Stricter Guidance for Accounts Being Proposed by Ethics Board

On November 25th, 2014, the International Ethics Standards Board for Accountants (IESBA) released a draft of some important changes to their accounting rules. Entitled "Proposed Changes to Part C of the Code Addressing Presentation of Information and Pressure to Breach the Fundamental Principles," the new guidelines are designed to help accountants produce accurate financial reports for their clients and navigate some of the ethical challenges that they face.

Many industry pundits believe that the revised accounting rules released in late November will help professional accountants working for businesses fulfill their obligations more easily. The new accounting guidelines clearly address the two aspects of a common quandary for modern accountants: the legal obligation to correctly report financial facts versus their clients' requests that they misreport data to place the company in a more favorable light.

Naturally, not all clients request that their accountants fudge the books. However, when it does happen, it can create an awkward situation for even the most experienced professional accountants. The revised accounting rules provide clear guidance about accountants' responsibilities as they prepare and present monetary information. Furthermore, they address the dilemma that manifests itself when clients or accountants choose particular accounting techniques over others in order to misrepresent financial data.

The IESBA's Exposure Draft presents a number of common scenarios during which business clients commonly attempt to pressure their accountants. With these acknowledgements, the IESBA demystifies some formerly foggy client-versus-accountant situations and offers their accountant members several viable solutions.

In addition to clarifying existing accounting rules, the revised guidelines provide accountants a way out of several so-called "gray areas." When they cite the new rules, accountants are, in effect, enabled to do perform their duties honestly instead of being forced into a deadlock with clients. If clients insist that their accountants use deceptive data, the guidelines make it easier for those accountants to disassociate themselves from the misleading information, thus protecting themselves and their careers.

The IESBA, which is an independent standard-setting entity under the patronage of the International Federation of Accountants, has long issued and supported the implementation of ethical standards for the international accounting community. In fact, member bodies have to comply with its accounting rules if they wish to remain in good standing with the board. Because of this, individual accountants have some leverage, particularly when they speak to their business clients about their professional and legal duties.

Accurate accounting is a vital part of any business, and when accounting rules are unfairly bent to present companies more favorably, their accountants risk serious professional consequences if their actions are discovered. Conversely, those accountants could face dismissal by disgruntled clients if they don't do as they're told. By addressing these uncomfortable issues and providing accountants with a set of revised accounting rules, IESBA has further empowered its professional membership.

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