Sustainability and the ICAS Code of Ethics: Professional competence and due care, confidentiality, and professional behaviour
Ann Buttery, Head of Ethics, ICAS Policy Leadership, highlights the third in a series of extracts from ICAS’ new guidance paper ‘Guidance to the ICAS Code of Ethics: Sustainability’ in relation to the fundamental ethics principles of professional competence and due care, confidentiality, and professional behaviour.
Sustainability, the CA and The Power of One
Society is changing. There is an ever-growing emphasis on sustainability, and Environmental, Social and Governance (ESG), at government and regulatory level as well as increased societal expectations for organisations to behave responsibly.
Whilst the “E” is clearly important, sustainability is not just about climate change - the importance of societal matters (the “S”) as well as governance and ethical corporate cultures (the “G”) are of equal significance. Organisations need to be thinking about the impact of sustainability/ESG on their organisation and the impact of their organisation on the environment and society.
The accountancy profession has a responsibility to act in the public interest. Ethics is the conscience of organisations, it is at the core of driving behaviours, and is the key to long-term thinking and trust. The golden thread of ethics and The Power of One weaves through sustainability and ESG. There is a need for all CAs to be aware that sustainability/ESG is not a niche topic that they can ignore. Every CA has their part to play in their own sphere of work around ethics and sustainability.
CAs must always ensure their obligations to the five fundamental ethics principles enshrined within the Code of Ethics (the “Code”) are met: integrity; objectivity; professional competence and due care; confidentiality; and professional behaviour. The new guidance to the Code seeks to assist CAs by signposting a number of areas of the Code where provisions could relate to sustainability related matters.
This extract is the third of a series from the guidance and highlights how the provisions within the Code in relation to the fundamental ethics principles of professional competence and due care, confidentiality, and professional behaviour could apply to sustainability. Links to the other extracts are provided below.
Professional competence and due care
Discussions around sustainability and ESG are taking place at all levels and, as a result, CAs now find themselves having to consider matters that traditionally have not been considered part of the core disciplines of an accountant. The world is changing rapidly. For CAs to remain individually professionally competent, and to continue to be valuable to the parties they serve, there is a need for CAs to keep up with these new developments.
CAs must comply with the fundamental ethics principle of professional competence and due care by attaining and maintaining their professional knowledge, including with regard to sustainability and ESG matters.
As the Code states at paragraphs 113.1 A1 and 113.1 A2:
“113.1 A1 Serving clients and employing organisations with professional competence requires the exercise of sound judgement in applying professional knowledge and skill when undertaking professional activities.
113.1 A2 Maintaining professional competence requires a continuing awareness and an understanding of relevant technical, professional, business and technology-related developments. Continuing professional development enables a professional accountant to develop and maintain the capabilities to perform competently within the professional environment.”
Acting with sufficient expertise
Section 230 of the Code sets out specific requirements and application material for professional accountants in business in relation to “Acting with sufficient expertise”. This Section starts by highlighting the following:
“R230.3 A professional accountant shall not intentionally mislead an employing organisation as to the level of expertise or experience possessed.
230.3 A1 The principle of professional competence and due care requires that a professional accountant only undertake significant tasks for which the accountant has, or can obtain, sufficient training or experience.”
230.3 A2 A self-interest threat to compliance with the principle of professional competence and due care might be created if a professional accountant has:
- Insufficient time for performing or completing the relevant duties.
- Incomplete, restricted or otherwise inadequate information for performing the duties.
- Insufficient experience, training and/or education.
- Inadequate resources for the performance of the duties.”
The Code provides example of actions that might address the threat – such as obtaining assistance or training from someone with the necessary expertise or ensuring that there is adequate time available to perform the duties – however, if the threat cannot be addressed, a CA would need to determine whether to decline to perform the duties in question.
When a CA is being put under pressure to act in a manner that might lead to a breach of the principle of professional competence and due care, Section 270 applies (this is discussed further in “Pressure to breach the fundamental principles”).
There is also a threat to compliance with the principle of professional competence and due care for CAs in practice in relation to “Professional appointments” - Section 320 of the Code.
The fundamental principle of confidentiality requires professional accountants to respect the confidentiality of information acquired as a result of professional and business relationships. However, the Code also states in paragraphs 114.1 A1 and 114.1 A2 that there are certain circumstances where professional accountants are or might be required to disclose confidential information or when such disclosure might be appropriate, and the factors to consider in deciding whether to disclose confidential information. This principle of confidentiality is equally applicable to sustainability related information.
In relation to the fundamental ethics principle of Professional Behaviour, the requirement in paragraph R115.1 of the Code states:
“R115.1 A professional accountant shall comply with the principle of professional behaviour, which requires an accountant to:
(a) Comply with relevant laws and regulations;
(b) Behave in a manner consistent with the profession’s responsibility to act in the public interest in all professional activities and business relationships; and
(c) Avoid any conduct that the accountant knows or should know might discredit the profession.”
A professional accountant shall not knowingly engage in any business, occupation or activity that impairs or might impair the integrity, objectivity or good reputation of the profession, and as a result would be incompatible with the fundamental principles. This includes avoiding any conduct that would be counter to values of equality, diversity and inclusion.”
The Code specifically addresses professional behaviour in relation to various aspects of sustainability/ESG, which are discussed in more detail below, including, for example, having detailed requirements and application material in relation to non-compliance with laws and regulations; emphasising the importance of CAs respecting values of equality, diversity and inclusion; highlighting the importance of an ethical organisational culture; and during the professional appointment process when there are questionable issues associated with the client.
However, even if an aspect of sustainability/ESG is not specifically mentioned in the Code, CAs need to be aware that adhering to the spirit of the professional behaviour principle, as well as the other ethics principles, in relation to sustainability/ESG matters is inherent in the Code.
Find out more
The guidance signposts the following other areas of the Code where provisions could relate to sustainability related matters (please note that these areas are provided by way of example and should not be considered an all-inclusive list):
- Sustainability and the ICAS Code of Ethics
- Preparation and presentation of information – integrity and objectivity
- CAs shall not knowingly be associated with misleading information
- Internal controls
- Inquiring mind
- Reliance on the work of others or on the output of technology
- Financial interests, compensation and incentives
- Non-compliance with laws and regulations (NOCLAR)
- Organisational culture, including responsibilities with regard to values of equality, diversity and inclusion
- Professional appointments
- Pressure to breach the fundamental principles
- Having the strength of character to act appropriately
- Speak Up? Listen Up? Whistleblow?
ICAS ethics resources
Find out more about the ethics resources ICAS provides to support its Members below.