Dear Professional Colleagues,
Ethics build the foundation, integrity fortifies it, and professionalism turns it into a legacy that inspires trust. On the occasion of Global Ethics Day on 16th October, I call upon all my colleagues to take up the mantle and achieve remarkable milestones, while upholding the bedrock of our profession that is Ethics and continue to forge the legacy of profession as trustees of public interest.Our profession is built on the pillars of excellence, independence and integrity, fostering a deep commitment to ethical principles at every stage of our journey. Since the dawn of accounting, ethics have been crucial in building trust and credibility, enabling us to serve as the custodians of the public interest.
As we navigate the complexities of today’s financial landscape, our role in promoting transparent reporting and corporate governance remains vital. The profession will continue to uphold these values, ensuring sustainable growth and contributing positively to society by maintaining the highest ethical standards.
Ethics: The Cornerstone of Indian Governance
Ethics play a pivotal role in shaping the governance framework of India. At present various regulatory bodies have embedded ethical principles for good governance and development of resilient economy. The Reserve Bank of India (RBI) encourages ethical banking and protects public interest through its Code of Bank’s Commitment which specifies the minimum standards of banking practices to be followed by the banks while dealing with the customers. Securities and Exchange Board of India (SEBI) ensures corporate governance in listing companies by enforcing Listing Obligations and Disclosure Requirements (LODR) regulations, fostering transparency and accountability in financial disclosures and its whistleblower provisions further strengthens and safeguards public interest in capital markets. Similarly, the Ministry of Corporate Affairs (MCA), released a set of guidelines in 2019 called the National Guidelines on Responsible Business Conduct (NGRBC) to provide guidance to businesses on what constitutes responsible business conduct.
Redefining Ethics for a Brighter Tomorrow
As a partner in nation building, the Institute has been diligently carrying out the assigned role of regulation and development of the profession of Chartered Accountants. Being relevant in this, the role of ethical standards is not only indispensable but interlinked with other professional standards too. The profession has always been stringent in following the Ethics. In 1952, amendment to the Chartered Accountants Act, 1949, introduced new clauses on professional misconduct, covering undercutting, client communication, and compliance issues. In 1959, significant changes added two schedules: the First schedule, addressing professional misconduct compromising independence, and the Second schedule, requiring High Court action. The ICAI introduced its first Code of Conduct in 1963, setting ethical standards for accountants. In 1976, the Ethical Standards Committee was formed to oversee ethical guidelines and ensure compliance by members, even before the formation of International Ethics Standards Board of Accountants (IESBA) of International Federation of Accountants (IFAC). Over the years the institute has revised the Code of Ethics many times to remain relevant, latest being in 2020.The Ethical Standards Board is actively shaping our profession to align with stakeholder expectations. Recently, it has decided that statutory auditors can no longer prepare Business Responsibility & Sustainability Reporting (BRSR) for audit clients but may issue advisory on the same. The measure aims to foster integrity and independence in all the different endeavours undertaken by the Chartered Accountants.Recently, CA Connect Portal was launched, it serves as a compliant platform for listing CA Firms and practitioners, adhering to ethical norms. It offers a centralized search engine, allowing clients to find services based on expertise, bridging the gap between clients and Chartered Accountants across locations.With these changes ICAI remains committed to maintaining high ethical standards and ensuring that members’ professional roles do not conflict with their duties as independent auditors.As CAs we must ensure adherence to laws and regulations related to taxation, finance, and governance so that these laws are respected and achieve its desired objective, by guiding their clients toward lawful and just actions. Our profession as trusted advisors help the stakeholders in choosing paths that are both legal and equitable.In today’s evolving landscape, as a professional we must upskill ourselves and be ready to address new ethical challenges, arising from the new and emerging regulatory requirements like sustainability reporting, related disclosures and challenges arising due to the technological advancements like ethical considerations of AI, data privacy and cybersecurity, ensuring that the reporting remains responsible and fair promoting the public interest.
