1 - The Importance of Ethics Flashcards
ethics definition
business ethics definition
science of morality, right vs wrong
application of ethical principles to business problems
how were laws formed
was discovered mutual co-operation needed so standards and principals were formalised in way of law
what is a corporate code of conduct
when businesses develop their own unique ethical values
often around integrity, customer focus and honesty
what are ethics/compliance officers
people who oversee application of ethical policies
factors to consider when determining if action is right/wrong
- consequences
- motivation for action
- any guiding principles?
- any key values to be followed?
examples of ethical issues in business
tax avoidance
‘creative accounting’
copying competitors
product issues
misleading marketing
impacts of operations eg social/environmental
aggressive selling methods
employee discrimination/unfair dismissal
data protection
insider trading and price fixing
bribery
espionage
donations to political parties
importance of accountants in ethics?
- hold leadership role
- act in public interest so needs clear and ethical guidelines
why do accountants need to act ethically
- ethics may be an issue of law
- profession represented by members
- need to protect public interest
- can jeopardise jobs of others and endanger industry reputation
- public sector accountants need to protect taxpayers money
schools of ethics
VIRTUE
DEONTOLOGICAL
UTILITARIANISM
virtue ethics meaning
according to a persons characteristics eg justice, charity etc
deontological ethics meaning
ethics according to a set of rules, a need to obey them
actions justified by outcomes
aka, normative approach
utilitarianism meaning
course of action decided on greatest benefit available
aka, consequentialist
which things influence ethical obligations
the law - inflexible, minimum standard
government regulations - standards eg safety
ethical codes - organisations have written codes
social pressure - can change values of the public eg environmental
corporate culture - attitudes and norms within an organisation
personal policies and values - individuals age, sex etc influences ethics
benefits of business ethics
attracts customers - better reputation
improves workforce effectiveness - good working conditions, attracts high calibre staff
cost reduction - less wastage and tax
risk reduction - reduces business risk
costs of business ethics
increased costs - ethical materials cost more
lost business - turn work away from unethical customers
resource costs - loss of management time
what are the ethical boards within accountancy in the uk
- FRC
- AAC/AC
what is the FRC
= financial reporting conduct
independent regulator, issues UK versions of International Financial Reporting Standards and International Standards on Auditing
what is AAC/AC
= Audit and Assurance Council and Accounting Council
both part of FRC, advise people in their respective areas of expertise
what are the sub-bodies monitoring accountability of accounting
- Codes and Standards Committee = provides strategic input and leadership, considering and advising FRC board, sub councils:
- audit and assurance council
- corporate reporting council
- actuarial council - Conduct Committee = oversees FRC’s Conduct Division monitoring recognised supervisory bodies, sub committees:
- corporate reporting review committee
- audit quality review committee
- case management committee
what is the international accountancy ethical organisation
= International Federation of Accountants (IFAC)
to develop standards, ethical values, quality practices
what are the five IFAC published code of ethics characteristics
integrity
objectivity
professional competence and due care
confidentiality
professional behaviour
IFAC role
provide minimum standards in:
- education
- examinations
- experience
what are the 7 principles of public life
LEADERSHIP = promote and respect principles
HONESTY = conflicts of interest declared
OBJECTIVITY = awards on merit
ACCOUNTABILITY
INTEGRITY = avoid actions influencing decisions
SELFLESSNESS = act solely in public eye
OPENNESS = info on decisions made available
what is the work of CIMA
regularly run surveys and publish findings to assess ethical standards of members and affiliates
what is responsible business
organisations commitment to operating in economically, socially, environmentally sustainable way
what do CIMA do regularly
assess whether partner organisations have:
- ethical values statement
- guidance on sensitive topics
- staff guidance on compliance
- ethical standards training
- hotline for workers for ethical advice
- incentives to uphold ethics
advantages and disadvantages to rules based approach to developing ethical code
= sets out in detail what members can/cant do
ADVANTAGES:
rules for outcomes
consistent application
breaches easy to identify
clear penalties
compliance bc of fear
DISADVANTAGES:
lengthy rulebooks, may go out of date
cant cover every eventuality
removes member discretion
requires interpretation
forced to use judgement in situations with no rules
framework approach to developing ethical codes
= sets out values and principles to help instill ‘right’ thing to do
ADVANTAGES:
encourages proactive actions
treats members as individuals
flexibility helps in complex situations
harder to find loopholes
less prone to being out of date
DISADVANTAGES:
subjective interpretations
potential for inconsistency
ambiguity may be confusing
guidelines eventually become rules
difficult to monitor compliance
rules based vs framework for characteristics
RULES BASED
enforceability = mandatory
choices = obedience
standards = explicit
motivation = fear driven
approach = law based
objective = detection
measure = rules
FRAMEWORK
enforceability = discretionary
choices = judgement
standards = implicit
motivation = value driven
approach = principles based
objective = prevention
measure = values/principles
individual types of ethics
egotists
pluralists
relativists
absolutists
consequentialists
individual types of ethics meanings
EGOTISTS = maximise personal benefit
PLURALISTS = maximise everyones benefit
RELATIVISTS = look at context, be realistic and pragmatic
ABSOLUTISTS = guided by laws/guidance, look at fundamental correctness
CONSEQUENTIALISTS = look at consequences before acting on a decision
