Home Accounting and Auditing Accounting ethics in the time of Covid-19 – avoid the fraud trap

Accounting ethics in the time of Covid-19 – avoid the fraud trap

906
0

The economic lockdown as a result of Covid-19 creates unprecedented opportunity for fraud, and will undoubtedly place huge pressure on accountants to sidestep their ethical obligations to act with integrity and professionalism.

The kind of fraud already starting to rear its head involves making false submissions for government Covid-19 assistance, falsifying financial statements, or making false declarations to SA Revenue Services.

The International Ethics Standards Board for Accountants (IESBA) has issued an ethics guide to accountants which is a timely reminder of the obligations and responsibilities imposed on all professional accountants.

The IESBA guide emphasises that professional accountants are required to comply with the five fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. The dramatic change in the business landscape may present new challenges and threats to accountants. Perhaps one principle stands out at times like these: integrity. Be honest and straightforward in all professional and business relationships. Professional accountants will be called on to produce, analyse and deliver the information on which critical decisions will be made, so it is vital that they live up to their ethical obligation to act with integrity.

What should accountants look out for from an ethical perspective?

Pressure to influence the preparation and presentation of information, falsely reporting revenue or expenses, or pressure to process a fraudulent claim for government assistance, for example.

Other pressures include:

  • Pressure to act without sufficient expertise or due care
  • Pressure to violate compliance issues with laws and regulations
  • Pressure related to conflicts of interest.

What are some of the issues related to NOCLAR?

NOCLAR stands for Non-Compliance with Laws and Regulations. NOCLAR is any act of omission or commission, intentional or unintentional, committed under the direction of an employing organisation. Accountants need to be alert to the fact that the pandemic has created opportunities for fraud, especially in the acquisition of personal protective equipment, online fraud (such as the sale of fake medical goods), fraudulent applications for government support, and charity impersonation fraud.

What about the pressure to reduce accounting service fees? This is a sensitive area that is best left up to the individual accountant, and there are no doubt good grounds for reducing fees or accepting delayed payments. But care should be taken to charge fees at a level appropriate for the task – in other words, not to undercharge so as to impair the ability to perform the engagement with at the required technical and professional standards.

When it comes to providing non-assurance services (or NAS) to clients, it is crucial to bear in mind that management of the client company is responsible for controlling, leading and directing the company. The NAS must not assume this function. In other words, the NAS must not create a threat to independence, nor may the accounting firm evaluate or compensate its members based on the success of selling NAS to audit clients.

For more information click here.

Saiba is offering the Practice Management webinar series for further information on this topic.