As a former CPA (former being the operative word), I know a thing or two about how smart people, well intended people, can take that first step on the slippery slope of unethical behavior. When it comes to accounting ethics, I am often asked to present my 
ethics and fraud prevention material to CPA’s or those accountants who need to know how easy it is to, without intent, get caught in situations that can lead to my ultimate outcome – an orange jumpsuit and handcuffs.
The International Ethics Standards Board for Accountants released a new standard recently that redefines the roles of auditors, CFOs and other accounting professionals when they witness or suspect illegal acts at their own organizations or within a client’s organization.
How Should Accountants Respond?
I recently received a call from a “former CPA” asking the simple question: Once convicted how do you put your life back together? When I got the call I inquired, what did you do to earn the felony conviction. Shocked as his answer, I learned something that I suppose I subconsciously knew but never thought about from a practical perspective. He shared with me the following:
I was CFO of a company where in I thought the CEO and COO were doing something unethical, at the least, and maybe borderline illegal. I quit the company having no desire to get caught up in their actions. Turns out my replacement CFO concluded the same thing and, too, left. The last CFO decided to get in on the action and now all three are in federal prison. But the story doesn’t end there. 18 months ago or so the US Attorney’s office contacted me and ask why I left? I responded that I thought the CEO and COO were shady and I didn’t want to have any part of it. So I quit. Hum…so you knew but you didn’t report. We call that “conspiracy” and that’s a federal offense. The end result was a guilty plea and now I don’t know how to recover.
Accounting Ethics and the new Code
The IESBA Code of Ethics applies to all professional accountants worldwide. IESBA is an independent standard-setting board supported by the International Federation of Accountants, or IFAC, whose member bodies in the U.S. include the American Institute of CPAs and the Institute of Management Accountants.
The standard is known as NOCLAR, short for noncompliance with laws and regulations. It aims to guide accountants on how to act in the public interest when they encounter or become aware of suspected illegal acts such as accounting fraud. When laws and regulations appear to have been broken, the new standard explains when and how accountants should report wrongdoing to the authorities, without breaching their ethical duty of confidentiality. IESBA sees the new standard as an opportunity for the global accounting profession to enhance its reputation as a safeguard for trustworthy business and a healthy global financial system.
Where from here?
As trite as it may sound, we all think we’re ethical till we’re not. Do not be fooled, even the best can step on to the slippery slope without intention. It’s critical to have effective training regarding the IESBA Code of Ethics. My company – the Ethics Resource Group – provides comprehensive ethics training that qualifies for CPE credit. For more information contact me directly.
