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AUTHOR │Mandie Wentzel, Project Manager: Ethics and Practice at SAICA
SAICA’s Code of Professional Conduct aims to enable SAICA members and associates to meet their responsibility to act in the public interest (paragraph 100.1 A1). A code of conduct is a declaration of a profession’s values and in the code, the profession declares its obligations to society and defines the standards of behaviour that the public can expect from members of the profession. Having a code of conduct is a key requirement for accounting to be classified as a profession and not simply a vocation, as it provides the standards of professional conduct used for the self-regulation of the profession. The SAICA code is based on the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA code), which is a principles-based code rather than a rules-based one.
There are several reasons for selecting a principles-based code instead of a rules-based code − the most obvious being the diverse nature of the scenarios that professional accountants could find themselves in, as it would be impossible to create a rule of conduct for each unique situation.
Furthermore, rules-based approaches often have negative consequences, such as:
Rules-based regulation therefore tends to create a culture of compliance instead of ‘doing the right thing’. There are, however, some advantages to using a rules-based code instead of a principles-based code. As principles-based codes (such as the SAICA and IESBA codes) allow a certain level of discretion, this could result in different interpretations of a situation, which could run the risk of people manipulating information. The biggest advantage of rules-based regulations is therefore that they are easier to apply since the requirements are prescriptive and leave little room for misinterpretation. Also, rules-based approaches are easier to enforce consistently and can provide comparability and standardisation as they require professional judgement, principles-based codes are often difficult to apply and may be ambiguous. The principles constituting a principles-based code could also be difficult to interpret, resulting in professionals not being able to make the right decisions due to a lack of guidance.
However, the advantages of having a robust and flexible principles-based code far outweigh the disadvantages:
To conclude: principles provide high-level guidance on what the right thing to do would be and call for professional judgement in the application of these principles in specific circumstances. By adopting a principles-based code, professional bodies such as SAICA shift the responsibility from having to identify prohibited services or activities to having professional accountants use professional judgement to manage threats to the fundamental principles of ethics through designing and implementing safeguards.