All key words Flashcards
Ethics
Can simply be defined as ‘the science of morality’, or ‘the difference between right and wrong’. This extends to ‘doing the right thing when no-one is watching’.
Responsible business
An organisations commitment to operating in a way that is economically, socially and environmentally sustainable, and ensuring this prevails while still upholding the interests of its various stakeholders.
Confidentiality
Means having a duty to safeguard any information in your possession unless there is a legal or professional duty to disclose.- 1 when permitted by law 2 when permitted by the client or employer 3 when required by law 4 when permitted by a professional duty or right.
Integrity
Means that an individual acts in a manner that is honest and straightforward in all professional and business relationships. This extends beyond the work that an accountant produces, and extends to the manner which they conduct themselves.
Lifelong learning
‘The concept that an individual never stops learning and should be open to new ideas, decisions, skills and behaviours.
Objectivity
Refers to the ability to make judgements and decisions free from bias, and within this the guidelines also make it clear that you are expected to avoid situations that cause a conflict of interest to arise.
Professional behaviour
Means not doing anything that will discredit CIMA or the wider accounting profession. This is defined as ‘actions which a reasonable and informed third party having knowledge of all relevant information, would conclude negatively affects the good reputation of the profession’.
Professional competence and due care
Means that an accountant should only take on tasks for which they are technically competent to perform. There is also a duty to take reasonable care and remain technically up to date.
Professional development
‘The development of personal qualities such as communication skills, assertiveness, time management and relationship building. They are skills that have to be developed by an individual and must come from deep within them.
Financial stakeholders
Those groups that would directly suffer if something happened to an organisation, including, shareholders, employees, customers and suppliers.
Non-financial stakeholders
Those others interested in how an organisation behaves, including government, media, competition and regulators.
Agency theory
Views the managers of an organisation as acting in an agency capacity, seeking to service their own self interest, and looking after the performance of the company only to the extent where this promotes their own interests. This gives rise to the agency problem.
Corporate governance
Is the system by which organisations are directed and controlled. Running an organisation of any type requires no specific qualifications, and there is no ‘rule book’, corporate governance aims to fill this gap.
Organisations (The three aspects)
1 Collective goals - profit making companies = profit maximisation, not for profit = maximising benefits of its beneficiaries
2 social arrangements - organisations are structured to allow people to work together towards a common goal
3 Controlled performance - systems and procedures will be developed to ensure individual and group collective goals are met
Stakeholder theory
Takes a more organic view of an organisation that goes beyond mere stewardship and states that the management has a duty of care not just to the owners, but also to the wider stakeholder community.
Stewardship theory
Views the management of an organisation as its stewards, tasked with managing its assets in line with the wishes of the owners.
Comply or explain
Means that should a company chose, or be unable to comply with the code, then the instance(s) of non-compliance should be disclosed and explained in the financial statements to satisfy the requirements of the stock market listing rules.
Management board
Composed entirely of managers, it is responsible for the day to day running of the business. The supervisory board appoints the management board, and membership of the two boards is mutually exclusive.
Supervisory Board
Consisting of workers representatives and stakeholder management representatives. The board has no executive function, although it reviews the company’s direction and strategy and is responsible for safeguarding stakeholder’ interests.
Analytical Review
Involves testing large volumes of predictable data by developing an expected balance, comparing to the actual data and reconciling any material differences.
External audit
A type of assurance engagement that is carried out by an auditor to give an independent opinion of a set of financial statements.
Fair Representation
The auditors report on the company’s financial statements is expressed in terms of truth and fairness. This is generally taken to mean that the financial statements are Factual, Free from bias, Reflect the commercial substance of the business’s transactions.
Fraud
Has been legally defined as ‘A false representation of fact, made with the knowledge of its falsity, or without belief in its truth, or recklessly careless, whether it be true or false’.
