At a glance
By Dr Simon Longstaff AO FCPA, executive director of The Ethics Centre.
The term “conflict of interest” is often too narrow to describe the wide range of conflicts that may occur in the workplace, such as conflicts of duty. This broadens the scope of trouble that can arise.
It is possible, with considerable diligence, to avoid some conflicts of either interest or duty. In fact, it’s preferable to have very few conflicts, but not all of them can be avoided.
There are duties in the profession that create a hierarchy of obligations. As a result, a distinct aspect of the accountancy profession is its acceptance of the responsibility to act in the public interest.
This means professional accountants are required to uphold the public interest that they serve and the interests of their clients over self-interest.
Within that framework, professional accountants are obliged to minimise, as far as possible, the conflicts that arise because of their other interests, or other duties that they owe people. However, it is not always possible to do that, so the final line of defence is in how those conflicts are managed.
Conflicts can usually be resolved with the consent of the parties whose interests are at stake. That begins with complete disclosure. It cannot be partial disclosure because this means informed consent is not possible.
Professional accountants must make sure that they withdraw themselves from the process of deliberation, so that they are not shaping the environment in ways that might be of direct benefit to them.
They must also accept the decision that others will make on this question. This could potentially include consenting to the professional accountant continuing to act with the conflict in place or accepting that they cannot.
At some point, professional accountants might be so conflicted that they are unable even to perform their function. In situations like this, they must step back and resign from it, or else remove the nature of the conflict itself.
Many organisations have policies about conflicts of interest and how to deal with them, but it is unclear how effective these policies are – and how effective they really want them to be.
For example, some large organisations sustain themselves by engaging with as many clients as possible in as many ways as possible. They believe that they can do that by preserving virtual barriers where they say, the audit partners won’t talk to the consulting partners, and vice versa.
Now, that is feasible – if those conflicts are fully disclosed to the clients and they consent to it. However, the business models for large organisations are often based on that assumption that the client will consent and that they will manage these conflicts, rather than seeking to minimise them.
What makes unethical events so damaging to the profession is that they make everybody doubt that potential conflicts are being managed in the ethical way people should expect.
To avoid a perceived conflict of interest at work, accountants must be far more rigorous in their own self-restraint about the opportunities they pursue or accept. Disclosure and informed consent are not always sufficient to address a conflict of interest.
In this respect, the Code of Ethics is clear – if a conflict of interest cannot be appropriately reduced to acceptable level or removed, the professional accountant is required to decline the engagement.
If they are committed to their ethics, they must be committed to the cost of it, because ethical commitments are not always cost-free.
Ethical commitments apply constraints to what professional accountants can do, and if they do not recognise this, they are not taking their responsibilities seriously.