Ethics and Suspected Illegal Acts

I recently attended a roundtable put on by the International Ethics Standards Board for Accountants (IESBA). The focus of the roundtable was proposed rules on reporting of suspected illegal acts by their clients and employers. On the surface this sounds like a no brainer – of course professional accountants should report illegal acts – but as usual, it is never that simple. Here are just a few of the complexities.

Are professional accountants supposed to be experts on all types of illegal acts? It’s one thing to ferret out fraudulent financial reporting. That is what a CPA is an expert at understanding. But what about areas that the CPA is not an expert such as employment law or OSHA violations – are CPAs expected t report any and all suspected illegal acts even in areas they don’t fully understand?

What if you think something might be wrong, but you are a junior accountant in the group. Should you report it anyway? What if you don’t have all of the facts that might be known to those higher in the chain of command that would clear up any concerns you might have? What if they don’t share that information because it is highly sensitive for other reasons and only those who need to know if the corporation are told? By bringing your concerns to a regulator you will cause needless activity in responding to them and maybe harm your employer’s competitive position.

What if you are hired to perform forensic work to evaluate the situation so the client can decide what to do? Would a client be willing to higher you if they know you have to report everything you find to appropriate authorities. Its for that exact reason that the concept of attorney-client privilege exists. Are we has the accounting profession going to say ethically we can’t tolerate such a concept?

What if the reporting is not covered by whistleblower protection and you only suspect something might be going on – you aren’t really sure? Do you just take the risk and report it because that is what the ethics code says you have to do?

Ethics sounds easy – just do the right thing – until you get into real life situations where the right thing may not be obvious and could even be the wrong thing because you don’t know all of the facts. Ethics codes should be there to help you decide what the right thing is, not make it harder. The question about the IESBA proposals is which is it. If you want to see more go to the IFAC website and check out the exposure draft and comment letters.

Advertisements


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s