Rethinking ethics management after PwC junior auditors fined
November 24, 2023
The PwC audit ethics breach serves as a stark reminder of the importance of ethical practices in accounting. This article explores the lessons accountants can learn from this incident and how they can strengthen their ethical practices to prevent similar breaches.
When in training, accountants are taught about several principles that are tantamount to the profession: integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour. They form the fundamental principles of the Ethics Code of Conduct for most accounting bodies.
In November 2023, a group of junior PwC audit staff were reprimanded by the ICAEW for sharing assessments for an assessment in a ‘group chat. They were all ordered to pay a fine of £2,107 and were found in breach of the Code of Ethics for professional behaviour.
ICAEW disciplined the PwC staff who participated in a group chat where two assessment answer documents were ‘created, added to, used and shared to assist with the completion of a number of assessments’, ICAEW said. The assessments were part of the training programme at PwC which were required to be completed by the staff.
Lessons from the PwC Ethics Breach
There has been an argument for many years that the ethics training provided to accountants – as well as legal, tax and other corporate professionals – needs to evolve beyond a box-ticking exercise.
In 2022, EY was forced to pay $100 million after auditors cheated on an ethics exam. The accounting giant was found to have withheld evidence from the US Securities and Exchange Commission when some of its audit professionals were doing to have cheated during exams required to obtain and maintain CPA licensees.
This along with the PwC ethics breach offers several important lessons for accountants. Firstly, it underscores the importance of individual responsibility in upholding ethical standards.
As the ICAEW disciplinary board noted, the individuals involved “knew, or should have known that they should not share answers or use answers shared by others.” This highlights the need for accountants to understand and adhere to ethical standards, even when under pressure.
There is also a role for firms to play. If staff need to be told not to accept bribes, this may be a sign that the employer has more serious problems. PwC’s response to the incident, included reinforcing expected behaviours and responsibilities, but went little further.
Strengthening ethical practices
To prevent similar incidents, accountants and firms can take several preventative measures. These include comprehensive ethics training, regular reminders of ethical standards, and robust mechanisms for reporting and addressing ethical breaches. Firms should also foster an environment where ethical behaviour is valued and rewarded.
Moreover, professional bodies like ICAEW can play a crucial role in promoting ethical practices. This can be achieved through stringent enforcement of ethical standards, as well as providing guidance and resources to help accountants navigate ethical dilemmas.
But there is also an argument to throw out the rule book and change ethics training altogether.
Every organisation, regardless of its business model or sector, will face ethical challenges. Recognising the inevitability of these issues is the first step. As Professor Linda Trevino notes, ethics are like a garden needing regular care to prevent the growth of weeds. Rather than viewing ethics as a problem, organisations should see them as a natural part of operations.
Open discussions about ethical challenges can foster a culture where employees are more inclined to address them. Organisations must understand that employees might not always recognise these challenges. Creating interventions that make ethical actions more straightforward than unethical ones is key.
For instance, training employees to navigate real-life situations, especially in contexts where ethical dilemmas like bribery are prevalent, is more effective than theoretical training. This approach equips them with practical skills to identify and tackle ethical traps.
Human tendencies like justifying decisions or ignoring challenging issues can impede ethical behaviour. Organizations should create environments where reporting ethical issues or seeking help is encouraged and viewed as a positive action. A good example is the UK’s “See It. Say It. Sorted.” campaign by the British Transport Police, which effectively encourages public reporting of suspicious activities.
Redefining the program
The incidents at PwC and EY are not mere breaches; they are symptomatic of a deeper issue in the ethical fabric of the accounting profession. It’s time to pivot from traditional rule-based ethics training to a more dynamic and situational approach.
This shift demands a blend of practical training, open discourse, and a culture that prizes ethical decision-making. Perhaps, it’s also time to explore innovative strategies, such as gamified ethics training or AI-driven ethical dilemma simulators, to engage the modern accountant.
[Accountancy Age]
