Are ethical standards slipping?

The Imprudent Accountant
An unnamed firm
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In the wake of recent events including prurient TV programmes and newspaper articles about The Paradise Papers and sexual harassment scandals in Parliament and beyond the public will soon conclude that professionals are capable of behaving very unprofessionally.

Accountants and lawyers have been involving themselves in scheming of a kind that looks bad, even if it might just about be legitimate for generations but are now being taken to task for it. There have also been far too many situations where companies have failed despite clean audit report or, at the very least, had to restate their beautifully overdressed accounts.

While MPs are not by definition professionals, a very high proportion are lawyers, accountants and the like. It was bad enough when they were fiddling their expenses but fiddling with their colleagues is an even worse advert for those who should be providing examples to us all.

From our perspective, the ICAEW’s code of ethics is as good a place to start as any, since members of other accountancy bodies will have very similar obligations. It starts with a series of fundamental principles and in particular for the purpose of this article it is worth focusing on


To be straightforward and honest in all professional and business relationships.

Professional Behaviour

To comply with relevant laws and regulations and avoid any action that discredits the profession.

I fully accept that there will always be grey areas where some believe that they have maintained integrity and behaved professionally, while others (frequently clients who believe that they have lost out) would disagree.

However, in my eyes, if recent media commentary is in any way accurate, some of our colleagues would be struggling to keep a straight face while claiming to have complied with these obligations.

I have written about the standard of auditing before and no doubt will do so again but on far too many occasions auditors seem to be failing, apparently using practices that are not rigorous enough to protect the stakeholders who are effectively employing them. How a global corporation like Tesco could be presenting accounts that were grossly misleading without the auditors sniffing out a problem is beyond me. I know that the only requirement is to confirm that the accounts show a true and fair view but surely those of us with integrity would imagine that we need to do enough to prove that accounts are not way off beam.

When it comes to tax, I always seem to cause a rumpus when questioning professional standards applied by some accountants, solicitors and particularly barristers. Constantly, schemes are devised where there is significant doubt as to whether or not they will work. In the forms of time, many of these have been proved to be flawed, while others await investigation. Accountants hide behind counsel opinions, some of which makes one wonder whether those delivering them are obliged to comply with any kind of ethical standards.

I have to say that I regard wholly artificial schemes with no purpose other than tax saving as unacceptable from an ethical viewpoint. The courts are beginning to take a similar stance, which means that many schemes which might just about have been regarded as viable in the past will not be in future.

Going a stage further, in moments of depression I sometimes wonder whether the main measures used by professionals in determining the applicability of tax planning arrangements include

  1. Can I get an embarrassingly large fee?
  2. Can I get a QC to sign the arrangement off?
  3. Will the clients sign a disclaimer saying that they know the scheme is quite likely to fail and won’t take action against my firm if it does?
  4. Will HMRC ever bother to investigate, even if the scheme doesn’t necessarily work?

Surely the most important question is can the arrangement be regarded as ethical? In addition, reputational risk might eventually begin to tell, if only a desire to avoid having your name publicised should a court or professional body take appropriate action.

I still carry my professional accounting qualification with pride but have to say that if the industry keeps moving as it has in recent years, it won’t be long before I worry about having to confess to being involved in a trade that has a reputation for bordering on the unethical.

About The Imprudent Accountant

About The Imprudent Accountant

Someone who should know better, but can't resist the occasional rant about the more exasperating aspects of the accountancy profession.


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14th Nov 2017 09:08

In my opinion the dodgiest accountants run the profession! The higher echelons of ICAEW and their international counterparts are stuffed full of dodgy auditors and dodgy tax scheme organisers.

Behind nearly every dodgy PLC audit and nearly every tax scandal there sits a Big 4 partner who is safe in the knowledge that there is a near 0% chance of any sort of disciplinary action.

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14th Nov 2017 09:42

"Accountants and lawyers have been involving themselves in scheming of a kind that looks bad, even if it might just about be legitimate for generations"

In 45 years I've been in the business, I don't think ethics have changed and I don't think we actually saw certain practices as legitimate (there are no degrees of legitimacy), rather we ignored ethics and reasoned that if the client wanted it, or benefitted from it, it was OK, we were doing our duty.

