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4. BA4 CIMA > 1 - The Importance of Ethics > Flashcards

1 - The Importance of Ethics Flashcards

1
Q

ethics definition
business ethics definition

A

science of morality, right vs wrong

application of ethical principles to business problems

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2
Q

how were laws formed

A

was discovered mutual co-operation needed so standards and principals were formalised in way of law

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3
Q

what is a corporate code of conduct

A

when businesses develop their own unique ethical values

often around integrity, customer focus and honesty

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4
Q

what are ethics/compliance officers

A

people who oversee application of ethical policies

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5
Q

factors to consider when determining if action is right/wrong

A
  • consequences
  • motivation for action
  • any guiding principles?
  • any key values to be followed?
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6
Q

examples of ethical issues in business

A

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

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7
Q

importance of accountants in ethics?

A
  • hold leadership role
  • act in public interest so needs clear and ethical guidelines
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8
Q

why do accountants need to act ethically

A
  • 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
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9
Q

schools of ethics

A

VIRTUE
DEONTOLOGICAL
UTILITARIANISM

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10
Q

virtue ethics meaning

A

according to a persons characteristics eg justice, charity etc

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11
Q

deontological ethics meaning

A

ethics according to a set of rules, a need to obey them
actions justified by outcomes

aka, normative approach

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12
Q

utilitarianism meaning

A

course of action decided on greatest benefit available

aka, consequentialist

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13
Q

which things influence ethical obligations

A

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

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14
Q

benefits of business ethics

A

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

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15
Q

costs of business ethics

A

increased costs - ethical materials cost more
lost business - turn work away from unethical customers
resource costs - loss of management time

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16
Q

what are the ethical boards within accountancy in the uk

A
  1. FRC
  2. AAC/AC
17
Q

what is the FRC

A

= financial reporting conduct

independent regulator, issues UK versions of International Financial Reporting Standards and International Standards on Auditing

18
Q

what is AAC/AC

A

= Audit and Assurance Council and Accounting Council

both part of FRC, advise people in their respective areas of expertise

19
Q

what are the sub-bodies monitoring accountability of accounting

A
  1. 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
  2. Conduct Committee = oversees FRC’s Conduct Division monitoring recognised supervisory bodies, sub committees:
    - corporate reporting review committee
    - audit quality review committee
    - case management committee
20
Q

what is the international accountancy ethical organisation

A

= International Federation of Accountants (IFAC)

to develop standards, ethical values, quality practices

21
Q

what are the five IFAC published code of ethics characteristics

A

integrity
objectivity
professional competence and due care
confidentiality
professional behaviour

22
Q

IFAC role

A

provide minimum standards in:
- education
- examinations
- experience

23
Q

what are the 7 principles of public life

A

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

24
Q

what is the work of CIMA

A

regularly run surveys and publish findings to assess ethical standards of members and affiliates

25
Q

what is responsible business

A

organisations commitment to operating in economically, socially, environmentally sustainable way

26
Q

what do CIMA do regularly

A

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

27
Q

advantages and disadvantages to rules based approach to developing ethical code

A

= 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

28
Q

framework approach to developing ethical codes

A

= 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

29
Q

rules based vs framework for characteristics

A

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

30
Q

individual types of ethics

A

egotists
pluralists
relativists
absolutists
consequentialists

31
Q

individual types of ethics meanings

A

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

4. BA4 CIMA (16 decks)

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