Internal audit
Is an independent appraisal function within an organisation designed to examine and evaluate its activities as a service to the organisation. The objective of internal auditing is to assist members of the organisation in the effective discharge of their responsibilities. To this end, internal auditing furnishes them with analyses, appraisals, recommendations, counsel and information concerning the activities reviewed.
Substantive tests
Are those designed to detect material misstatements.
Tests of control
Are audit procedures designed to evaluate the operating effectiveness of controls in preventing or detecting or correcting material misstatements.
Written representations
Is a written statement provided by management to the auditor in support of other evidence.
CSR
Is an organisations obligation to maximise positive stakeholder benefits while minimising the negative effects of its actions.
Sustainability
Central to this is the concept of sustainability; developing strategies so that the company only uses resources at a rate that allows them to be replenished, such that the needs of the currency generation can be met without compromising the needs of future generations.
Acceptance
Can be defines as ‘the unconditional assent to all of the terms of the offer’, as per Neale v Merrett
Agreement
Is made by offer and acceptance
Consideration
Both parties must bring something of value to the contract
The Contract
May be defined as an agreement which legally binds the parties, or an agreement which the law will recognise and enforce
Intention
The parties must have an intention to create legal relations between themselves
Invitations to treat
This is merely something that acts as an inducement to encourage another person to make an offer, and is therefore not capable of acceptance itself
Offer
An offer to be bound on specific terms, it must be certain.
Unenforceable
The contract us valid but performance by one party cannot be enforced.
Vitiating factors
Are those that render the contract:
form: some contracts must be made in a particular form
terms: must be properly incorporated into the contract
consent: a misrepresentation made by one party may affect the validity of the contract
legality: the courts will not enforce a contract which is deemed to be illegal or contrary to public policy
capacity: certain bodies can only make contracts within the boundaries of their authority; also generally people lack contractual capacity if they are under the age of 18.
Void
There is no contract
Voidable
The innocent party can withdraw from the contract
Consideration
Can be defined as ‘the element of value in agreement’, and in English law, must be supplied by both parties in order to form a binding contract.
Misrepresentations
Can be defined as ‘a false statement of fact made by one party to the other before the contract, and made with a view to inducing the other party to enter into it’.
Condition
Is a fundamental part of a contract; breach of a condition gives the innocent party the right to repudiate the contract and claim damages- Poussard v Spiers
Express term
One that has been agreed by the parties between them, either orally or in writing, during the information of a contract.
Innominate terms
Are those that cannot be classified as a condition or a warranty until the contract has been breached. The tests used to classify the term is whether or not the innocent party ‘loses the whole benefit of the contract’ - Aerial Advertising v Bachelors Peas
Implied terms
Are those terms that are not agreed upon by the parties, but are incorporated into the contract in one of the following ways:
1 implied by statute - such as the terms of the Consumer Rights Act 2015
2 Implied by custom - some terms are customary through trade usage - Hutton v Warren
3 Implied by the courts - in order to give business efficacy to an agreement - The Moorcock
Constructive dismissal
Occurs when an employee, who has resigned, is able to prove they did so under duress from their employer, and as such, was therefore actually dismissed.
Dismissal
Refers to situations where the employer decides to terminate the employment relationship.
Summary dismissal
Occurs when the employee is ‘sacked on the spot’ e.g. without any notice.
Unfair dismissal
Is a statutory claim made by ‘qualified’ employees who have been ‘unfairly dismissed’.
Wrongful dismissal
Is a common law claim that can be made where an employee has been dismissed without justification, often when they have been denied their required notice period.
Money laundering
Is the process by which the proceeds of crime, which have illegitimate origins, are converted into assets that appear to be legitimate.
Whistleblowing
The name commonly given to workers making a disclosure of wrongdoing (usually) by their employer.
Incorporation
An entity that has been created in its own right and is thus known as a ‘corporation’, and is therefore separated in law from its owners.
Articles of association
The working part of the constitution that has now absorbed much of the content that used to be the preserve of the memorandum of association. the MOA now merely records the initial subscribers to the company’s share capital.
