Developing a Code of Ethics for the Swedish audit profession 1923 to 1994 - Juxtaposing the internal and external role of the Code

Abstract

The paper presents an analysis of context within which FAR, the Swedish professional association representing accountants has developed and revised the Code of Ethics from 1923 to 1995. The purpose is to enhance our understanding of the choices made as to what ethical rules were verbalized or codified and the motivations behind the codification.

Building on Birkett and Evans’ (2005) model for organizing and understanding histories of the professionalizing activities of occupational associations of accountants and Abbotts view of professional codes, a theoretical framework has been constructed to analyze the circumstances and sequence of events that have had an influence on codification of ethics. The findings is based on content analysis of the Code of ethics and an extensive review of archival documents from FAR, legislation and previous studies on the development of the profession in Sweden.

The findings have been analyzed in three phases depicting the development of the profession as the state shifts from an industrial to a neoliberal state. The phases are:

Phase 1 A newly established Gentlemen’s club (1923-1932)

Phase 2 Professionalization of auditors (1933-1976)

Phase 3 Internationalization of the audit profession (1977-1995)

The analysis shows how the Code of Ethics has been verbalized within the context of shifting ideologies of government and governance of both the state and profession in an increasingly interconnected and interdependent world. Ethical codes are context sensitive. Differing from Anglo Saxon studies; this study is set in the Swedish context where the state and profession have co-developed over time. The code has been codified in a changing regulatory landscape where public and private actors occupy the audit regulatory arena and the ethics of the profession is regulated by a complex interplay of legislation and by laws, international, regional and FAR’s codes of ethics governing professional conduct. In 1923, when FAR was established, the rules of professional conduct were not explicitly codified. Rather, the expected conduct of a member was socialized through initiation and other meetings, social networks and education. The professionalization of auditors, growth and heterogeneity of FARs’ members, the financial scandals, the economic and regulatory developments have led to an increasing need to verbalize and publish the Code of Ethics for the profession. The power to verbalizing the ethical rules has changed over time and with time the profession gained an increasing power over determining the content of its ethical code. The Code serves not only to legitimize the activities of the audit profession to regulators and other important stakeholders but importantly, it acts at the same time as a remedy for association control, juxtaposing the internal and external role of the Code.

Abstract (Swedish)

The purpose of this paper is to conduct an analysis of how the Code of Ethics has been used by FAR as a strategy in the history of the professionalization project of Swedish auditors from 1923-1994. Acknowledging the differences between professional development in the Anglo-Saxon countries and Continental Europe, the study contributes to nuance the theory of profession and deepen our knowledge of the role of ethical codes in the context of shifting ideologies of government and governance of both the Swedish state and profession. The Swedish system adopts a similar tradition with the European Continental tradition where there is a close relationship between the State and the profession. To determine the function of the code, this study first maps out the discretion granted to the audit profession to decide on its ethical rules; then analyses how the audit profession had verbalized its ethical codes over time within the context of legal, regulatory changes and development of the audit profession in Sweden.
The theoretical framework draws on Birkett and Evans’ (2005) model for organizing and understanding histories of the professionalizing activities of occupational associations and Abbotts view of professional codes. The study is based on content analysis of relevant law, regulation and the Code of Ethics. It is further supported by an extensive review of archival documents from FAR and previous studies on the development of the profession in Sweden.
The findings of this study show that ethical rules were essential for association control. The verbalization of different ethical rules appears to be a function of the development in size and geography of members. Most of the guild rules were kept inside the organization to protect the autonomy and flexibility of the association to manage its internal affairs. The verbalizing of ethics has been used as a reminder for the members of the rules that were at hand by other organizations. During the first period such reminders were done through speeches and meetings, but when oral verbalization was not enough written verbalization was published. During later periods these verbalizations were also targeted at important stakeholders. The profession used the space granted by the state to bring international norms into the Swedish profession acting as a rule intermediary interpreting international norms in the Swedish context. In contrast with studies that focus on the role of the code as a means to obtain legitimacy, the results of the study lead us to conclude that weight of this argument is somewhat of lesser significance in the Swedish case. It is apparent that as the status of the Swedish profession in ethical issue is not depending on the profession’s capacity for self-regulation, but the profession’s capacity to assure an institutional frame within which it may act.

• author: Jonnergård, Karin and Sonnerfeldt, Amanda
• organization: Department of Business Administration
• publishing date: 2016
• type: Contribution to conference
• publication status: published
• subject: Business Administration; Economic History; Work Sciences
• keywords: code of ethicsx, code of ethics, accountancy profession, regulation, accounting history, Sweden
• pages: 36 pages
• conference name: Nordic Accounting Conference 2016
• conference location: Copenhagen, Denmark
• conference dates: 2016-11-17 - 2016-11-18
• project: ‘Redovisningens reglering och praktik’ by Torsten Söderbergs Stiftelse, completed 30/6/2017
• language: English
• LU publication?: yes
• id: 3d731eca-fcf8-481d-bc44-ad410032c388
• date added to LUP: 2017-07-06 11:26:26
• date last changed: 2018-11-21 21:33:17