CGMA code of ethics Flashcards
What do ethics mean for a business?
Ethics are a code of moral principles that people follow with respect to what is right or wrong
They are an important and powerful element in business.
What are examples of the application of ethics to a business environment?
Fair treatment of workers - safe working conditions etc
Avoiding bribery
Good professional conduct & honesty
Respecting personal data
Appropriate and fair advertising
Safety at work
Why are ethics important to a business?
Generate a good feeling amongst staff - staff are likely to feel better and be more productive if in an environment where they feel respected and responsible
Avoid legal action
Avoid bad publicity
Competitive advantage - being ethical can be a USP and thus serve as a comp advantage
Why does ethics help financial reporting?
It helps ensure accurate information is provided with full and open disclosure
What are the different levels of ethical behaviour?
The law - represents the min standard of behaviour required within a particular society e.g. murder is illegal
Regulations - standards set by prof bodies and orgs within particular contexts e.g. IFRSs, CIMAs principles
Ethical behaviour - Above laws and regs. Highest level of conduct e.g. providing useful info in the accounts beyond what is required to help investors
What are the 3 parts to the CIMA code of ethics?
Part A: General application of the code - fundamental ethical principles for accountants
Part B: Professional accountants in public practice - application of fundamental principles
Part C: Professional accountants in business (CGMAs) - threats to fundamental principles
What are the 5 elements of CIMA code of ethics?
Professional behaviour - avoiding actions that could discredit the profession and comply with law / reg
Professional competence and due care - Prof knowledge, skills, tech standards be maintained to practice at full competence
Integrity - straightforwardness & honesty. Not misleading
Objectivity - Unbiased and unpartial. No conflicts of interest or illicit relationships
Confidentiality - safeguarding info. Unless disclosure required by law, permitted by law, authorised by client / employer or professionally permissable
What are the 5 common threats to ethical principles?
Self interest threats - financial interests, incentives, commercial pressures from other businesses
Self review threats - Where one is expected to review ones own previous judgement i.e. they previously made a mistake in their accounts
Familiarity threats - Sympathy to interests of others resulting in prof judgement being compromised
Intimidation threats - actual or perceived threats which stop one acting objectively
Advocacy threats - the threat that a member will promote an employing organisations interests to the point that objectivity is compromised
What safeguards can help protect against threats to ethics?
Ethical conduct programmes
Regulation
Careful recruitment
Disciplinary procedures
Staff performance procedures
What steps should be considered when approaching ethical issues?
Is there a threat –> Yes –>
Is the threat acceptable –> No
–> Can safeguards be applied? –> No –> Has discussion with a supervisor fixed the issue –> No –> has discussion with higher authority fixed the issue –> No –> Can further safeguards ensure compliance –> No –> Eliminate exposure
What does section 340 of CGMA code relate to?
The preparing and reporting of financial information
When does knowing, or deliberate, misrepresentation of financial info occur?
When a member:
- Makes materially false and misleading entries in the FS
- Fails to correct materially false or misleading entries when they have the authority to do so
- Signs documents that contain materially false and misleading info
Also true if the member permits or directs another to do any of the above
What is subordination of judgement?
When an accountant feels unable to make a judgement due to pressure of intimidation from a senior colleague
What safeguards can help overcome subordination of judgement?
Evaluate the significance of any threats
Discuss concerns with a supervisor
Discuss concerns with higher authority
Consider safeguards to ensure compliance e.g. has relevant evidence been documented, company policy that requires reporting on difference of opinion
Eliminate exposure to subordination of judgement i.e. accountant removes themself from the situation
