Ethics

Question 1

Five pillars of Ethics - OPPIC

Answer 1

Objectivity - Bias, conflicts of interest or undue influence of others should not compromise professional or business judgement
Threats include profit related pay.

Professional competence & due care - Ensure you are able to provide adequate advise where needed. no making mistakes and be diligent. continuing CPD is crucial

Professional behaviour - compliance with law and be polite, avoid anything that brings the professional to disrepute.

Integrity - Honesty, truthfulness, fair dealing

Confidentiality - Respect confidentiality of information that comes your way, not to be used for personal gain. unless there is a legal or professional right to do so.

Question 2

Ethical accounting issues

Answer 2

Individual errors - junior staff
series of errors - deliberate error or fraud

Ethical conduct & culture issues
1. Pay rises can be a threat to independence
2.Someone in a new role can be prone to making errors.
3. Hiding information and failing to report bad new
4. Nepotism - corrupt or unethical scenario where people are promoted due to personal relationship rather than good work.
5. Insider trading - illegal, wrong and unethical
6. Data - Weak IT controls, lack of staff controls

Question 3

Types of threats

Answer 3

Self Interest threats - financial or other interest
familiarity threat - owning to an established or close relationship with a client or employer
Intimidation Threat - attempts to exercise undue influence over the accountant
self review - reviewing results of previously completed work
Advocacy - promoting clients or employers position to the point it becomes compromising

Question 4

Action to correct ethical issues

Answer 4

1. Reflect on the current situation and ethical values
2. Discuss concerns with a suitable person - Auditor, NED, whistle-blower
3. Get professional advise from ACCA or a lawyer.
4. Consider resignation - As a measure of last resort

Question 5

Consequences of unethical behaviour - Investors, employees, Auditors

Answer 5

1. Investors
   - Damaged reputation of the business
   - Share price falls
   - Increases cost of capital
2. Employees
   - Profit related pay falls
   - Job losses
   - criminal prosecution
3. Audit firm replaced