Professional Ethics and External Regulation
Why ethics and regulation matter
Accounting relies on trust. The finance professional must act with integrity and follow rules set by external bodies. Candidates must understand the ethical principles and the regulatory framework that governs accountants and businesses.
Ethical principles to know
- Integrity: be honest and straightforward.
- Objectivity: no bias, conflict of interest or undue influence.
- Professional competence and due care: keep skills current, work carefully.
- Confidentiality: do not disclose information without authority.
- Professional behaviour: comply with laws, avoid discrediting the profession.
External regulation
- Legislation: companies must keep accounting records and file accounts (e.g. Companies Act requirements).
- Tax authorities: e.g. HMRC; businesses must calculate and pay tax correctly.
- Professional bodies: set standards and codes of conduct for members.
- Audit and reporting standards ensure consistency and reliability.
Traps in questions
- Confusing confidentiality with integrity - confidentiality is about not disclosing; integrity is about honesty.
- Thinking ethics only applies to senior staff - it applies to everyone handling financial information.
- Assuming regulation is optional - legal requirements are mandatory, not best practice.
- Overlooking conflicts of interest - objectivity requires declaring and managing them.
Rule of thumb
When facing an ethical dilemma, apply the five principles as a checklist and ask: Is it honest, unbiased, competent, confidential and lawful? If not, escalate.
Worked example: A manager pressures an accountant to overstate revenue. The accountant should refuse (integrity, objectivity) and report through proper channels - not comply.