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Ethics, Technology, and the Professional Accountant in the Digital Age

April 23, 2021
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Ethics, Technology, and the Professional Accountant in the Digital Age

Change is here—and more is coming—for the accountancy profession. New technologies are driving that change. This is nothing new: the profession adapted and thrived through the past century of technological revolution. But success is not a given. The profession will achieve it only with thorough and thoughtful responses to today’s challenges and preparation for those to come.

The importance of ethics in the work of professional accountants will not change with the times, but the application of the profession’s foundation in ethics will take different forms. As entire economies and societies digitalize, the traditionally data-heavy finance functions of the professional accountant are taking on a scale and level of complexity that in many cases exceed what professional accountants—or any one person—have been trained to handle. Expectations for the profession continue to grow. The profession and the core competencies of individual accountants will need to evolve to remain relevant.

To adapt well, the profession must pose the right questions and find solid answers. And wherever uncertainty makes finding answers difficult, the profession must continue this dialogue with urgency and focus.

These efforts are underway. Accountancy Education is a strategic priority for IFAC. It established a comprehensive, integrated approach to respond to accountancy education challenges and opportunities in 2019. A recent summary is included in ‘Progressing IFAC’s New Approach to Advancing Accountancy Education’. IFAC organized a virtual four-day global summit, “The Anticipatory Accountant: Global Trends Transforming Learning & Development,” on November 16-19, 2020 which focused on three broad themes: technology, the environment and society.

The International Ethics Standards Board for Accountants (IESBA) is executing its Technology Initiative, which includes an objective to identify potential ethical implications of technology developments on the robustness and relevance of the fundamental principles and independence standards in  the International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code), as well as ways in which technologies could be used to support and enhance compliance. It delivered a report in December 2019, laying the ground for a substantive and timely response to ethical and public interest challenges posed by digital transformation. More recently, IESBA has established a new Working Group to accelerate the development of guidance to assist accountants and auditors navigate the more pressing ethics and independence challenges arising from evolving technologies. During its March 2021 meeting, the IESBA approved the Term of Reference for this new Working Group and determined a new timeline for its Technology Exposure Draft.

In October 2020, IFAC convened a group of over 30 people representing professional accountancy organizations, firms, accountants in business, academia, and international standard setters around the world. On the agenda were the ABCDE of the digital age (Artificial intelligence and robotic process automation, Blockchain, Cloud, Data, and Ethics) and compliance with the Code under these new conditions.

Their discussion featured three defining themes:

  1. How much should the Code change in response to technological advances?
  2. Who is accountable for ethical issues not clearly in the scope of the professional accountant’s traditional ethical mandate?
  3. How much should professional accountants know about new ICT considerations that exceed traditional core competencies?

The conversation was fruitful—and it is certain to continue. The following are key takeaways from the event.

How much should the Code change and what support could be helpful?

Participants agreed that the Code provides high-level principles-based guidance for most technology-related ethics issues. Whether the Code’s requirements should change—and how much they should change—was the subject of a longer discussion.

Some participants felt strongly that the Code should change very little or not at all. They argued that the more detailed and specific the Code becomes on issues of ethics and tech, the more quickly further advances in technology will render the Code outdated. They raised the concern that making the Code more specific could undermine global adoption and implementation by spurring jurisdictions to carve out exceptions for themselves.

Some argued that professional accountants do not face substantially different ethical issues, but rather, new circumstances under which they need to apply the current Code. Theft is still theft even when information, rather than physical goods, is stolen. Along the same lines, the profession needs to find new ways to do essentially the same things. A practitioner, for example, does not need to develop new services when new ways of delivering existing services will suffice.

Offering case studies emerged as a popular way forward. Rather than focusing on changes to the Code, the profession could meet the demand for guidance on new issues of ethics in tech by discussing the nuances and open questions around specific applications of the Code’s principles to real-life situations. Presenting non-authoritative guidance through case studies and other materials could help practitioners interpret and apply the Code.

