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CMA2 > 14 Ethics > Flashcards

14 Ethics Flashcards

1
Q

Ethics: What are they

A

philosophical examination and understanding of what is right and wrong,

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2
Q

Morality: What is it

A

Application of ethical principles.

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3
Q

Virtue: What is it

A

Characteristics of morality of an individual.

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4
Q

Teleology

A

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.”

effects of decisions on multiple stakeholders should be taken into account.

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5
Q

Deontology

A

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

a decision is right if it follows a moral rule or law even if the consequences of the decision are bad.

Deontology and teleology are opposites.

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6
Q

Utilitarianism

A

values maximizing positive effects,

“greatest happiness to the greatest number of people”

is a stream within teleological philosophy

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7
Q

Virtue ethics

A

A decision is right if a virtuous person would do the same in the same circumstances.

focused on the individual, not the action itself

guides the individual to the types of characteristics and behavior a “good” person would seek.

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8
Q

Relativism

A

claims that no universal set of moral principles exists

a decision is right if it is based on what appears to be right or reasonable within one’s own belief or value system.

“Who am I to judge?”

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9
Q

Justice

A

Every individual should be given what (s)he deserves.

equals should be treated equally, and unequals should be treated unequally.

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10
Q

business ethics includes certain concepts that can influence daily business.

A

Fairness

Integrity

Due diligence

Fiduciary responsibility

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11
Q

Business Ethics: Fairness

A

fairness means applying the same rules, standards, or criteria in the same situations. A person’s bias should be minimized when making decisions.

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12
Q

Business Ethics: Integrity

A

Internal compass that guides behavior. Integrity in the workplace means that a person does what (s)he says

one who acts with integrity upholds ethical standards and is incorruptible.

core principles of integrity are virtue, compassion, honesty, loyalty, and objectivity.

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13
Q

Business Ethics: Due diligence

A

thorough evaluation of an organization or individual to assess potential risks. Ethical due diligence should be considered by organizations. Without knowing business partners, an organization cannot uphold its own ethical standards.

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14
Q

Business Ethics: Fiduciary responsibility

A

legal responsibility to act solely for the best interests of another

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15
Q

to whom an ethical challenge should be reported.

A

IMA has an ethics helpline for members who wish to discuss ethical issues. The number is 800-245-1383.

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16
Q

Conflicts of Interest

A

IMA Statement requires members to mitigate actual, and to avoid apparent, conflicts of interest.

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.

17
Q

Methods for control of a

Conflict of interest include the following

A

Provide a code of conduct provision applying to conflicts of interest. The code of conduct should say that employees are to

RRR, NPEE
REFRAIN from engaging in any activity that would prejudice their ability to carry out their duties ethically.

Require FULL financial disclosure by all managers.

Require Prior notification of any transaction that may raise a question about a possible conflict of interest.

Notify all parties of the potential conflict.

Prohibit financial ties to any supplier, customer, or distributor.

Encourage adherence to strong ethical behavior in corporate actions, policies, and public communications.

Employees should refuse any gift, favor, or hospitality that would influence or would appear to influence their actions.

18
Q

IMA Standards

4 Standards

A

Competence
Confidentiality
Integrity
Credibilty

19
Q

3 Standards

- Competence

A

M, P, P
Maintain leadership and expertise by enhancing knowledge and skill

Provide decision support info and recommendations that are Accurate, Clear, Concise and Timely

Perform all duties in accordance with laws, regulations and technical standards

20
Q

4 Standards

Integrity

A

A,R,M, C
Abstain from engaging or supporting any conduct which would discredit the profession

Refrain from engaging in conduct which would preclude carrying out duties ethically

(COI)
Mitigate actual conflicts of interest
Regularly communicate with biz associates to avoid apparent conflicts of interest.
Notify all parties of potential conflicts of interest.

Contribute to positive Ethical Culture

21
Q

3 Standards

Confidentiality

A

K, I, Refrain

Keep information confidential unless authorized or required by law

Inform all parties of the appropriate use of confidential information and Monitor

Refrain from using confidential information for illegal or unethical gain

22
Q

4 Standards

Credibility

A

C, C, P, R

Communicate all information fairly and objectively

Communicate all limitations or constraints which could preclude reasonable judgement or successful performance of an activity.

