7. Ethical Conflict & Reporting Unethical Behaviour

Question 1

What is conflict of interest?

Answer 1

-where the business or personal interests of an accountant may influence their objectivity

Question 2

When might you experience conflict of interest?

Answer 2

1. when providing services or advice to one client where they know that this will have an adverse effect on another client (objectivity)
2. info gained about one client could potentially be beneficial to another (confidentiality)

Question 3

How can you reduce the risk of conflict of interest?

Answer 3

-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

Question 4

What is loyalty?

Answer 4

-being firm and not changing in your support for a person or an organisation, or in your belief in your principles

Question 5

What is a conflict of loyalties?

Answer 5

-expected to be loyal to employer but also owe a duty of loyalty to the accounting profession

Question 6

What could a conflict of loyalties lead to?

Answer 6

-breaking the law
-breaching rules of profession
-be part of a plan for unethical earnings
-misleading auditors

Question 7

What happens if the employer puts pressure on them to carry out ‘unethical’ activities?

Answer 7

-persuade the employer not to continue with the unlawful activity
-involve more senior staff
-consult professional body
-resignation if exhausted all options

Question 8

What is the best way to resolve ethical conflict?

Answer 8

-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

Question 9

What are the main organisational and professional values?

Answer 9

-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

Question 10

What is conflict with personal views?

Answer 10

-where key personal values may conflict with the values of the organisation itself

Question 11

What are the 2 categories of misconduct?

Answer 11

-bringing the accounting profession into disrepute
-acting in breach of the rules and regulations of the accountant’s professional body

Question 12

What is ‘whistle-blowing’?

Answer 12

-a person who tells someone in authority about misconduct that has or may occur

Question 13

What should you consider before internally whistleblowing?

Answer 13

-ensure that they know all facts and have evidence
-follow employers internal procedures for reporting misconduct
-ensure situation is fully explained to management

Question 14

What is the public interest disclosure act 1988?

PIDA

Answer 14

-offers the employee such protection in certain circumstances

Question 15

What protection does PIDA cover?

Answer 15

a likely:

-a criminal offence
-breach of legal obligation
-miscarriage of justice
-endangerment of safety
-environmental damage

Question 16

What must the employee show to be covered by PIDA?

Answer 16

-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

Question 17

What does liability mean?

Answer 17

-having legal responsibility for something with the possibility of having to pay for damage

Question 18

What is negligence?

Answer 18

-breach of duty of care that is implied in a particular situation

Question 19

How can you minimise the risk of professional negligence?

Answer 19

-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

Question 20

What is professional indemnity insurance?

Answer 20

-cover against legal to compensate a third party who has sustained damage through a breach in the accountant’s duty of care

Question 21

What is professional negligence?

Answer 21

-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

Question 22

What is the legal statue that protects employees who make disclosures of confidential information that they believe to be in the public interest?

Answer 22

Public Interest Disclosure Act 1998