There were others who regarded their own wellbeing, both in reputational notoriety and financial, as primary but there we are sliding towards criminality and those people will always be there regardless of the ethics of the day.

In addition to managers and partners signing off my audit queries over questionable accounting and behaviour, without further action, my most abiding memory is the recurring topic of "offshore".

Regardless of its regularity in the 80s & 90s I always had that knotting feeling in my gut whenever a superior instructed me to arrange it or, later, clients approached me with "what do you know about offshore trusts". Despite that ethical message from below, I colluded and referred them on to my numerous contacts in the industry who I knew were only to eager to feed my client's, as well as their own, greed.

This all changed for me 20 years ago when I learned that "No" was as valid a response as "Yes" to some client demands.

So, other than in the early days when the young brain is forming and confused over the the mixed messages it gets from the outside world, I don't think you can be taught ethics and, even though it's incumbent on regulatory bodies to define what they mean, the text is not worth the paper its written on when it comes to day to day living and working. In my experience ethical & unethical behaviour in "the profession" is not influenced at all by whether the person has a certificate on the wall.

Given that my "gut-brain" (Google it) is about nine meters long and, unlike it's cousin in my head, not influenced by conscious input, I'll stick with what it tells me.

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14th Nov 2017 11:28

I suspect ethics is a product of environment and upbringing and those who spent large parts of their working lives in close contact with marketed scheme originators or sellers will be more accepting, at least in the beginning, I do suspect time may engender more cynicism.

Those away from the rare atmosphere of every day exposure may, when coming into contact with the sellers of same, have an initial awe of the knowledge and expertise of the sellers, I know I did when I spent a fair bit of the early 2000s talking to parties re SHEPS , losses on AIM shares and a charity and similar, all re a large trading profit we had made.

We were lucky, we were not totally seduced into the exotic ( Scots have a sceptical view of life) instead relying on EZ investment, somewhat more vanilla than some of the other offerings.

But there is the rub, when is the line crossed, because as far as I can see the structure of some EZs, with say rental deposits etc manufactured out of the pool of available money, does suggest inflation of the qualifying expenditure (there is no free lunch, follow the money), yet an EZ was a government prompted idea, like EIS, VCT and way back BES (Licence to print money re the college accommodation ones).

Re audit I am possibly not the best party to comment, the last time I worked on a quoted company audit (and that was local subsidiaries) was 1987 as a trainee, however I suspect the issue is partly the growing complexity of the world and I suspect audit has struggled to drag itself from our 1980s type approach of systems notes, risk evaluation, walk through tests, materiality setting, compliance testing, substantive testing and analytical review to how it possibly needs to be.

Yes audit now does a lot of these functions using software but I suspect, somewhere along the way, risk evaluation got thrown out of the window.

I suspect drawing the flowcharts etc made one think more re where the risks were whereas software doing the work may have the auditor switching off his/her risk awareness- no evidence but I do know my own use of tax software over the years has led me to be more accepting of the result that pops out the bottom.

Was Tesco issue re rebates re shelf space? If the only way to really test was say to take sample of agreements used and compare with what had been recognised, pretty time consuming, niche and specialist, possibly why audit possibly missed the issue, I would guess the actual legal agreements between Tesco and the suppliers re these were enormous and complex.

From my experience (or reading on here) practitioners for smaller clients seem slightly more ethical than their 1980s/1990s counterparts, or at least those who seem to know what they are doing, the somewhat "loose" accounting I observed in the 1980s and 1990s, on occasion, is certainly not admitted (£Stock -say £5000 etc).

Then again the level of competence of some posting here suggests that whilst ethics may have improved for the competent, technical skills have not as widely improved across practitioners, there are posts on here showing less understanding than I had after only one year at university studying accountancy , at the start of my apprenticeship, scary that some of these are owners of accounting service providers and raises the question,what ethical standards are observed when someone charges another for a service that they are patently unfit and untrained to offer?

