It is widely accepted that accountants require more than merely professional competence because their actions contribute to the moral and ethical culture of organisations. This is increasingly true in recent times as accountants are faced with new digital technologies which may impact on the ethical considerations required. 

Ethical dilemmas are not easily resolved as they often involve different perspectives and choices. Often there are different ethical and moral considerations which may include the environment, wealth distribution and personal relationships. Consequently, accountants frequently face a range of ethical dilemmas and recognising and dealing with these dilemmas is a significant part of being a professional accountant. Some of these issues can be resolved if accountants regularly engage with others as this engagement is likely to improve the accountant’s ethical thinking by helping to view an issue from different perspectives. The ultimate decisions and actions an accountant might take can be affected by culture and social norms.

Strong ethical principles and behaviour are increasingly important in the digital age as there is potential for an increased range of threats. The threats to ethical behaviour can be categorised as follows:

• Self-interest threat: a financial or other interest (personal/organisational) will inappropriately influence a professional accountant’s judgement or behaviour.
• Familiarity threat: owing to an established or close relationship with a client or employer, a professional accountant will be too sympathetic to that party’s interests or too accepting of their work.
• Intimidation threat: a professional accountant will be deterred from acting objectively because of actual or perceived pressures, including attempts to exercise undue influence over the professional accountant.
• Self-review: a professional accountant will not evaluate appropriately the results of a previous judgement, made earlier in the course of providing a current service.
• Advocacy: a professional accountant will promote a client’s or employer’s position to the point that the professional accountant’s objectivity is compromised.

A contemporary accountant needs to be aware of these issues to allow him/her to deal with new digital scenarios. These will include cybersecurity, platform-based business models, big data and analytics, cryptocurrencies , distributed ledgers and artificial intelligence (AI). Ethical behaviour helps to build trust. Stakeholders are much more likely to continue investing their trust in the accountant if there is belief that the accountant will always act ethically.

The ethical principles which are most likely to be compromised by digital developments are professional competence and due care. Ethical challenges are likely to arise as the digital age can present new problems that have not been seen before. The accountant needs to understand the situation in depth and its context before being able to act. A lack of knowledge and expertise will create the risk of compromising professional competence and due care. It is difficult to apply ethical judgement on the use of digital technology without an understanding of what it is, and the opportunities and challenges it poses. To behave ethically and instil trust, professional accountants will need to learn new information relatively quickly, and to apply their judgement to this information, often in situations they may not have seen before. In addition to being directly connected to ethical situations that are personally experienced, it is possible to be indirectly connected to ethical situations by being an observer. In these situations, the ethical responsibility of the accountant is not diminished in any way.

Data theft is the most immediate and common impact of a breach in cybersecurity. Organisations hold a lot of valuable data in a variety of systems. The data itself could be internal (eg employee-related) or external (eg customer-related). The effects of data theft include financial loss and reputation/brand damage. Hackers can expose the vulnerability in an insecure database where commercial implementations have not been adequately secured.

IT security is a technology issue but the accountant is a custodian of sensitive data and needs to be aware of the risks. The risk that objectivity may be compromised arises from intimidation from a hacker’s threats that data will be misused or destroyed. Additionally, the ethical duty of confidentiality, which would relate to customer or employee data, will also be compromised. Professional accountants need to know where there is information of value to external parties and should ensure that there are controls to secure it.

Regulation on data collection and analytics is increasing and organisations need to ensure the involvement of all relevant stakeholders. The accountant has a responsibility to ensure that regulations are understood, and properly addressed. The accountant could be accused of failure to act with integrity, competence and due care if customers’ data is misused. The organisation should be honest in the way it has obtained consent from customers for using their data and should not compromise customers’ confidentiality.

The accountant needs heightened ethical awareness when it comes to considering what action to take when there has been a breach of security in either their own organisation, or in one that they are advising. Given the accountant’s obligation to act in the public interest, it might be necessary to make a public disclosure, such as informing customers that their personal information has been exposed.

