When people think of bribery and corruption, they likely have a perception of the actions needed to perpetrate financial crime and the locations where this happens. It’s not always someone with a bag of cash, someone with a gun, and they’re not always in a poorly lit alley or a smoke-filled room. Financial crime and corruption happening in airconditioned offices, perpetrated by those who claim to be professional accountants, are just as damaging.
When the measures by which management and others will be rewarded, or otherwise held accountable, can be manipulated by a particular accounting outcome, there is a good chance that accounting and personal ethics will collide. While this seems obvious in the private sector (Steinhoff and Tongaat Hulett are good examples), the public sector is not immune.
From a performance management perspective, making sure that the success of the organisation is directly linked to an individual’s performance makes sense. However, in doing so, the professional accountants, governance and other oversight structures should be skeptical about the potential for manipulation, especially when those who are rewarded for performance have a direct influence on performance outcomes.
While the manipulation of financial information could take a variety of forms, there is an emerging trend of manipulating accounting policies to achieve a specific outcome. Accounting policies should be designed to provide users of the financial statements with information to (a) hold entities accountable and (b) make financial, economic and other decisions. This means that as a professional accountant the question should always be whether the information provided in the financial statements (or lack thereof) is in the best interest of the user of the financial information.
In theory, accounting and ethics should never collide, they should walk hand in hand, the one should complement the other. However, when accounting can be used as an opportunity to hide nefarious transactions, poor management, and inefficiency, and help officials meet their performance targets, accountants are placed in the spotlight and have a duty to take ownership for poor decision-making.
As a professional, you are duty-bound to not only apply the Code of Ethics but to live by it. What you choose to disclose in the financial statements is no different. If you are confronted with ethical dilemmas, speak to a colleague, speak to your line manager, speak to the chairperson of your audit committee, speak to the chairperson of your board, speak to someone in your professional body. But most importantly, if you see something, say something.
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