The complicated regulatory and financial environment today subjects Australian accountants to growing examination of their independent practices and ethical decision-making skills. Accountants must consistently address conflicts of interest that threaten professional objectivity through competing responsibilities and personal associations.
Professional accountants practising in commercial roles or serving in public and advisory positions must treat conflict of interest identification and management as both an ethical and legal requirement beyond theoretical speculation. When conflicts of interest are mishandled, they can cause reputational harm and disciplinary measures and result in violations of the Accounting Professional & Ethical Standards Board (APESB) Code of Ethics.
Accounting professionals need to comprehend how conflicts of interest manifest within their field.
A conflict of interest emerges when a professional accountant’s responsibilities toward one party could be jeopardised by their obligations to another party or their own interests. The APES 110 Code of Ethics for Professional Accountants (including Independence Standards) describes a conflict of interest as:
“A situation where a professional accountant possesses competing professional or personal interests that could potentially impact their objectivity.”
A professional accountant faces a conflict of interest when they possess competing professional or personal interests that threaten their objectivity.
Conflicts can emerge through multiple channels as follows:
Personal conflicts (e.g. a financial interest in a client’s business)
Professional conflicts (e.g. acting for two clients with opposing interests)
Organisational conflicts (e.g. internal reporting lines affecting impartiality)
Conflicts can be actual, perceived, or potential. Accountants need to consider all forms of conflict as significant under the APES 110 Code, regardless of personal beliefs about judgment impact.
Common scenarios leading to conflicts
Accountants need to understand the usual situations where conflicts occur to manage them successfully. These include:
Accountants must prepare financial statements for companies when they or their close family members own shares in those companies.
Accountants face potential conflicts when they give business advice to several clients operating within the same industry who might compete against each other.
Auditing services provided to a client, together with non-audit services that include tax advice or transaction support, generate potential conflicts.
Accountants who perform professional services while holding management positions or board/advisory roles in client companies experience potential conflicts of interest.
New fields like sustainability reporting and crypto asset management present special conflict risks when accountants share training or investment strategies across various platforms.
Regulatory and ethical frameworks
The APES 110 Code serves as the fundamental ethical guideline for Australian accountants and conforms to the standards set by the International Ethics Standards Board for Accountants (IESBA). The Code establishes five fundamental principles:
Integrity
Objectivity
Professional competence and due care
Confidentiality
Professional behaviour
The principle of objectivity receives its greatest threat from conflicts of interest, which also undermine professional behaviour. The Code mandates a risk-based approach: Accountants need to recognise threats and assess their importance before implementing protective measures to minimise them to a tolerable degree, but should withdraw from an engagement if risk mitigation proves unsuccessful.
Certain responsibilities become mandatory for professionals working within regulated fields like audit services and financial advisory roles. The ASIC and ATO regulatory agencies can conduct investigations into compliance-related conflicts when matters of public interest are involved.
A practical framework for managing conflicts
A structured framework with defined key steps enables accountants to manage conflicts proactively.
1. Identification
Early identification is critical. Accountants need to keep a heightened awareness level throughout the client onboarding process and during both service scoping and engagement renewal stages. Red flags include:
Dual roles or relationships with the client
Related parties involved in multiple engagements
Situations involving contingent fees or performance-based incentives
Conflict check systems enable firms to identify engagements that involve related clients and stakeholders or overlap service areas. All relevant departments must provide input to keep these systems up-to-date through regular updates.
2. Evaluation
After recognising a potential conflict, the next step involves evaluating both its nature and its significance as a threat. Consider:
Is the conflict actual or perceived?
Would a reasonable third party who understands the facts consider the accountant's objectivity compromised?
Are there any legal or regulatory implications?
All evaluations require documentation, while those that demand additional scrutiny must be examined by a senior or independent member of the firm.
3. Safeguarding
When a conflict is manageable, appropriate safeguards must be implemented. These may include:
Informing relevant parties and obtaining informed consent
Implementing barriers that prevent information sharing between staff members handling competing client engagements is essential.
The firm should ensure each client receives service from distinct teams or partners.
Using review mechanisms by independent senior personnel
Rotating staff to maintain independence
When the implementation of effective safeguards proves impossible, the ethical choice becomes withdrawing from or declining the engagement.
Institutional policies and cultural considerations
Firms need to integrate conflict management within their governance frameworks beyond individual client work. This includes:
Create and update a conflicts of interest policy designed to meet the organisation's services, client needs and sector-specific requirements.
Staff members need training on identifying conflicts and making disclosures as a component of their continuous professional development.
Large firms need to create a conflicts committee that investigates intricate and ambiguous cases.
The organisation should foster an ethical culture through transparent communication about possible conflicts.
These practices maintain response consistency while ensuring defensibility and alignment with community standards.
Communicating transparently with clients
Open communication is fundamental to conflict management. Upon revealing a conflict, clients must receive information about it using straightforward language.
Clients will receive information about their choices, which encompasses the option to withhold consent.
Recording this communication process protects professionals from liability claims. If consent is granted, it should come from a knowledgeable and voluntary decision rather than being assumed or inferred.
Technology and emerging risks
The shift toward digital transformation brings fresh complexity to the management and detection of conflicts. Modern accountants deliver services through cloud-based systems alongside AI-driven analytical tools and third-party platforms. These technologies sometimes make data flows difficult to follow while embedding automated decision-making and creating potential hidden conflicts throughout systems.
Organisations need to examine technological conflict implications, which include data access levels along with information exchange practices and unintentional overlaps of advisory with assurance functions across their technological platforms.
Traditional engagement boundaries become increasingly indistinct as accountants expand their services to cover ESG reporting, digital transformation and virtual CFO functions. Ethical clarity becomes more important than ever.
The professional lives of accountants inevitably contain conflicts of interest, yet these conflicts should not threaten their ethical standards or professional standing. Accountants who implement a proactive and structured approach with transparency based on APES 110 Code principles and firm policies can identify risks early to take proper actions that uphold top accounting ethics standards.
The rising regulatory demands and evolution of the accounting field necessitate ongoing education through superannuation webinars and legal briefings to keep accountants both informed and prepared for these challenges. The accounting profession depends on trust, which stems from the foundational practice of managing conflicts professionally and with integrity.
Article by TEN - The Education Network
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