Provide all relevant information which could reasonably be expected to influence users understanding of reports, analyses or recommendations.

Report any delays or deficiencies in information, processes, timeliness or internal control

23
Q

Fraud Triangle

- 3 types

A

O, R, P

When all 3 are present. Fraud risk is high.

Opportunity

  • the only type of fraud that can be mitigated by management…usually by internal controls
  • opportunity is cause by a breakdown in oversight, internal controls, or enforcement

Rationalization

  • assume that anyone can justify/rationalize
  • URL LERN
Pressure (motivation)
- the need for cash
-or other pressure ...continued employment, respect
-Mgt Comp tied to financial results
     - Meeting Debt covenants, budgets
     - Meet or exceed earnings targets
     - Public Companies: exceed analysts 
          forecasts
24
Q

Fraud Triangle

Rationalization list

A

URL LERN
Underpaid/Overworked
Rank has it’s privileges
Loan

Low self esteem
Everybody does it
Revenge
Nobody gets hurt

25
Q

Red Flags/Risk Factors

Fraudulent Reporting

A

HHIS, BUNN, XXX, PPP

High turnover of mgt, board, counsel
History of securities violations
Industry/Market decline
Strained relationship with auditors

Bankruptcy, Foreclosure, Hostile Takeover threat.
Unreasonable Sales/Profit incentives
Unusually rapid growth
Non-financial excessive participation in accounting principals/estimations

XXX
Transaction - Tax Havens
Transaction - Related party unrelated
Transaction - Highly Complex

PPP
Poor Cash Flows
Performance too good or bad to be true
Pressure to Meet Earnings Expectations

26
Q

Misappropriation flags

A

FFUUUCC, PPP, HELMS

Failure of EE's to take vacation
Failure to follow up on past due A/R
Unusual A/R write offs
Undocumented petty cash expenses
Unexplained budget variances
Common addresses for payable, pmt, refund
Complaints by Customers

PPP
Poor Supervision
Payroll checks w second endorsement
Products or services purchased in excess of need

HELMS
High-Valued, small-sized inventories
Employees on payroll who don't sign up for benefits (fictitious employees)
Large amounts of cash on hand
Missing documentation for transactions
Shortages on delivered/received goods
27
Q

Investigative Techniques

A

DPS CEI

-Documents

  • search likely locations
  • look for ALTERED documents
  • Copies examined for AUTHENTICITY

Public Searches of Info

a. Public Records
- Civil/Criminal Actions
- Bankruptcy Records
- Marriage Licenses/Divorces
- Property Records
- Litigation History

b. Social Media
c. Commercial Online services. (privateyes)
d. Electronic Evidence (difficult to determine who created, easily changed)

Interviews - one of the most efficient and useful techniques

INTERVIEWS SHOULD BE

  • SUFFICIENT IN LENGTH
  • EXCLUDE IRRELEVANT FACTS
  • OBJECTIVE AND IMPARTIAL
  • TIMELY
  • INFO FLOWS TO INTERVIEWER (NOT >)
28
Q

4 Overarching Prinicpals

A

HFOR

Honesty
Fairness
Objectivity
Responsibility

29
Q

Managing Fraud Risk

Primary Controls

A

Preventative: Deter occurrence of unwanted events. eg cash in locked safe, segregation of duties

Detective: alert AFTER an event has occurred.
eg hash totals, burglar alarm

Directive: CAUSE or ENCOURAGE desirable evert. procedure manuals

Corrective: CORRECT effects of unwanted events.

30
Q

Managing Risk

SECONDARY CONTROLS

A

COMPENSATORY: REDUCE risk when primary INEFFECTIVE. do not by themselves reduce risk to ACCEPTABLE levels. Supervisory Review

COMPLEMENTARY: WORK WITH OTHER CONTROLS. (Segregation of Duties)

31
Q

Segregation of Duties

A

ARC

Authorization, Record keeping, Custody

32
Q

Independent Checks

Reconciliation

A

Reconciliation performed by someone that is

a. UNCONNECTED with original transaction
b. WITHOUT CUSTODY of assets

CMA2 (30 decks)

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