Ethics Resources for Accounting Professionals

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Ethics Resources for Accounting Professionals
Financial Accountants

How should I handle reimbursement claims with missing, insufficient or even suspected fraudulent supporting documents?

Colleagues who have incurred expenses for official use or functions may be allowed to claim for reimbursement from the company. What if some claims submitted have no or insufficient supporting documents such as purchase orders, delivery notes, invoices and receipts? Or if the supporting documents received appear to be fraudulent? Financial accountants will face an even more difficult dilemma if such claims are submitted by senior management of the company.

Even worse, unscrupulous colleagues may resort to offering bribes or gifts to financial accountants in order to have their claims with missing, insufficient or even fraudulent supporting documents successfully processed.

Should I follow the management's request to manipulate financial statements?

For certain reasons (e.g. to satisfy the listing requirements, to show good financial performance of the company), financial accountants may be requested by the senior management to inflate the sales turnover and profit figures in the financial statements by falsifying sales invoices and accounting records. They may also be asked to postpone the recognition of costs and expenses, manipulate the value of inventories, or adopt different depreciation and amortisation methods for the same asset types.

Financial accountants should be aware of the threats as well as understand the legal requirements under the Prevention of Bribery Ordinance (POBO) (Cap. 201) and other relevant legislations. The above situations create various threats to the fundamental principles of ethics for professional accountants.

Fundamental principles of ethics for professional accountants

According to the Code of Ethics for Professional Accountants (COE) issued by the HKICPA, there are five fundamental principles of ethics for professional accountants (the fundamental principles):

Integrity – to be straightforward and honest in all professional and business relationships.
Objectivity – to exercise professional or business judgment without being compromised by:
- Bias;
- Conflict of interest; or
- Undue influence of, or undue reliance on, individuals, organizations, technology or other factors.
Professional Competence and Due Care – to:
- Attain and maintain professional knowledge and skill at the level required to ensure that a client or employing organization receives competent professional service, based on current technical and professional standards and relevant legislation; and
- Act diligently and in accordance with applicable technical and professional standards.
Confidentiality – to respect the confidentiality of information acquired as a result of professional and business relationships.
Professional Behaviour – to:
- Comply with relevant laws and regulations;
- Behave in a manner consistent with the profession's responsibility to act in the public interest in all professional activities and business relationships; and
- Avoid any conduct that the professional accountant knows or should know might discredit the profession.

Unlawful Acts or Defaults by or on Behalf of a Member's Employer

It is not practicable to set out all the offences which members may encounter in the course of their work but the principal statutory and common law offences concerned are:

theft, obtaining by deception, false accounting, and suppression of documents;
fraud, forgery and offences in relation to companies;
corruption offences;
bankruptcy or insolvency offences, frauds on creditors or customers, false trade descriptions, and offences arising out of relations between employers and employees;
conspiracy, soliciting or inciting to commit crime and attempting to commit crime;
offences in relation to taxation; and
insider dealing.

(Paragraph 500.1, section 500, Chapter C of the COE)

If a member acquires knowledge indicating that his employer or someone acting on behalf of his employer may have been guilty of some default or unlawful act, he should normally raise the matter with management internally at an appropriate level. If his concerns are not satisfactorily resolved, he should report the matter to non-executive directors and those charged with governance where these exist. Where this is not possible or fails to resolve the matter, a member may wish to consider making a report to a third party. Members in business should refer to section 260 under Chapter A of the COE, which sets out the response framework when members encounter non-compliance with laws and regulations during the course of their work. Local guidance is provided in section 500 of Chapter C of the COE on reporting suspected defaults or unlawful acts to third parties outside the organisation for which the member works.

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