Global Shifts: Evolving Ethical Standards by International Bodies
Ethics in the accounting profession vary across countries, yet many align with global standards to ensure consistency and trust. Most nations follow the International Ethics Standards Board of Accountants (IESBA) Code of Ethics, which emphasizes core principles such as integrity, objectivity, confidentiality, professional competence, and behaviour. These principles form the ethical backbone of the profession, ensuring a unified approach worldwide.Countries like the USA, UK, Australia, and Ireland place a strong emphasis on auditor independence due to their complex financial markets. Transparency and accountability to the public are also key, particularly in countries like Canada and Australia, where the ethical codes emphasize public duty and transparency in financial disclosures. In nations like India, Singapore, and Malaysia, ethics are tightly woven into corporate governance, requiring accountants to provide transparent financial information. These countries also have strict anti-corruption and fraud prevention measures, reflecting their efforts to combat unethical practices in emerging markets.Additionally, nations are adjusting their reporting frameworks to address modern challenges such as digital currencies and cybersecurity, ensuring that ethics evolve alongside technological advancements of AI/ML in the global financial landscape.
India Setting the Path for Global Leadership
India and the Indian Accounting Profession has always been on forefront of working to establish the practices, standards and frameworks to move on the path of building an ethical path for leadership which is imperative for the development of society and mankind. The words of our Past President CA R.C. Cooper as stated in foreword of the 1963 edition of the Code, aptly places the Ethics at the heart of our profession:-
- Ethics is a state of the mind, and there may be some act which, though it may not strictly fall under one of the items of the Schedule, may be one which may not be proper by any moral or ethical standards. In the larger interests of the Institute, the Council exhorts all members to search their hearts and conscience whenever in doubt, and thereby assist towards the maintenance of high principles of professional conduct established by the Council.
It is noteworthy that International Federation of Accountants (IFAC) issued its first edition of Code of Ethics for Professional Accountants in July, 1990 whereas the Institute brought its first edition of Code of Conduct in 1963 for the Chartered Accountants. We are stringent of the International ethical standards by certain parameters. Internationally, there are very little of the kinds of prohibition contained in clauses of the two schedules to the Chartered Accountants Act. Even in the comparable areas, Institute has certain stricter provisions e.g. complete bar on accounting and internal services to audit clients, which may not be so internationally.As we understand standard setting globally, it becomes evident that while the Western world formulates standards tailored to their specific needs, India is setting an example by developing forward-thinking, globally relevant standards. India supports global convergence through standards like Ind AS aligned with IFRS, and International Standard on Auditing (ISA), while also pioneering new trends, such as the development of Forensic Accounting & Investigation Standards (FAIS) and Sustainability Reporting Standards. Additionally, innovative practices like the Unique Document Identification Number (UDIN), Digital Competency Maturity Model (DCMM), and Audit Quality Maturity Model (AQMM) playing pivotal role in enhancing the quality of our profession.With persistence and dedication to excellence the CA course and qualification and course has evolved to be amongst the best globally. Today, it is evident that our 42,000 members are making their mark on global landscape and building the Indian Accountancy Profession into a global brand. Further, it is interesting to see that while our 1954 members were able to become members of leading global accounting bodies (ICA England & Wales, CPA Australia, CPA Canada, CPA Ireland, South African Institute of Chartered Accountants(SAICA), CA Australia & New Zealand, Malaysian Institute of Certified Public Accountants(MICPA), ICA Nepal) under the Mutual Reciprocity Agreements (MRA) for recognition of qualification while not many foreign members were able to gain the Indian qualification. This is testimony to quality of our CA curriculum incorporating the latest technological advancements and ethical standards, which has nurtured our members into global professionals with comprehensive knowledge, futuristic skillset and global mindset. On many occasions the Hon’ble Supreme Court has applauded ICAI education and examination system for its quality.With the rise in the quality membership of ICAI, total membership strength has risen to 4 lakh members & student base of 9.5 lakhs, making it the world largest accounting body, whereas other Accounting bodies are struggling to attract talent to the profession.India’s rapid rise on the global stage exemplified by visionary leadership of our Hon’ble Prime Minister Shri Narendra Modi ji, has propelled the nation’s global aspirations to new heights. This is evident through India’s successful execution of the G-20 summit and its growing influence in global initiatives like the Global Biofuel Alliance and International Solar Alliance.In this transformative moment, ICAI must leverage this opportunity by harnessing its quality education, professional expertise and innovation potential to lead the global standard setting process and shape the international financial landscape by fostering trust, transparency, and equity. As we celebrate Global Ethics Day on 16th October, 2024, I urge all our members to follow the path of ethics and be abreast of latest development in ethics by attending the programs being conducted by CPE Study Circles, branches and Regional Councils.
