7. Ethical Conflict & Reporting Unethical Behaviour Flashcards
What is conflict of interest?
-where the business or personal interests of an accountant may influence their objectivity
When might you experience conflict of interest?
- when providing services or advice to one client where they know that this will have an adverse effect on another client (objectivity)
- info gained about one client could potentially be beneficial to another (confidentiality)
How can you reduce the risk of conflict of interest?
-compartmentalising responsibilities and knowledge about each client by using different members of staff
-when taking on new client - consider if a CoI could arise
-if there is, make clients both fully aware
What is loyalty?
-being firm and not changing in your support for a person or an organisation, or in your belief in your principles
What is a conflict of loyalties?
-expected to be loyal to employer but also owe a duty of loyalty to the accounting profession
What could a conflict of loyalties lead to?
-breaking the law
-breaching rules of profession
-be part of a plan for unethical earnings
-misleading auditors
What happens if the employer puts pressure on them to carry out ‘unethical’ activities?
-persuade the employer not to continue with the unlawful activity
-involve more senior staff
-consult professional body
-resignation if exhausted all options
What is the best way to resolve ethical conflict?
-state all relevant facts relating to the conflict
-assess all ethical issues involved
-the fundamental principles that have been involved
-are there any internal procedures to help
-alternatives
-seek advice from others
What are the main organisational and professional values?
-being transparent with stakeholders
-reporting financial info clearly and on time
-being honest about gifts
-paying suppliers a fair price and on time
-providing fair treatment and good working conditions
-appropriate use of social media
What is conflict with personal views?
-where key personal values may conflict with the values of the organisation itself
What are the 2 categories of misconduct?
-bringing the accounting profession into disrepute
-acting in breach of the rules and regulations of the accountant’s professional body
What is ‘whistle-blowing’?
-a person who tells someone in authority about misconduct that has or may occur
What should you consider before internally whistleblowing?
-ensure that they know all facts and have evidence
-follow employers internal procedures for reporting misconduct
-ensure situation is fully explained to management
What is the public interest disclosure act 1988?
PIDA
-offers the employee such protection in certain circumstances
What protection does PIDA cover?
a likely:
-a criminal offence
-breach of legal obligation
-miscarriage of justice
-endangerment of safety
-environmental damage
What must the employee show to be covered by PIDA?
-the disclosure is made in good faith
-the employee reasonably believes that the info disclosed is true
-the employee would otherwise be victimised, or the evidence concealed if the info isn’t disclosed
What does liability mean?
-having legal responsibility for something with the possibility of having to pay for damage
What is negligence?
-breach of duty of care that is implied in a particular situation
How can you minimise the risk of professional negligence?
-ensure before taking on an assignment, the exact duties to be included in the assignment are written down and both agreed (letter of engagement)
-add further duties if required
-when giving advice without all info you need, ensure the client is aware of this
-if preparing unaudited accounts, clearly mark on docs that they are for private use
-if assignment is complex - take specialist advice
What is professional indemnity insurance?
-cover against legal to compensate a third party who has sustained damage through a breach in the accountant’s duty of care
What is professional negligence?
-may occur where a client, to whom an accountant owes a duty of care, suffers a financial loss that can be proved to be the fault of the accountant
What is the legal statue that protects employees who make disclosures of confidential information that they believe to be in the public interest?
Public Interest Disclosure Act 1998