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14th Nov 2017 11:44

I trained and qualified at the London head office of Cooper Bros, which went on to become part of PWC ... and back then we were auditing Rhodesian and South African companies that just did what the current crop of Google/Yahoo/Apple etc still do ... in this case bypass all the international regulatory blocks on monetary transfers in/out of South Africa and Rhodesia (as Zimbabwe was back then) ... and all totally above board! Nowadays this type of scam is called "image rights" etc, back then it was just plain financial magic.
That was the start of me getting seriously underwhelmed by professional standards ... and things have certainly not improved. And, seeing as we all motivated to some extent by greed (me included), I don't envisage that much change taking place very soon.......... Four years after that I got out of the profession, and on passing all my chartered accountancy exams purposely did not enrol with the ICAEW ... instead I went to Switzerland and worked as a professional cook for a few years, then switched profession several times and now find myself working part-time as an "ethical" accountant.

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to KH
14th Nov 2017 12:56

But at least you are now qualified to cook the books. Sorry, I know, a crass comment, but if I didn't say it someone else would?

Accounting standards?? Don't get me started, I've given up wondering when they would all finally agree they had got them right.

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to Paul Scholes
14th Nov 2017 15:12

Paul, the answer is never as things change.

I am eagerly awaiting the resurrection of son of SSAP16 if we propel ourselves into a high inflation environment, I will feel my life has then gone full circle after spending weeks studying accounting in an inflationary environment during 1984-85 never therafter to have much use for all the theory.

Accountancy ideas are like clothes, come in and out of fashion (where are my flares and platforms), remember Brand Accounting with Rank Hovis (dear to my heart as Hodgson Impey, my then employers, were their auditors-though not our office)

I must admit all this valuation nonsense in FRS102 is leaving me a little cold but I put that down to my age (getting like my late father, if it worked before why change it etc etc)

The main problem is like everything else in society politicians want standard measures (school performance, hospital waiting etc ) so everything in the main gets crammed into one "set of clothes" or in our case 2-3 sizes with large size differences (You can have
your company in an 18 inch waist, a 24 inch waist or a 48 inch waist, what do you mean you are a 32, either cram yourself into the 24 or wear a belt with the 48).

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14th Nov 2017 16:30

My clients for 20-30 years and their trading results have changed little yet what I present them with each year has gone up & down and side to side.

When I audited multi-nationals it made sense to have a common accounting approach across say the EU and the ACA's who we dealt with in the companies had as much interest in keeping the mystery of accounting in flux as we did, mystery=expertise=fees, but for my OMBs, the ones that make up maybe 95% of the companies in the UK?

The one blessing now is that all but two of my clients are FRS105s and so neither I nor they take any notice of the year end accounts, just a few keyboard stokes and mouse clicks a year.

Sorry to the OP for straying

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15th Nov 2017 21:42

People with questionable ethical standards will always exist - everywhere. What should those standards be? Give me 10 people, I'll give you 12 answers.

Look. Today, I met 2 guys who let low value properties to people who don't have much money. All financed by mortgages (under ltd co protection).

Both drive extravagant cars. Really extravagant cars.

That made me think a little bit about the morality of demanding money that someone has really grafted for just so you can take it down the car dealership/shopping centre/generally blow it like it doesn't mean a lot.

I wouldn't say I'm a socialist and I get that the money is due to them under all the rules of the law and blah de blah. While not illegal, blowing people's NMW money on bling just feels wrong. It certainly made me feel uncomfortable. I wouldn't want to do it.

I guess it's another one of those questions of morality that is down for us all to resolve as individuals.

You'll never find a common standard. Never. Anyway, 20 years later, you'll find that the judge/actor/MP/TV weatherman/sculptor of BBC TV centre statues was a paedo. Morality? Judgement? What does it all mean and who dictates it to who and who should have that right?

It is probably a conundrum that is as old as time itself.

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to AnnAccountant
20th Nov 2017 12:20

I have faced the same discomfort with clients and friends and it's very difficult to stand back and be objective but, how someone choses to spend their money is up to them and, unless you know any of their tenants, would your view be different if you found out that the tenants were struggling financially because they chose to spend their money on bling or didn't make the most of opportunities available to them, or gambled, smoked etc etc?

The car thing has been a pet environmental gripe for me for 20 years, but rather than get into grief with clients, friends & family who see things differently, it's enough to do what is right for me and let others then judge the rights and wrongs.

What I tend to find is that if a client choses to splash their money on what I regard as irrelevances or for self-aggrandisement, there will come a time when they see tax as just another overhead they need to reduce which is the time when I inform them of my views and ways of working and ask them to go away.

I would always say I'm left wing!

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