It’s not uncommon for accountants to find themselves in situations where there is a conflict of interest. If you prepare, audit or advise on financial matters, knowing how to navigate such scenarios is essential for preserving reputations and careers.
The importance of objectivity in UK accounting
As a professional, you are obliged to be objective. This is a fundamental part of the ICAEW Code of Ethics and the UK Financial Reporting Council’s (FRC) Ethical Standard. Both require you to avoid situations where bias, conflict of interest or undue influence override your professional judgment.
This means stepping back from tasks where your view could be swayed. Personal relationships or commercial pressures, for instance, could affect your decision-making.
Failing to remain objective can damage more than just your client’s outcomes. You risk breaching regulatory standards and damaging your firm’s reputation. The FRC has increased its scrutiny of how auditors and accountants exercise professional judgement, especially in areas such as audit independence and valuation work. In 2023, the FRC fined several UK firms for ethical failings, highlighting how closely it monitors ethical breaches and conflicts.
To stay compliant, you must regularly assess whether you can continue without compromising integrity. If you are unsure, step aside or escalate the matter to a compliance officer.
Recognising and addressing bias
No one is immune to bias. No matter how experienced or well-intentioned you may be, bias can creep in. It may be through familiarity with clients or overreliance on past data, but these factors can sway how you approach providing a professional service.
That’s why professional scepticism, which is where you approach each engagement with a questioning mind, is so crucial. It allows you to test assumptions rather than accept them at face value.
To help avoid bias, undergo ethics training throughout your career. The ICAEW encourages regular reflection on ethical challenges.
Also, actively seek an independent second opinion. This gives an outside view and checks your work for unconscious assumptions that might skew your conclusions.
Managing conflicts of interest
Spotting a conflict isn’t always easy. You need to stay alert to any situation where your objectivity could reasonably be questioned.
To manage conflicts effectively, you need clear internal policies that flag issues early. Establish a procedure that requires team members to disclose personal or professional connections that could affect their judgment.
Should you identify a conflict, document it and either restructure your approach or remove yourself from the assignment. Being transparent is key here.
It’s also important to be alert to any changes in regulations. The FRC’s rules on auditor independence, for instance, were revised in December 2024 to clarify what’s allowed and what’s not. For example, they restrict certain non-audit services for audit clients, aiming to avoid blurred boundaries between consultancy and assurance roles.
Safeguarding your practice
Even with solid ethics and rigorous controls, mistakes or perceived failings can happen. That’s where robust risk management comes into play.
- Build clear protocols for identifying risks: Note every decision made and document every response to ethical dilemmas. Ensure your team knows exactly when and how to report concerns.
- Implement comprehensive risk management policies: You could explore options for accountants’ insurance that can help protect your firm against claims arising from perceived or actual conflicts of interest. Don’t be afraid to seek legal advice should the situation call for it, either. Having legal representation to hand can form part of a wider risk management strategy.
Ethical threats in accounting can be potentially career-ending if ignored. By taking steps to ensure you meet the best ethical practices, you can stay compliant and build trust that sets your firm apart.
