Gifts, entertainment, and bribery pose ethical challenges for accountants. These practices can blur the lines between professional relationships and improper influence, potentially compromising integrity and objectivity. Understanding the boundaries is crucial for maintaining trust in the profession.

Accountants must navigate complex legal and ethical landscapes when dealing with gifts and entertainment. Clear policies, adherence to professional standards, and a commitment to transparency are essential. Recognizing and avoiding bribery is vital to uphold ethical standards and comply with anti-corruption laws.

Gifts and Entertainment in Accounting

Distinguishing Between Acceptable and Unacceptable Gifts and Entertainment

• Gifts and entertainment are common in business relationships but there are legal and ethical boundaries that must be observed, especially in the accounting profession where independence and objectivity are paramount
• Acceptable gifts are typically of nominal value, not given with the intent to influence a business decision, and would not be perceived as compromising an accountant's integrity or objectivity (small promotional items, moderately priced meals, occasional tickets to local events)
• Unacceptable gifts are those that are lavish, extravagant, or given with an explicit or implied expectation of receiving something in return, such as preferential treatment, confidential information, or a favorable decision
  • Cash gifts are generally prohibited
• The frequency and timing of gifts and entertainment should also be considered
  • Accepting multiple gifts from the same party or gifts during sensitive periods like contract negotiations or audits may create the appearance of impropriety

Guidance on Acceptable Practices

• Company policies, professional ethics codes, and cultural norms provide guidance on acceptable practices
• Accountants should err on the side of caution and consult with supervisors or ethics officers when in doubt
• Examples of company policies may include setting value limits on gifts, requiring disclosure or approval for certain types of entertainment, or prohibiting gifts from audit clients
• Professional ethics codes like those issued by the AICPA and IFAC emphasize the importance of integrity, objectivity, and professional skepticism in dealing with gifts and entertainment

Bribery and Corruption: Legal and Ethical Implications

Defining Bribery and Corruption

• Bribery is the offering, giving, soliciting, or receiving of something of value to influence the actions of an official, or other person, in charge of a public or legal duty
• Corruption is the abuse of entrusted power for private gain
• Engaging in bribery or corruption is illegal under domestic and international laws
  • Penalties can include fines, imprisonment, and reputational damage for both individuals and organizations
• Bribes can take many forms beyond cash payments (lavish gifts, entertainment, travel expenses, charitable donations, job offers for decision makers or their relatives)

Ethical Considerations and Public Trust

• Facilitation payments, sometimes called "grease payments," made to expedite routine government actions may be allowed under some laws but are still ethically questionable and prohibited by many companies
• Even the appearance of bribery or corruption can undermine public trust in the accounting profession and the integrity of financial markets
• Accountants have a responsibility to act with honesty and integrity and to report any suspected wrongdoing
• Turning a blind eye to bribery or corruption, even if not directly involved, can make an accountant complicit and damage their professional reputation

Anti-Bribery and Anti-Corruption Laws for Accounting

Key Laws and Regulations

• Numerous laws and regulations exist at the national and international levels to combat bribery and corruption
  • Key examples include the U.S. Foreign Corrupt Practices Act (FCPA), the U.K. Bribery Act, and the OECD Anti-Bribery Convention
• These laws generally prohibit the payment of bribes to foreign officials to obtain or retain business and require companies to maintain accurate books and records and adequate internal controls
• Violations can result in significant fines, imprisonment for individuals, and exclusion from government contracts

The Role of Accounting Professionals

• Accounting professionals play a critical role in preventing, detecting, and reporting bribery and corruption
  • They are responsible for ensuring that financial statements are free from material misstatement due to fraud and that internal controls are effective
• Auditors are required to assess the risk of material misstatement due to fraud, including bribery, and to respond appropriately
  • This may involve additional audit procedures, communication with management or those charged with governance, or reporting to regulatory authorities
• Professional ethics codes, such as those issued by the AICPA and IFAC, also address bribery and corruption and provide guidance for accountants on how to maintain integrity, objectivity, and professional skepticism

Policies for Handling Gifts, Entertainment, and Bribery

Establishing Clear Policies

• Organizations should establish clear, written policies on gifts, entertainment, and anti-bribery that align with applicable laws, regulations, and professional standards
  • These policies should be communicated to all employees, directors, and third parties acting on the organization's behalf
• Gift and entertainment policies should set value limits, define acceptable and unacceptable types of gifts and entertainment, address timing and frequency, and provide guidance on when prior approval or disclosure is required
• Anti-bribery policies should prohibit the offering, giving, soliciting, or receiving of bribes, kickbacks, or other improper payments
  • They should also address facilitation payments, political and charitable contributions, and hiring of government officials or their relatives

Implementing Procedures and Enforcement

• Procedures should be implemented to support compliance with these policies
  • This may include due diligence on third parties, training for employees, regular risk assessments, monitoring of expenses and transactions, and mechanisms for reporting and investigating potential violations
• Accounting and record-keeping procedures should ensure that all transactions are accurately and transparently recorded and that there are no "off-books" accounts or hidden payments that could be used to conceal bribes
• Enforcement of policies is critical
  • Violations should be promptly investigated and disciplined, and the effectiveness of policies and procedures should be regularly reviewed and updated as needed
• Tone at the top is important - senior management and the board should model ethical behavior and reinforce the importance of compliance