Insolvency Practitioners & the Connection to Accounting Firm-Wide Ethics – What to Know

Insolvency practitioners may be relatively unheard of, but they are considered as the backbone of the British economy. They work towards remedying any business’s experience of financial distress. More businesses run into the threat of insolvency and succumbing under financial burdens, so insolvency practitioners are urged to take on a bigger role in the UK’s business landscape. With the country’s businesses and political landscapes experiencing continuous shifts, insolvency practitioners can help to control of external factors. These include loose governance and a culture of permissiveness. Insolvency practitioners and their connection to ethics When it comes to understanding concepts that go beyond mere regulations, insolvency practitioners are highly encouraged to follow a code of ethics as they continue to take on pressuring matters where businesses are most vulnerable. One such example of this delicate relationship between ethics and insolvency practitioners manifested in a case that involved a “Big Four” accounting firm and two partners. The two partners in the case acted as administrators for a company that was enrolled in the accounting firm’s client list. The company was eventually fined a sum of £1 million, which was a result of the party’s failure to comply with a code of ethics. It began as a standard bit of client work wherein the two partners operated the company in question and enrolled it under the care of the accounting firm. However, it resulted in a grave violation of business ethics. Based on the news reports surrounding the controversy, the two partners had worked aside each other and set the structure of the company in such a way that they could have a secured creditor status—one that was poised to yield high returns in the case of the company’s collapse. Throughout the timeline of the case, authorities discovered holes in the authority of the said deal while uncovering the accounting firm’s role supporting the collapse of the company in question. A matter of service One observation that can be made from the above case is that insolvency practitioners and larger firms must respond with ethics when handling corporate failures. They must justly handle the process of flagging potential problems and sustaining businesses (and the livelihoods that they support). Additionally, insolvency practitioners are also questioned on who they serve—whether it may be their stakeholders or the client themselves. Given the sheer seriousness of every situation that involves the task of handling a business’s finances in dire straits, insolvency practitioners are expected to hold more rigorous standards when carrying out their checks and balances. Through the use of a properly-set check and balance system, insolvency practitioners are much more capable of ensuring fair and equitable outcomes— but the final result is a matter of their dedication to following a code of ethics. Conclusion Insolvency practitioners play a crucial role in supporting the UK’s economy, so accounting firms are obliged to improve their processes while reorganising their goals. On top of the necessary measures taken to ensure a fair and universally beneficial check and balance process, accounting firms are also called to hire and act carefully to avoid cases such as the above. For fresh accountancy news and updates in the UK, subscribe to Accountancy Today.