Who is accountable?

As business becomes more complex with digitalization and technology developments advance, questions arise on over-reliance on technology.

Artificially intelligent systems raised exceptionally broad and profound concerns. A system’s logic in producing a certain output might be clear only to its developer—or only to people with extremely sophisticated technical knowledge that match that of the developer. Some systems, especially those that feature machine learning, might give outputs that even its developer cannot explain. One participant asked, “How do you take responsibility for something over which you do not have control?” Extremely disruptive historical events, such as the COVID-19 pandemic, make relying on these systems even more challenging: because of irregularities in data, systems that learn through algorithms might be, according to one participant, “technically right but professionally wrong.”

The group emphasized that greater reliance on technology in decision-making will pose dilemmas related to the Code’s existing requirements on reliance on others, and that these dilemmas deserve further study. Maintaining professional judgement, according to some participants, requires the professional accountant to judge the reliability of a given system only with a complete understanding of the organization.

How much should the professional accountant know?

The need for a foundation in skills and ideas that enable growth—such as a commitment to lifelong learning, professional skepticism, and collaboration within a multidisciplinary model—was among the group’s most emphatic conclusions. Not least among these concepts is professional ethics. IFAC’s January 2020 call on stakeholders to re-imagine the future accountant puts the individual at the heart of future-readiness and, as a result, highlights each professional accountant’s responsibility for the lifelong learning and career development that will enable success in the digital age. A passive, compliance-based approach must give way to an active approach tailored to each individual.

ICT expertise is becoming more important for the professional accountant in the digital age. Per one participant: “How do professional accountants know what they do not know?” Education and training that help the professional accountant keep pace with technology developments will be crucial, and some in the group suggested professional accountancy organizations (PAOs) should play a big role in providing it.

The group agreed that how much a professional accountant should know will vary by role. In one role the professional accountant might need skills necessary to interrogate, synthesize, and analyze data, while another role might call for the skills necessary to collaborate with data scientists. For some participants, it was essential that professional accountants—irrespective of their roles—know enough to understand what is being said, ask the right questions of those providing data, and make sense of data to aid decision-making. One participant said, “The professional accountant cannot put his hands up and say, ‘the machine told me’ … [and] cannot accept data without understanding the underlying logic without applying enabling competencies such as critical thinking, professional skepticism, professional judgment.”

Expanding a collaborative dialogue

All participants in the event urged that as the swift pace of change raises new questions about the fitness of the profession—including its international standards—for the digital age, collaboration between all stakeholders will be essential.

IFAC encourages its members to join this dialogue. A recording of the event is available here.

Do you have additional comments? Do you have examples of ethical issues or case studies you could share? Do you have guidance that might be useful to PAOs and their members? If your answer to any of these questions is “yes,” please contact us at [email protected]. As we receive feedback, we will continue sharing thought leadership on the Knowledge Gateway.

Please also note that CPA Canada, ICAS and IFAC recently joined forces to deliver an exciting virtual workshop exploring how professional accountants continue to add value in the digital world. The event was based around an exploratory paper ‘Ethical Leadership in an Era of Complexity and Digital Change’ and a recording is also available here.

Please also continue to follow IESBA’s work in this area. Phase 2 of their Technology Initiative will cover technologies captured under the broad headings of blockchain, cybersecurity, Internet of Things, cloud-based services, and data governance.


Christopher Arnold is the head of SME/SMP and Research at IFAC. He was previously an Audit Manager for Deloitte and qualified as an accountant in a mid-tier accountancy practice in London (now called PKF-Littlejohn). Christopher started his career as a Small Business Policy Adviser at the Association of Chartered Certified Accountants (ACCA)


This article originally appeared on the IFAC Knowledge Gateway. Copyright © 2021 by the International Federation of Accountants (IFAC). All rights reserved. Used with permission of IFAC. Contact [email protected] for permission to reproduce, store, or transmit this document.

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