Platform-based businesses create value by bringing together consumers and producers. Examples are Airbnb, Uber, Google, Facebook, YouTube, eBay, and Alibaba. They have minimum levels of physical assets or inventory of their own to sell and do not need necessarily an increase in employee numbers to expand. They  simply need to build up a substantial user base and connect them to a list of trusted specialist suppliers  to provide the services. The individuals whose services these businesses offer may be contracted to work for the business (but are not employees)and this can often raise questions about employee protection and governance issues. The accountant may need to evaluate whether the supplier is being unfairly treated by the business, for example whether they are indeed employees and have specific rights or whether they are suppliers without such legal rights. Preventing unfair treatment of stakeholders is an issue for the accountant. In this scenario, there is a need to balance the commercial interests of the business with the interests of the suppliers and customers.

Distributed ledger technology (DLT) is a digital system for recording asset transactions in which the transactions and their details are recorded in multiple places at the same time. It is a digital database of records with information relevant to a group of participants. Unlike traditional databases, distributed ledgers have no central data store or administration functionality. All participants are looking at a common, shared, view of the records which are updated at the same time for all participants.

For example, in the UK, the Land Registry expects to use DLT to revolutionise the land registration and property buy-sell process. The reliability of such a system is paramount as is the need to ensure that sensitive citizen data is not at risk. Such a system will affect a significant proportion of the population and could result in significant economic consequences if it went wrong. In turn, this may present ethical challenges to the government’s accountants and auditors. Accountants will therefore require a knowledge of distributed ledgers and be able to assess the risk of hacking or other unauthorised access to data. Professional accountants must be honest about whether they are comfortable with their knowledge of DLT and may need to consider the public interest when they are dealing with large volumes of sensitive information.

The increasing use of big data, and AI can enable quicker more consistent, evidence-based and accurate decisions. AI should be lawful, ethical and robust.

However, the characteristics of AI create questions around the ethical use of the new technologies. Artificial intelligence and machine learning technologies are rapidly transforming society and will almost certainly continue to do so in the coming decades. This social transformation will have deep ethical impacts, with these powerful new technologies both improving and disrupting human lives.

 The accountant should review the governance and assurance needed around AI, so that all stakeholders can have confidence in its appropriate use. The following  ethical issues may arise for the accountant:

• Artificial intelligence, like human intelligence, may be used maliciously.
• There are risks of bias in the system in unexpected and potentially detrimental ways.
• AI will be a threat to certain categories of employment.
• There is the question of technical safety and failure.

The principles embodied in ethical codes will remain highly relevant in the face of big data, and AI. However, while the ethical principles do not necessarily need to change, compliance is likely to become more difficult. A challenge is the lack of understanding around the contractual terms regarding the use of data.

Finally, the list of contexts in which confidentiality can be breached is ever growing, which makes it unique amongst the fundamental principles. However, the fundamental ethical principles are still fit for purpose. AI may well remove certain ethical threats for example, intimidation threat, but it may also complicate demonstration of compliance with the principles.

There are various ways of addressing an ethical issue and one such way is outlined below:

• The accountant must determine the nature of the decision that has to be made by determining the context of the ethical dilemma.
• The accountant must determine whose rights and interests are affected by the decision.
• The accountant must determine the rules of professional practice, internal and external governance codes and relevant laws.
• The accountant needs to set out the arguments in for and against taking a particular course of action.
• The accountant needs to formulate a solution that does justice to the arguments for and against the action to be taken.
• The accountant needs to take into account any negative consequences of taking or not taking the action.

It can therefore be seen that, although the environment in which an accountant operates may change, in this case become more digitalised, the basic ethical considerations remain the same. However, there may be some additional things that the accountant may need to think about if s/he finds herself/himself in an ethical dilemma that is set in a digital context. These considerations are summarised above and SBR candidates should have an awareness of these whilst preparing themselves for their forthcoming SBR exam and professional career.

Written by a member of the Strategic Business Reporting examining team