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Whether you are employed in business or the public sector or work in practice, CIMA's code of ethics can help you to identify and deal with situations where your professional integrity may be at risk. The code describes the high ethical standards every CIMA member and student must demonstrate, and gives guidance on how to uphold these.
Five fundamental principles form the basis of the code: integrity, objectivity, professional competence and due care and professional behaviour. These are summarised here, but a full explanation, along with guidance on applying the principles, is available in the complete code of ethics.
Integrity means being straightforward, honest and truthful in all professional and business relationships. You should not be associated with any information that you believe contains a materially false or misleading statement, or which is misleading because it omits or obscures the facts.
Objectivity means not allowing bias, conflict of interest or the influence of other people to override your professional judgement. To protect your objectivity, you should avoid relationships that could bias or overly influence your professional opinion.
Professional competence and due care is an ongoing commitment to maintain your level of professional knowledge and skill so that your client or employer receives a competent professional service. This should be based on current developments in practice, legislation and techniques, and you must also make sure that those working under your authority have the appropriate training and supervision. Work should be completed carefully, thoroughly and diligently, in accordance with relevant technical and professional standards.
Confidentiality means respecting the confidential nature of information you acquire through professional relationships such as past or current employment. You should not disclose such information unless you have specific permission or a legal or professional duty to do so. You should also never use confidential information for your or another person’s advantage.
Professional behaviour requires you to comply with relevant laws and regulations. You must also avoid any action that could negatively affect the reputation of the profession.
The code itself contains further explanation of these principles, and examples of how they can be applied for both Professional Accountants in Business (Part B) and Professional Accountants in Practice (Part C). It is impossible to define every situation that could create a threat to the principles, and it is equally impossible to set out specific safeguards for each case, so instead the code sets out common examples of when these principles might be threatened and guidance as to what action should be taken to reduce or remove the threats.
A principles-based code such as CIMA's is widely considered to be more effective than a set of rules. Whereas there can be a tendency to try and circumvent rules, principles are more flexible and can be applied in a wider variety of situations. Principles also encourage users to think about the underlying intent of the code rather than simply adopting a check-box approach to compliance with rules.
To apply the fundamental principles of the code (integrity, objectivity, professional competence and due care, confidentiality and professional behaviour), you first need to be able to identify and evaluate existing or potential threats to them. If a threat exists that is anything other than trivial, you will need to take action to remove the threat or reduce it to an acceptable level.
Although it is impossible to define all the situations that could create a threat to the fundamental principles, the code does identify five categories of common threat:
Self-interest threats can occur as a result of your own or your close family's interests – financial or otherwise. These threats often result in what is commonly called a 'conflict of interest' situation. Working in business, a self-interest threat could result from concern over job security, or from incentive remuneration arrangements. For those in practice it might be the possibility of losing a client or holding a financial interest in a client.
Self-review threats occur when you are required to reevaluate your own previous judgement, for example if you have been asked to review and justify a business decision you made, or if you are reporting on the operation of financial systems that you were involved in designing or implementing.
Familiarity threats can be present when you become so sympathetic to the interests of others as a result of a close relationship that your professional judgement becomes compromised. Sometimes this can result from long association with business contacts who influence business decisions, long association with colleagues, or from accepting gifts or preferential treatment from a client.
Intimidation threats occur when you are deterred from acting objectively by actual or perceived threats. It could be the threat of dismissal over a disagreement about applying an accounting principle or reporting financial information, or it could be a dominant personality attempting to influence the decision making process.
Advocacy threats can be a problem when you are promoting a position or opinion to the point that your subsequent objectivity is compromised. It could include acting as an advocate on behalf of an assurance client in litigation or disputes with third parties. In general, promoting the legitimate goals of your employer does not create an advocacy threat, provided that any statements you make are not misleading.
So what should you do if there is a threat – or potential threat - to the principles of the code?
CIMA's code of ethics has a 'threats and safeguards' approach to resolving ethical issues. This means that if you are in a situation where there might be a threat to any of the code’s fundamental principles you should first assess whether the threat is significant. If it is, you should to take action to remove or mitigate it.
Safeguards can be found in employing organisations, such as whistleblowing or grievance procedures, or can be embedded within the profession in the form of standards or legislation. Safeguards are also the actions that a professional accountant takes to resolve an ethical conflict or dilemma.
If a colleague, employer or client has done something that you think is unethical, if you are under pressure to do something you think goes against the principles of the code of ethics or if you are facing a conflict of interest, then you will need to think about what safeguards or actions to take to resolve it. These safeguards could take a number of forms. The code does not describe all the safeguards that could be implemented, but instead gives general guidance for handling ethical issues, both for accountants working in business and for those in practice. This guidance is explained on the Ethical dilemma? page on this site.
