What are the 5 Principles of the CIMA Code of Ethics? Simple Summary and Examples
CIMA, the Chartered Institute of Management Accountants, provides a Code of Ethics that serves as a guiding framework for how accountants and accountancy professionals should act.
CIMA’s Code of Ethics is made up of five fundamental principles:
- Integrity
- Objectivity
- Professional Competence and Due Care
- Confidentiality
- Professional Behaviour
Let’s now look into the definitions for each of these principles:
Integrity
A professional accountant must be straightforward, honest and truthful in all professional encounters
They should not be part of any reports, documents, or information that they know:
- Is false or misleading
- Has important information missing, making it misleading.
Objectivity
A professional accountant must always be fair, and not let personal feelings, conflicts of interest, or pressure from others affect their work.
They should not do any job if their professional judgment might be unfairly influenced by a situation or relationship.
Professional Competence and Due Care
A professional accountant must display ongoing commitment to their level of professional knowledge and precision.
This means keeping up-to-date with the knowledge and skills needed to perform the job to a high standard, and also show care and attention in their work.
Confidentiality
A professional accountant should not disclose information unless they have specific permission or a legal or professional duty to do so.
When deciding whether to disclose information, accountants should consider factors like whether it could harm anyone involved, if the information is true and complete, and who the communication is for.
There are situations where accountants may need to disclose information, such as when required by law, authorised by the client, or when there’s a professional duty.
Professional Behaviour
A professional accountant must comply with relevant laws and regulations, and also avoid any behavior that could negatively affect the reputation of the accounting profession.
What is the Purpose of the CIMA Code of Ethics?
The purpose of the CIMA Code of Ethics is to:
- Set the expected standards of behavior and conduct.
- Serve as a guide for ethical decision-making.
- Contribute towards building trust among stakeholders.
- Deter unethical behavior and prevent misconduct.
- Uphold the professionalism of a CIMA member.
- Ensure actions prioritise the interests of stakeholders.
Examples of Using the CIMA Code of Ethics
To further illustrate how the CIMA Code of Ethics can be used in real world scenarios, let’s look at some examples for each principle:
Integrity
Imagine a management accountant who uncovers a financial irregularity in the preparation of the annual reports.
Rectifying this error would reduce the reported profit in the business by a material amount, which would not look good to external stakeholders.
Upholding the principle of integrity, they promptly report the findings and correct the error, even if it means facing internal challenges and discontent from senior managers.
Objectivity
A management accountant is evaluating different investment projects for the company.
The accountant independently evaluates the potential returns, risks and other relevant factors associated with each investment.
Personal biases or preferences are set aside to ensure that the most financially viable decision is made for the benefit of the business.
Professional Competence and Due Care
An accountant takes on some extra work in their current role around interest rate hedging, something they are not overly familiar with.
To further enhance their understanding of this complex financial subject, they undertake additional training to enable them to perform their role at a higher standard.
This commitment to ongoing learning demonstrates adherence to the principle of professional competence and due care.
Confidentiality
A management accountant is preparing the annual reports for a listed company.
The financial results are likely to materially impact the share price of that company.
Acquaintances of the management accountant are asking how the business has performed over the year.
Knowing that this information could be used to profit on the stock market, the management accountant declines to disclose that information, and explains the reasoning.
This commitment to confidentiality builds trust with clients and stakeholders.
Professional Behavior
A management accountant is responsible for tax budgets and reporting.
The accountant ensures that the tax returns are conducted within the framework of applicable laws, claiming only legitimate deductions and credits.
Professional behavior highlights the importance of complying with relevant laws and regulations while avoiding any behavior that might bring the accountancy profession into disrepute.