Most accountants see ethical challenges increasing: ACCA

By Jim Tyson for CFODive.com

• Most accountants see ethical challenges growing more complex throughout their profession as technology speeds the expansion of businesses worldwide, exposing regional differences in law and culture, the Association of Chartered Certified Accountants said.

• Nearly one-in-four accountants (24%) have faced pressure to act unethically during the past three years, and 55% of finance executives have witnessed unethical behavior during their careers, the ACCA said Monday, reporting on a global survey.

• “These insights underscore the need for robust ethical leadership and culture in organizations, and ongoing learning and development to support professional accountants in navigating these challenges,” Sarah Lane, ACCA head of ethics and assurance, said in a statement.

U.S. accounting firms have come under sharper scrutiny in recent years. Their supervisor, the Public Company Accounting Oversight Board, reported in August that an increase in flawed reporting by audit firms persists.

The most error-prone audit firms “are strongly influencing the aggregate deficiency rate,” the PCAOB said in a review of 2023 inspections of financial reports for 2022.

Inspections of nearly half (46%) of the engagements reviewed by the PCAOB revealed a Part 1.A flaw, or evidence that the audit firm failed to obtain enough evidence to support its opinion on a company’s financial statement or internal control over financial reporting, the PCAOB said. It did not single ethical lapses as a source of flawed accounting.

The PCAOB has recently come under fire for the high deficiency rates, with Sens. Elizabeth Warren, D-Ma., and Sheldon Whitehouse, D-R.I., criticizing the supervisor for not reversing the trend in shoddy audits.

The findings in the PCAOB’s August “analysis reveal a nearly complete failure [by PCAOB], indicating that investors and the public essentially face a coin flip when it comes to whether they should believe and trust the results of public companies’ audits,” Warren and Whitehouse said in an Oct. 9 letter to PCAOB Chair Erica Williams.

“The new findings of frequent audit deficiencies raise fresh questions about the accuracy and utility of public company audits and about the PCAOB’s ability to carry out its statutory role as auditor of the auditors,” the lawmakers said.

Forty percent of accountants said they most frequently face ethical challenges and threats to sound accounting because of weaknesses in company leadership and culture, the ACCA said, citing its survey.

Sixty four percent of respondents said ethical dilemmas have become more difficult to resolve during the past three years, the ACCA said.

Thirty percent of accountants cited an emphasis on sustainability as a point of ethical tension, including “operating sustainably, reducing environmental impact, honest reporting on sustainability practices and balancing profitability with sustainability,” the ACCA said.

More than one-in-four of the respondents (26%) said technology posed an ethical challenge, including “ensuring unbiased, transparent and accountable use of AI in decision-making,” according to the ACCA, which surveyed 1,165 finance executives in 135 countries.

Respondents identified a full range of unethical practices, including tax avoidance, pressure to manipulate financial statements, bribery, conflicts of interest, reluctance to challenge authority and weak governance and accountability, the ACCA said.