Ethics

Question 1

What are the 5 principles of ethical behaviour and what do they mean

Answer 1

integrity:
Being straightforward & honest in all professional & business relationships

objectivity:
not allowing bias, conflict of interest or the undue influence of others to override professional and business judgements (independence in mind and appearance)

professional competence and due care:
an accountant should maintain professional knowledge and skills at the required level to ensure that the client receives a competent professional service.

confidentiality:
information acquired as a result of professional and business relationships should not be disclosed to third parties except when specific authority is given or there is a legal duty (criminal case) or professional right to disclose

professional behaviour:
accountants should ensure that their behaviour complies with relevant laws and regulations and avoids bringing the accountancy profession into disrepute

Question 2

What are the 5 threats to the fundamental ethical principles and what do they mean

Answer 2

self-interest
Financial interest/personal gain on part of the accountant may influence the judgement/ behaviour of the accountant

self-review
The accountant has been involved in preparing data that is then going to be used for making business decisions, which the accountant is also involved in

familiarity threat
Has a close personal relationship with the client, which means the accountant becomes too sympathetic to the interests of that person

intimidation threat
May feel intimidated (bullied or put under pressure by the client)

advocacy threat
Seen to support a client’s point of view publicly - even in a court of law

Question 3

How do you structure an ethics question

Answer 3

Introduction
One paragraph per ethical concern - discuss context, fundamental principles etc - is it illegal or unethical
Threats to principle
Limitations
Conclusion

*try to discuss concepts

Question 4

What courses of action can be taken if there’s suspicion of unethical or illegal behaviour

Answer 4

• obtain and check all facts
• is behaviour unethical or illegal
• identify fundamental principles affected
• evaluate significance of threats
• identify courses of action
• seek external help when necessary

*persuade person to not be unethical
*consider resignation
*whistleblow ‘public disclosure act’
*consult your professional accounting body’s technical advisory service

Question 5

What does the code of ethics prescribe

Answer 5

A principle based approach rather than a rules-based approach

i.e. if an accountant has not behaved ethically, the course of action should be to try get the accountant to be as ethically rather than punish them

Question 6

Name 2 safeguards in the work environment

Answer 6

• leadership culture; tone at the top
• internal policies & procedures
• recruitment of high calibre, competent staff
• encouraging staff to consult w/ senior staff over compliance issues

Question 7

Name 2 safeguards created by the accounting profession or legislation

Answer 7

• CPD requirements (keeping knowledge & skills up to date)
• professional standards
• corporate governance regulations
• external review of work by a legally empowered third party