Chapters 1&2 Flashcards
(31 cards)
Define Ethics
The difference between right and wrong
or
doing the right thing when no one is watching
How do morals differ from ethics
Morals relate to a persons individual beliefs and can be derived from religious or cultural influences.
Therefore issues can arise where its morally justifiable but unethical eg refusing to bake a wedding cake for a gay couple (discrimination) because her religious beliefs don’t agree with same sex marriage.
Society and ethics?
- standard of living increases with mutual co-operation
- Laws set the minimum expectations for regulating the behaviour of our society
- acting altruistically is voluntarily acting above the min requirement in a fair/civilised society
Business and ethics?
‘good ethics can be good business’ eg financial paybacks for going above and beyond. So companies will develop their own unique ethical values in their corporate code of conduct. May even have an ethics / compliance officer to oversee this.
unethical companies
Therefore unethical companies are breaching societys trust -> bad reputation-> lose sales. Eg avoiding tax, creative accounting, copying, product defects, misleading marketing, environmental/social issues, aggressing selling, employee discrimination, data protection issues, bribery, business intelligence/spying, donations to political parties for fame.
Accountancy profession and ethics
accountants = leadership role in society so should act to protect public interest and uphold standards. Public sector accountants are duty bound to protect tax payers money. and IF unethical -> can ruin their career, the company itself and the whole industry reputation.
What are the broad schools of ethics?
- Virtue Ethics (CIMA advocates, following virtues eg justice/charity/generosity)
- Deontological Ethics ( duty central concept ie obeying rules aka normative approach)
- Utilitarianism (greatest benefit/utility to the most people - branch of consequentialist theory)
Personal approach’s to ethics
- Egotists (max personal outcomes and own needs)
- Pluralists (outcomes that benefit everyone)
- Relativists (context & are flexible / pragmatic)
- Absolutists (laws and regulations)
- Consequentialists (possible consequences decide what to do)
What factors influence ethical obligations
- The law (primary influence, min standard of behaviour)
- Gov Regulations
- Ethical codes
- Social Pressure (eg environmental/discrimination issues)
- Corporate culture
- Personal policies and values (moral issues)
Benefits and costs of business ethics
B:
- attracts customers (rep and brand)
- productivity and effectiveness of workforce
- cost reduction (eg less wastage)
- risk reduction
C:
- increased costs (eg fair trade produce)
- lost business (eg turning down work with unethical customers)
- resource costs
Who provides the ethical framework for accountants in the UK?
Financial Reporting Council (FRC)
- independent regulator in the UK Financial Services Sector
- high quality corporate governance in order to promote UK investment
- audit & assurance council AND Accounting council are parts and provide advice in their areas
FRC Sub Bodies that monitor the accounting profession?
Codes and Standards Committee (councils)
- advise upon drafts and standards
- comments on proposed developments
Audit and Assurance Council, Corporate Reporting Council, Actuarial Council
Conduct Committee (committee's) - audit quality reviews - corporate reporting reviews - discipline and regulation Corporate Reporting Review Committee, Audit Quality Control Committee, Case Management Committee
Globally who regulates the accounting profession?
International Federation of Accountants (IFAC)
- their code of ethics compiled by the IESBA eg integrity, objectivity etc
- their role is to ensure consistent minimum standards in areas eg Education, Examinations, Experience
The Seven Principles of Public Life = governance for public sector accountants
Leadership (promote/respect other principles)
Honesty (declaring conflict of interests)
Objectivity (awarded on merit)
Accountability (responsible for own actions)
Integrity (not influencing decision making)
Selflessness (act in public interest)
Openness (decision making info = available)
LetsHelpOurAsianIndianSelvesOkay
CIMA’s work focuses on the concept of ‘responsible business’
= an organisation committed to operating in a way that’s economically, socially and environmentally sustainable while still upholding the interests of its various stakeholder groups.
CIMA assess if their partner organisations follow that
Rules Based (Or Compliance) Approach
- Ethical codes set out in detail what can/cannot be done
( - black & white - law - compliance )
+ rules for specific outcomes
+ consistent application
+ easy to identify breaches / non compliance and so issue clear penalties
+ people comply as they fear consequences
- lengthy rulebooks which may become outdated
- cannot cover ever eventuality so what to do in those
- cannot learn every rule
- removes member discretion (judgement)
Framework Approach
-Ethical code sets out values / principles designed to help individuals how to act by instilling the idea of what the correct thing is to do
( - CIMA/IFAC use it - flexible -discretion - guidelines)
+ proactive actions
+ members as individuals capable to decide
+ flexibility helps in complex situations
+ harder to see loopholes
+ less prone to becoming outdated
- subjective interpretations
- potential for inconsistency
- may just become rules based if enforced
- difficult to monitor compliance
Rules Based vs Framework Approach
mandatory vs discretionary obedience vs judgement explicit vs implicit fear driven vs value driven law based vs principles based detection vs prevention rules vs values / principles
CIMA code of ethics for professional accountants
- 2006 -> - 2010 -> 2015
- reflects IFACS principles and is a framework approach
- sets the standards it expects of its students and members
- 3 main aims (personal responsibility, guidance on situations where there might be ethical pitfalls, how tp address these)
- arranged in 3 parts: A is general to everyone
B to public practice and C to business’
Examples of issues where there may be ethical pitfall’s to those in the public practice and those in business
PP
conflicts of interest, second opinions, fees, marketing, gifts, hospitality, custody of client assets, objectivity, independence
B
preparation and reporting of info, acting with sufficient expertise, financial interests, inducements
CIMA code of ethics 5 fundamental principles
O P P I C
- Objectivity
- judgements/decisions free from bias and avoid conflict of interest - Professional Competence and Due Care
- technically competent, taking care and being up-to-date through continuous development - Professional Behaviour
- no behaviour that would discredit CIMA or wider profession, following all laws - Integrity
- honest and straight forward conduct at all times - Confidentiality
- safe guarding information unless theres a legal or professional duty to disclose (eg permitted by law, the client, the employer, a professional duty/right or required by law eg criminal)
CIMA 5 groups of threats to professional ethics
ASS IF
- Self Interest
- other interest (eg financial) will inappropriately influence the accountant’s judgement - Self Review
- not appropriately evaluating the results of their own or others work - Advocacy
- promoting a client or employers position whereby objectivity is compromised - Familiarity
- long or close relationship will affect the work eg too sympathetic to their interests or too accepting of work - Intimidation
- will be deterred from being objective due to pressures and attempts to influence
CIMA Safe guards to tackle the 5 threats (ASS IF)
general
- education and training
- CPD (continuing professional development)
- standards
- regulatory monitoring / disciplinary procedures
- corporate governance requirements
- external review by a legally empowered third party
work
- organisational system
- internal control
- codes of conduct
- recruitment procedures to get high calibre staff and then followed with enough education / training
- ethical leadership (able to be honest with)
- communication channels for reporting (eg formal dispute) and gaining advice
- employee performance system
CIMA - Personal Qualities
Triple R, T, C
Reliability - trustworthy and dependable
Responsibility - ownership of actions and decisions
Respect - listening and understanding
Timeliness - work in agreed timeframes
Courtesy - good manners and consideration
