ICAS ICAS logo

Quicklinks

  1. About Us

    Find out about who we are and what we do here at ICAS.

  2. Find a CA

    Search our directory of individual CAs and Member organisations by name, location and professional criteria.

  3. Careers

    Access current vacancies and understand what it’s like to work here at ICAS.

  4. Contact Us

    Get in touch with ICAS by phone, email or post, with dedicated contacts for Members, Students and firms.

Login
  • Annual renewal
  • About us
  • Find a CA
  • Careers
  • Contact us
  • Become a CA
  • CA jobs
  • SCABA
  • ICAS Foundation
  1. Members
    1. Become a member
    2. Manage my membership
    3. Benefits of membership
    4. Professional development
    5. Mentoring
    6. Member rewards
    7. CA jobs
    8. Area networks
    9. International communities
    10. Get involved
    11. CA Connect
    12. CA magazine
    13. Top Young CAs
    14. Career breaks
    15. The ICAS member app
    16. Newly admitted members 2021
    17. CA Wellbeing
  2. Become a CA
    1. How to become a CA
    2. Routes to becoming a CA
    3. CA Stories
    4. Find a training agreement
    5. Why become a CA
    6. Qualification information
  3. CA Students
    1. Studying with ICAS
    2. Timetables and exams
    3. Learning requirements
    4. Learning updates
    5. Learning blog
    6. Totum Pro | Student discount card
  4. Employers
    1. Become an Authorised Training Office (ATO)
    2. Resources for Authorised Training Offices (ATO)
    3. Professional entry
    4. Apprenticeships
  5. Thought leadership
    1. Technology
    2. Trust
    3. Talent
    4. Research
    5. CA Agenda podcast
    6. CA Agenda videos
    7. ICAS webinars
    8. CA Summit
  6. Professional resources
    1. Anti-money laundering
    2. Audit and assurance
    3. Brexit
    4. Charities
    5. Coronavirus
    6. Corporate and financial reporting
    7. Business and governance
    8. Ethics
    9. Insolvency
    10. Pensions
    11. Practice
    12. Public sector
    13. Sustainability
    14. Tax
  7. Regulation
    1. Complaints and sanctions
    2. Regulatory authorisations
    3. Guidance and help sheets
    4. Regulatory monitoring
  8. Governance
    1. At a glance
    2. Charter, rules and regulations
    3. Council
    4. Boards and key committees
    5. Public reporting
    6. Executive team
    7. Diversity
    8. Member research
  9. Contact us
    1. ICAS technical helpdesk
    2. ICAS logo request
  10. Careers
    1. Business centres
    2. Meet our team
    3. Benefits
    4. Vacancies
    5. Imagine your career at ICAS

Ethical dilemma 10: Heroic efficiency target

All rights reserved. This case study may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, with appropriate acknowledgement of the publisher.


In 2008, ICAS Research published the report "What do you do now? Ethical Issues Encountered by Chartered Accountants" by Dr David Molyneaux containing 28 true life case studies of ethical dilemmas faced by accountants either in practice or business.

In recognition of this work, in 2009 the ICAS Technical Policy Board then published "Shades of Grey" containing a further series of case studies, one of which is reproduced below.

The views expressed in these respective case studies are those of the Ethics Committee and do not necessarily represent the views of the Council of ICAS.

This case study gives general guidance only and should not be relied on as appropriate or comprehensive in respect of any particular set of circumstances. It is recommended that users consider seeking their own professional advice.

The authors or the publisher can accept no responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication.

Scenario

You are the finance director of Fortunesareus plc, a large UK subsidiary of an internationally based financial services organisation, which has grown substantially in recent years. You have been in the role for 4 years and believe that there is a very real chance that you might be in line for promotion to the group finance director position within the next couple of years, as long as you play your cards right and do not rock the boat.

You believe that such a promotion is merited. You have committed yourself to the organisation and your work-life balance is heavily weighted towards the former. Your work is your life, at least at the moment.  

The Fortunesareus group, has had a bad couple of years worldwide, partly to do with the economic downturn in most areas, but also to do with poor management in some key areas of operations (but not in the UK).

In response to these poor results, the US parent had insisted on 5% cost cutting efficiencies in the current year in all subsidiaries: for you in the UK subsidiary, this was a very tough target and you have just about achieved it, but at the cost of a dispirited workforce and a range of economies which could not be sustained in the long term. The need to ensure that the company satisfies all of its regulatory requirements is a major issue and these cuts have left your organisation vulnerable.  

