ACCA - The global body for professional accountants


What if your manager asks you to claim expenses under a code other than that relating to the expenses incurred, on the grounds that this budget code is under-spent and the correct code is already over-spent.

Step One: What are the relevant facts?

It is not that you are being asked to claim expenses fraudulently, because the expenses were legitimately incurred, and so you are not benefiting financially. The issue is whether budget information and variance analysis would be reliable if managers are manipulating the use of budget codes. The incorrect allocation of the expense could result in the senior management being deliberately misled. You might think that you have no choice, because your manager is asking you to do this. But should you be taking more responsibility for your actions?  Should you be seeking more information from your manager?

Step Two: What are the ethical issues involved?

Be aware of the five fundamental principles. You are clearly being asked to breach the fundamental principle of integrity.

Step Three: Which fundamental principles are threatened?

As well as your integrity being threatened, your objectivity is at risk as you are probably experiencing an intimidation threat from your manager. Of course, you want to keep your job and see your career progress, and so this intimidation threat is linked to one of self-interest. Even if you do not consider your manager to be intimidating, you might find if difficult to challenge his requests, due to the closeness of your working relationship (the familiarity threat).

Since you are not being asked to act dishonestly for personal gain, you might decide that the threat to your integrity is not very significant. However, you are thinking about the consequences and not the risk. You are also ignoring the possible consequence that senior management may be deliberately misled as a result of your actions. The risk of this happening is significant, unless appropriate safeguards are put in place.

Step Four: Do internal procedures exist that mitigate the threats, and can further internal procedures be established?

What kinds of safeguards would ensure that budgetary codes are not misused or manipulated? You might be aware that the analysis of the expense claim will be drawn to the attention of management by way of procedures that already exist. An additional safeguard to allow the proposed action to go ahead would be to discuss the situation with your manager, and seek assurances that the treatment of the expenses claim will be disclosed to the users of the information. You might also discuss the situation with an independent person (while maintaining confidentiality), for example with ACCA’s Technical Advisory Service.

Step Five: Alternative courses of action 

Ask yourself if you are satisfied with the safeguards that exist and/or will be put in place. Are you truly satisfied that the risk of breaching the principle of integrity is, or can be made, insignificant? Whether you take steps to ensure that management are made aware of the expense coding or you refuse to carry out the request of your manager, you should ask yourself whether you would pass the ‘mirror test’. You may decide to obey your manager’s request and use an incorrect budget code, because you want to protect the budget holder’s position, and because you have received assurances that the proposed action will not result in senior management being misled. On the other hand, you may feel that, as a professional accountant, it is your duty to report expenses as they are, because you are not comfortable that the proposed course of action would not mislead senior management. Which decision feels right for you? Are you able to look at yourself in the mirror comfortably?

Last updated: 4 Aug 2014