by Glenn Cheney

The major professional organizations for accountants have always required their members to meet codes of ethics, but after the recent spate of accounting scandals, those organizations are looking for ways to reinforce those codes and their members' adherence to them.

 For helpProfessional accounting organizations have several resources for concerns, questions and information regarding ethics.

American Institute of CPAs
Hotline: (888) 777-7077; e-mail:

Institute of Management Accountants; hotline: (800) 6-ETHICS.

Institute of Internal Auditors

Financial Executives Institute

International Federation of Accountants

Susan S. Coffey, American Institute of CPAs vice president of self-regulation and Securities and Exchange Commission practice section, said expressing the burden that has fallen on professional associations, "Ethics has always been the cornerstone of the profession.""We have always supported and professed ethical behavior among all of our members regardless of their discipline. We have always recognized that we have a public interest responsibility, and we will continue to dedicate the resources necessary to make sure the public is protected," she emphasized. We will do what needs to be done to regain confidence in our program."

The ethics page of the AICPA’s Web site is, by far, the most comprehensive of the major accounting organizations. It carries information about independence, the institute’s code of ethics, its ethics examination, a short "test your knowledge" quiz, case studies, ethics enforcement and links to an e-mail ethics hotline. New to the page is an ethical behavior "decision-making tree."

The institute is also enhancing its interactive CD-ROM-based course on auditor independence to include other areas of ethics. The course is now applicable to members in auditing and other financial disciplines.

In addition, the AICPA is expediting various projects. One will provide best practices guidance on a firm’s dependency on a client, including the dependency of a branch office or an individual partner. The guidance will identify threats that exist for large and small firms and will recommend mitigation and safeguards.

The AICPA has issued an exposure draft on changes to the institute’s code of conduct to avoid revolving-door problems with auditors being hired by former clients.

The institute is also developing a conceptual framework to deal with audit firms’ scope of services. Once that framework is developed - it is a long-term project - individual services will be assessed.

Institute of Internal Auditors

Last year, a few months before the Enron story officially broke, the Institute of Internal Auditors issued a practice advisory on the role of internal auditors in the assessment of ethics within an organization. Unfortunately, the advice came too late to help Enron investors and employees.

"Enron didn’t have its own internal auditing function," said William G. Bishop III, IIA president. "It had Arthur Andersen doing it, but that’s akin to not having an internal audit function. WorldCom had internal auditing, and internal auditors challenged the CFO and went around him to the audit committee when he tried to suppress their audit. They applied their own ethical values to that situation."

The IIA has seen no need to modify its code of ethics in response to the recent scandals, but its ethics committee has stepped up efforts to communicate with the institute’s 77,000 members in 110 countries. One program, still under development, will help internal auditors educate their company managers on how to ensure ethical integrity.

The IIA is also working on a practice advisory on the internal auditor’s role in the assessment and development of the corporate governance process.

Bishop further stated that internal auditors play an integral part in corporate ethics because part of their audits assesses the ethical integrity of the company, from top to bottom. In some cases, internal auditors create a company’s code of ethics and serve as de facto chief ethics officers or ombudsmen. When the "tone at the top" appears less than ethical, internal auditors can set a tone in the middle, as it were, and offer an honest ear to the reports of honest middle-managers.

Institute of Management Accountants

Concerned with the damage done to their members’ professional reputation by a few handfuls of shady corporate accountants, the Institute of Management Accountants is giving the world’s financial professionals an opportunity to reaffirm their commitment to conduct all financial affairs with the highest standards of professional ethics. Any financial professional, whether an IMA member or not, can go to their Web site and sign a pledge to comply with the institute’s code of ethics.

The IMA is also developing an ethics course for members. The course will be offered live over the Internet via the institute’s Lifelong Learning Center Web site. The course will face difficult issues that face management accountants.

The institute is also making an effort to find more counselors for its ethics phone and email hotline.

"With everything that’s been happening, we expect the hotline to be used a lot more," said Kim R. Wallin, IMA vice president-elect. "We need to get more counselors trained to handle situations."

IMA’s ethics committee is also going to write tough, ethical what-would-you-do scenarios that will appear on their ethics Web page and its "house organ," Strategic Finance.

International Federation of Accountants

The International Federation of Accountants, home of the International Auditing and Assurance Standards Board, issued a new code of ethics just a few days in advance of the collapse of Enron, the culmination of a four-year project. The code was sent to IFAC’s members around the world for adoption "as soon as possible." The European Union has signed on as have "a significant number" of other members.

"The project involved a total re-write of the auditor independence section of our code of ethics, moving to a principles-based approach," said James M. Sylph, the IAASB’s technical director. "While not fully in place yet, the code certainly would respond to the incidents around WorldCom and Enron."

The IAASB is in the process of revising its standards on quality control and expects to issue three exposure drafts in December. The proposed standards would tighten the quality control requirements promulgated by national auditing associations and those practiced by member audit firms.

"Audits cannot be expected to find sophisticated fraud perpetrated by senior management who deliberately deceive auditors," Sylph said. The "IAASB supports changes in audit standards that can improve the likelihood that fraud and fraudulent reporting will be detected and provide shareholders and the general public with greater confidence in the financial information circulating in capital markets."

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