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The bottom line no accounting professional should cross

Why it is vital to know the difference between the principle of professional behaviour and unethical behaviour

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Professional behaviour is one of the five fundamental accounting principles with which accounting professionals must comply. It is defined in AAT’s Code of Professional Ethics as the requirement “to comply with relevant laws and regulations and avoid any conduct that discredits the profession”.

The first part of the principle is a clear, non-negotiable legal requirement; the second, however, is more subjective. Being required to avoid any conduct that discredits the profession means considering the profession’s reputation beyond that of legal compliance.

Unethical behaviour can be understood in broader terms. It is any action that violates the spirit or letter of the code in its entirety. It therefore relates to all five of the fundamental ethical principles: integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.

What’s the difference?

Essentially, the principle of professional behaviour defines a minimum standard that is required of accounting professionals in relation to its specific scope; unethical behaviour is any conduct that falls short of the profession’s broader standards as defined by the code.

This means that breaching a fundamental principle will mean that the individual involved has behaved unethically.

Examples of unethical behaviour that breach the principle of professional behaviour include money laundering and tax evasion, making false or exaggerated claims in advertising professional services, or making inappropriate statements in public or online. However, fraudulent financial reporting would also be unethical behaviour as it is a breach of integrity, as would disclosing client data for personal gain because that breaches confidentiality.

The potential consequences of unethical behaviour are severe. They can impact the individual, their employer and the profession. They can be enforced by accounting bodies through disciplinary regulations, by employers through internal disciplinary procedures, as well as the legal system.

Disciplinary action by professional accounting bodies

When a complaint of unethical behaviour is made against an AAT member, it is investigated. Where misconduct is proven, sanctions are imposed and the outcomes of the investigation published on its website. This is because disciplinary action is designed to protect the public and uphold the integrity of the profession. Making information publicly available goes some way to mitigating reputational damage and maintaining the public’s trust, as well as ensuring it is easily discoverable by current and prospective clients/employers. Typical outcomes include:

Reprimand	Used when past behaviour was clearly unacceptable but did not result in significant risk or damage to the public, the member’s professional reputation or AAT.
Warning	Focuses on future conduct and aims to modify behaviour to promote the public interest. Reprimands and warnings are often issued together as a disciplinary sanction.
Fine	Can be up to a maximum of £10,000. May be imposed alone or with other sanctions.
Conditions on membership / licence	Restrictions placed on the member’s ability to practice or offer specific services. May include restrictions on taking new clients or a requirement for mandatory supervision/further training.
Suspension	Temporary removal of membership and the right to practice as an AAT member, meaning the AAT designation cannot be used, or licensed services provided, during the period.
Expulsion	Permanent removal of AAT membership and loss of AAT qualification/designation.

Internal disciplinary procedures

Unethical behaviour by accounting professionals who are employed is likely to be subject to internal disciplinary procedures as well as AAT’s disciplinary action. An employer will probably undertake a formal internal investigation to determine if there has been a breach of the company’s rules or the individual’s contract of employment.

Different organisations will have different processes and consequences depending on the nature and severity of the unethical behaviour, but typically:

misconduct, such as persistent poor professional conduct, could result in warnings, and
gross misconduct, such as fraud, theft, severe insubordination or actions bringing the company into serious disrepute, could lead to dismissal.

Employers may also report misconduct to AAT to ensure the professional body is aware of the unethical behaviour.

Potential financial consequences

AAT fines and costs	Financial penalties plus legal and investigation costs.
Loss of income	Loss of salary or business earnings due to suspension, loss of a practising licence or eventual expulsion/dismissal.
Legal fees	Cost of legal representation (AAT disciplinary tribunals plus any civil or criminal court proceedings).
Civil damages	Cost of being sued by an employer or client for negligence, breach of duty or financial loss resulting from unethical conduct.

Potential legal consequences

Criminal charges	Money laundering, fraud and tax evasion are examples of unethical behaviour which is also illegal and can therefore result in arrest, prosecution and imprisonment.
Regulatory penalties	Breaching specific financial regulations, such as Anti-Money Laundering (AML) regulations, can result in significant penalties and potentially criminal charges.
Professional indemnity	Unethical behaviour could result in insurance policies being voided.

Potential reputational consequences

Negative publicity	Lasting reputational damage, for individuals, employers and the profession, can occur when unethical behaviour is reported in the media.
Loss of trust	Unethical behaviour can undermine confidence in both the individual and profession with clients, employers, and the public.
Unemployability	Future employment or business can be difficult to find due to AAT's publication of disciplinary action.

KEY TAKEAWAYS

The Code of Professional Ethics sets out the fundamental principles with which accounting professionals must comply, including that of professional behaviour. Unethical behaviour is anything that falls short of the expected standards outlined for the profession in the Code. The consequences of unethical behaviour can be significant and widespread, encompassing disciplinary action enforced by professional accounting bodies such as AAT, internal disciplinary procedures taken by employers, as well as having financial, legal and reputational ramifications.

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