Ethics and disclosure: An analysis of conflicting duties

Abstract

Abstract The ethics of many professionals, including accountants, have come under increasing scrutiny and have been frequently challenged. In the case of accountants an area of concern is fairness of disclosure. Frequently referred to as “the expectations gap”, there seems to be a difference in perception on the part of the public and accounting professionals as to what constitutes fair disclosure. This paper is an attempt to clarify the ethical duties of the accountants in the area of disclosure. It is shown that accountants sometimes have a genuine conflict between duties to comply with professional rules and duties to disclose information in the public interest. The conflict is analysed by bringing to bear the extensive research on conflicting ethical duties from the philosophy literature. Four criteria used in the philosophy literature are applied in an attempt to resolve the conflict. The results of that analysis indicate that, at least sometimes, accountants are ethically compelled to violate rules requiring compliance with GAAP and/or maintenance of client confidentiality. The circumstances under which disclosure is ethically compelled relate to the certainty of outcomes and consequences of not disclosing. This paper is not a prescription for practicing accountants, but is forwarded in the hope of enlightening policy makers to the ethical dimension of disclosure issues in practice. As it stands, professional rules in accounting do not necessarily support ethical behaviour on the part of accountants in regard to disclosure.