At a recent video conference, Dan, the American Group FD, informed you that all subsidiaries must achieve a further 10% efficiency saving in the subsequent year (for which you are currently preparing the budgets), but that all operational and sales targets must still be met.

You and your colleagues greet this news with a degree of incredulity but it is made very clear that this is not negotiable.

You know that this is going to be almost impossible to achieve in practice and so, the next day, you call Dan and share these views with him. He tells you in no uncertain terms that your views are unhelpful and that if you are not prepared to implement these cuts then someone else will be found who can. You point out that the cuts will severely impact on the business's ability to satisfy its legal and regulatory responsibilities:  

"We are struggling as it is to satisfy our compliance requirements."  

Dan replies ominously:  

"That is your responsibility, not mine."  

By the end of the call it is crystal clear: either cuts will be made or you will be fired.  

Once again you think to yourself, can further costs be trimmed without impacting on the company's compliance needs? You come to the same conclusion that this does not appear possible unless the company is willing to live with the significant risk that it will not comply with the regulatory requirements.  

What do you do now? 

Scenario Analysis

What are the readily identifiable ethical issues for your decision?  

For you personally

  • Is there someone else in the organisation that you can discuss this issue with?
  • Others in the organisation must be aware of the need for the company to comply with its regulatory requirements?
  • Can you elevate this matter for full discussion at a future meeting of the group board?
  • If, after proper debate, the proposals are still to be enacted, then you will need to consider your position if you still believe that their impact will put the company in a position where it is no longer able to satisfy its regulatory requirements.
  • Is there a need to consider whistle blowing?

For the Company  

  • Has the impact of these proposed cuts on the company's ability to meet its compliance requirements been thought through properly?

Who are the key parties who can influence, or will be affected by, your decision?

  • You
  • Your fellow directors
  • The group FD and his fellow directors
  • The shareholders
  • The employees
  • The financial regulatory body
  • Customers and suppliers of the company.

What fundamental ethical principles for accountants are most applicable and is there an apparent conflict between them?  

Integrity  

The need to ensure your fellow board members and those of the parent company are aware of the company's obligation to meet its compliance requirements.  

Objectivity  

The need to be able to assess the impact of these proposed cuts without personal bias.  

Professional competence and due care  

Assumed.  

Confidentiality  

If the company decides to go ahead with this level of cuts is there any need to consider any possible whistle-blowing requirements?

Professional behaviour  

The need to effectively communicate the compliance risks of this proposed cost cutting exercise to your fellow board members and those of the group.  

Is there any further information (including legal obligations) or discussion that might be relevant?  

  • What whistle-blowing requirements exist within your organisation and within your regulated sector?
  • Is there a conflict between the 'Guardian' and 'Commercial' strands of an accountant's responsibilities?
  • In the shorter-term possibly, but for the longer-term sustainability of the company it would appear as though these competing strands are aligned.

Based on the information available, is there scope for an imaginative solution?

No.  

Are there any other comments?  

None.

Ethics and The Power of One

ICAS calls on every CA to place ethical leadership at the heart of their professional responsibilities

2021-04-alterledger 2021-04-alterledger
ICAS logo

Footer links

  • Contact us
  • Terms and conditions
  • Modern slavery statement
  • Privacy notice

Connect with ICAS

  • Facebook (opens new window) Facebook Icon
  • Twitter (opens new window) Twitter Icon
  • LinkedIn (opens new window) LinkedIn Icon
  • Instagram (opens new window) Instagram Icon

ICAS is a member of the following bodies

  • Consultative Committee of Accountancy Bodies (opens new window) Consultative Committee of Accountancy Bodies logo
  • Chartered Accountants Worldwide (opens new window) Chartered Accountants Worldwide logo
  • Global Accounting Alliance (opens new window) Global Accounting Alliance
  • International Federation of Accountants (opens new window) IFAC
  • Access Accountancy (opens new window) Access Acountancy

Charities

  • ICAS Foundation (opens new window) ICAS Foundation
  • SCABA (opens new window) scaba
ICAS logo

Our cookie policy

ICAS.com uses cookies which are essential for our website to work. We would also like to use analytical cookies to help us improve our website and your user experience. Any data collected is anonymised. Please have a look at the further information in our cookie policy and confirm if you are happy for us to use analytical cookies: