Unit 14: Business Ethics

Question 1

Describe the concept of ethics.

Answer 1

Ethics can be described as a philosophical examination and understanding of what is right and wrong, or good and bad.

Question 2

What is the difference between teleology and deontology?

Answer 2

Deontology and teleology are opposites.

Teleology - From this perspective, everything is a function of its end, purpose, or goal. The moral good is derived from what is achieved and whether the consequences of an action are considered “good.”

Deontology - What is good or right is derived from the action itself regardless of the consequences.

Question 3

Describe utilitarianism as it applies to ethics.

Answer 3

Utilitarianism values maximizing positive effects, such as welfare or happiness. The morally right decision is the one that maximizes these positive effects. The general principle is that the “greatest happiness to the greatest number of people” is the measure for right or wrong decisions.

Question 4

What is integrity?

Answer 4

Integrity is an individual’s internal compass that guides behavior. Integrity in the workplace means that a person does what (s)he says.

Question 5

Describe a fiduciary responsibility.

Answer 5

Fiduciary responsibility is the legal responsibility to act solely for the best interests of another.

Question 6

What is relativism as it applies to ethics?

Answer 6

Relativism (or moral relativism) claims that no universal set of moral principles exists. In relativism, a decision is right if it is based on what appears to be right or reasonable within one’s own belief or value system. Therefore, judging others’ decisions as wrong is difficult, because they can be right according to their own value systems.

Question 7

What is a conflict of interest?

Answer 7

A conflict of interest is a conflict between the personal and the official responsibilities of a person in a position of trust, sufficient to affect judgment, independence, or objectivity in conducting the affairs of the business.

Question 8

What are the four overarching principles discussed in the IMA Statement of Ethical Professional Practice?

Answer 8

Honesty
Fairness
Objectivity
Responsibility

Question 9

What are the four categories of standards addressed by the IMA Statement of Ethical Professional Practice?

Answer 9

Competence, Confidentiality, Integrity, and Credibility.

Question 10

Describe the competence standard in the IMA Statement of Ethical Professional Practice.

Answer 10

Maintain an appropriate level of professional leadership and expertise by enhancing knowledge and skills.
Perform professional duties in accordance with relevant laws, regulations, and technical standards.
Provide decision support information and recommendations that are accurate, clear, concise, and timely. Recognize and help manage risk.

Question 11

Describe the confidentiality standard in the IMA Statement of Ethical Professional Practice.

Answer 11

Keep information confidential except when disclosure is authorized or legally required.
Inform all relevant parties regarding appropriate use of confidential information. Monitor to ensure compliance.
Refrain from using confidential information for unethical or illegal advantage.

Question 12

Describe the integrity standard in the IMA Statement of Ethical Professional Practice.

Answer 12

Mitigate actual conflicts of interest. Regularly communicate with business associates to avoid apparent conflicts of interest. Advise all parties of any potential conflicts of interest.
Refrain from engaging in any conduct that would prejudice carrying out duties ethically.
Abstain from engaging in or supporting any activity that might discredit the profession.
Contribute to a positive ethical culture and place integrity of the profession above personal interests.

Question 13

Describe the credibility standard in the IMA Statement of Ethical Professional Practice.

Answer 13

Communicate information fairly and objectively.
Provide all relevant information that could reasonably be expected to influence an intended user’s understanding of the reports, analyses, or recommendations.
Report any delays or deficiencies in information, timeliness, processing, or internal controls in conformance with organization policy and/or applicable law.
Communicate professional limitations or other constraints that would preclude responsible judgment or successful performance of an activity.

Question 14

What is the difference between fraudulent financial reporting and misappropriation of assets?

Answer 14

Fraudulent financial reporting is most often committed by management to deceive financial statement users. It is the focus of external auditors and the concern of regulatory bodies, such as the Public Company Accounting Oversight Board and the SEC.
Misappropriation of assets is most often committed by employees and results from theft, embezzlement, or defalcation.

Question 15

What are the three characteristics of fraud recognized in the fraud triangle

Answer 15

Opportunity
Rationalization
Pressure (Motivation)

Question 16

Which characteristic of fraud can be controlled by management or the organization?

Answer 16

Opportunity is the only characteristic of fraud that can be controlled by management or the organization. Management typically institutes internal controls to reduce opportunity.

Question 17

Describe rationalization.

Answer 17

Rationalization is a person’s ability to justify actions as consistent with his or her personal code of ethics.

Question 18

What is a red flag?

Answer 18

A red flag is a risk factor that may indicate potential fraud. Examples include missing documentation, failure of employees to take vacations, shortages in inventories, products purchased in excess of needs, and payroll checks with second endorsements.