Chapter 3
The Accounting Framework
70
Ethics of Accounting
Users place significant trust in the accuracy of financial records to enable them to make sensible
decisions regarding a business. It is an accountant’s responsibility to ensure that the financial status
of the business is accurately reported. The standards by which these actions are judged as being
honest versus dishonest, right or wrong, fair or unfair, are also known as
accounting ethics
.
Professional accounting bodies have strict rules governing the behaviour of their members. Some
cases have resulted in jail sentences for violating these rules. Two of the most infamous examples
are Enron and Worldcom. The senior executives of these companies were found guilty of various
offences, including using company funds for their own personal use, and covering up certain nega-
tive financial information.
Typical ethical standards for accountants state that
• Members shall act with trustworthiness, integrity
and objectivity.
• Members shall not participate in any activity or
provide services to any company that the member,
or a reasonably prudent person, would believe to be
unlawful.
• Members shall not engage in a discriminatory prac-
tice on prohibited grounds for discrimination, as those terms are defined in the Canadian Human
Rights Act.
• Members shall not criticize another professional colleague without first submitting this criti-
cism to that colleague for explanation.
• Members shall act in the interest of their clients, employers, and interested third parties,
and shall be prepared to sacrifice their self-interest to do so. Members shall honour the trust
bestowed upon them by others, and shall not use their privileged position without their princi-
pal’s knowledge and consent. Members shall avoid conflicts of interest.
• Members shall not disclose or use any confidential information concerning the affairs of any
client, former client, employer or former employer.
• Members shall, when engaged to audit or review financial statements or other information, be
free of any influence, interest or relationship with respect to the client’s affairs,which impairs the
member’s professional judgment or objectivity, or which, in the view of a reasonable observer,
may have that effect.
• Members shall not, without an employer’s or client’s consent, use confidential information
relating to the business of the member’s employer or client to directly or indirectly obtain a
personal advantage. Members shall not take any action, such as acquiring any interest, property
