which sadly continue to flow and which seem to have no end in sight not least because of inattention to, or insufficient focus on the good corporate governance, transparency and accountability of clients.
If the auditors always let public interest before client interest guide them, the auditing profession today will be in a much better and respectable position.  There are many threats and government initiatives awaiting the audit profession such as the Audit Reporting and Governance Authority (ARGA) in the UK but none of this will stop the suppression of the profession as we know it, and bring about a turnaround unless we adopt basic and genuine ethical conduct as a base for the way forward.  It is not even worth the cost of setting up all these super authorities unless the accountant/auditor on the ground is innately willing to change and align more with societal needs such as environmental impact, employee well-being, safety and fair pay, quality of goods and services, safety of products, fair pricing and a host of other objectives beyond money and wealth which companies in major advanced economies are beginning to embrace as a yardstick of public recognition and therefore capital availability and demand for their business and products.  No matter how many codes are produced and harshened.
More codes, more circumvention unless we change.  We also tend to use codes only when we hit trouble, a bit like turning to God only when we become sick.  And then we use them for the wrong reason.  Not to check what we should have done right, but to check how we can interpret the code to justify our shortcoming.  Here again comes in the conflict between morals and law.  We have abandoned morals in favour of the book.  Little do we think, when we do this, that books are man-made, whilst morals are natural, spiritual, call them what you like but supreme and higher than man can make.
Honesty is basically what we are talking about.  When we listen to our conscience, we are being honest.  Honesty is one value of the many that we are born with and which with education and good upbringing and training we learn how to bring out and use during our lifetime.  There are many values that we can apply in our offices and in our clients’ board rooms but the value of always thriving to do the right thing without fear or favour is the best service that you can give to your client.  It is the most lasting service.
We often find ourselves in tight situations where we need to please our client.  We would be pleasing our client more if we express our conscientious views than the effort to bend and twist standards and regulation to suit undesirable or frivolous suggestions.  As advisors we are meant to guide ethically and not to square circles whilst beautifully bound codes uselessly stare at us from the shelves of our offices.

Mario is a long standing auditor currently entrusted with governance and oversight assignments as a member of the boards of various companies. He is also a committee member of the Malta Institute of Accountants Ethics Committee.


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