Chap 1 Flashcards
Define ‘Ethics’
A set of moral principles and values
that guide behaviour
Define ‘Code of Ethics’
A set of standards
governing the conduct
of members of a certain profession
How should an accountant behave?
trustworthy
must consider public interest and social responsibility
What does CGMA stand for?
Chartered Global Management Accountant
What is the CGMA Code of Ethics?
As it says on tin
-Emphasises that accountants must act in the public interest
-Based on Code of Ethics for Professional Accountants published by IESBA
Transgressions of the Code - CGMA DO take action, IESBA and IFAC don’t. No legal consequences, but professional/commercial consequences
What is IESBA and IFAC
IESBA - International Ethics Standards Board for Accountants
IFAC -International Fedaration of Accountants
IESBA is a part of IFAC, which represents all the major accountancy bodies of the world. IFAC is not itself a membership body
The CGMA code sets out the basic needs of the accountancy profession, what are these?
PCPC
Professionalism
Credibility
Provide high quality services
Confidence
What are the Fundamental Principles of the code?
CIPOP
Confidentiality
Integrity
Professional behaviour
Objectivity
Professional competence and due care
What are the personal qualities required of an accountant?
CTR3
Courtesy
Timeliness
Reliability
Responsibility
Respect
What are the professional qualities required of an accountant?
SASI
Skepticism
Accountability
Social responsibility
Independence
What are the two ways to incorporate ethical behavior into organisations?
Rules Based/Complience approach
Principle based approach (conceptual framework)
Features of a rules based compliance approach
- Minimum standards must be achieved
- Punish offenders
- Supervision -inspections carried out
- Consistent and east to follow, but potential workarands
Features of a principles based compliance approach
- Law is basis for action
- Employees encouraged to take responsibility
- Management create environment to support ethical values
- Build values into systems
- Adaptable to diff situations and
- May lead to inconsistencies and confusion
What type of framework is CGMA?
Conceptual framework
Which organizational values promote ethical behaviour?
Openness, Honesty, Accountability
Respect Trust
Empowerment Leadership
What is the development cycle?
DADARE
Continual profession development is at the heart of CGMA membership
Define -expectations of roles
Assess - capabiliy gap
Design - a programme
Act - qualifications, training etc
Reflect
Evaluate
What is the FRC?
Financial Reporting Council
UK’s professional oversight board for accounting
-Regulates specific activities of UK accountancy bodies including CGMA
-Regulation covers: Training, CPD, conduct and discipline
What are the Seven Principles of public life?
LISA HOO
Leadership
Integrity - avoid actions that place under oblig
Selflessness -act in public interest not personal
Accountability - responsibility and prepared to be scrutinised
Honesty - declare private interests and resolve conflict
Objectivity - award contracts on merit
Openness - decisions must be freely avail
What is consequentialism?
focuess on consequences any action might have.
Must understand consequences of actions.
Moral = good consequences.
Situational and contingent (subject to change).
What is utilitarianism?
measures quality of outcome in terms of
greatest happiness for greatest number
What is best for majority
What is egoism?
What is best for me?
Any act is justified if any decision is based on the
needs/interests of the individual
making the decision
What is ethical relativism?
There are relative rights and wrongs, nothing is absolute. Some ethically wrong things are less important than others. Can lead to acceptance of ‘anything goes’
What is ethical absolutism
there are fixed rights and wrongs which are unvarying
What is pluralism?
several values which may be equally correct and fundamental yet in conflict with each other
What are virtue ethics?
The virtues of justice and generosity
enable us to act in ways
that benefit both the person possessing them and that persons society
Applies to accounting
What is a deontological approach?
humans are rational and have a duty to respect other rational beings
What are individual benefits of ethical behaviour?
- Better reputation
- Promotion and jobs and job satisfaction
- Peace of mind
What are Benefits of ethical behaviour for accountancy profession?
- Better reputation, earning prospects, employability
- Reduces pressure for gov regulation
- Trust and respect for public
What are benefits for society for ethical behaviour
- Confidence in accountants and financial statements
- Stability in financial markets
- Protection from crime
- Success of organisations and society
What is an ethical dilemma?
a situation where two conflicting obligations are faced
E.g.
Being asked to probe friends who work at competitors
Being asked to disclose confidential info
Issuing reports that misrepresent the facts
Gifts/Bribes
Lacking qualification
What is a conflict of interest
A situation in which:
two or more interests,
exist within one person or organisation
and are incompatible.
This threatens objectivity and could adversely influence decision making. It may create an ethical dilemma
What is the CGMA codes conceptual framework?
A methodology for dealing with ethical dilemmas
If accountants realise compliance with one or more of the code’s fundamental principles is jeapordised, what should they do?
- Identify the principles in danger
- Identify the nature of the threat to the principles
- Identify safeguards to reduce threat/elimate
What are threats to compliance with fundamental principles?
- Self interest: shares in company you’re auditing
- Self review: preparing and auditing financial statements
- Advocacy: remaining with a supplier company because you introduced the company
- Familiarity: appointing a family member as a manager (nep)
- Intimidation: threat of loss of job
What safeguards are there to the fundamental principles?
- Education, training and experience requirement for entry to CGMA
- CPD requirements
- Corp governenance requirements
- Statutory or common law rules
- Professional standards
- Professional monitoring and disciplinary procedures
- 3rd party review
- Whistleblow procedures
- Disciplinary procedures
What is the CGMA Ethics checklist?
A checklist to follow if you have an ethical dilemma or conflict of interest
List the CGMA Ethics checklist
- Check all the facts and document them if poss
- Is it ethical
- Is it legal
- Identify fundamental principles affected
- Identify affected parties
- Possible course of action
7.Seek advice - proffesional or legal - Refuse to remain associated with the conflict
Process for resolving ethical conflict
1) Try to resolve yourself
consider
-fundamental principles
facts and ethical issues involved
alternative courses of action and consequences
2) select appropriate course of action
3) keep a record of all correspondence
4) consult with appropriate people in organization
5) obtain professional advice from professional body
6) obtain legal advice
6) Change role or department
7) resign if all else fails
If dilemma encompases breaches of law consider whistleblow
List all important acronyms
Basic needs of accountancy profession: PCPC
Fundamental principles of the code: CIPOP
Personal qualities required of an accountant: CTR3
Professional qualities required of an accountant: SASI
CPD cycle: DADARE
Seven principles of public life HOA RT EL
FP: Confidentiality
Respect confidential information and do not disclose to third parties unless a legal/professional right or duty to disclose
FP: Integrity
Straightforward and honest
FP: Professional Behaviour
Comply with laws and regs
FP: Objectivity
no bias, conflict of interest, undue interest of others
FP: Professional competance and due care
maintain knowledge and skill
When can confidentiality be broken?
Obligatory responsibility – suspect money laundering, drug trafficking or terrorist offences
Voluntary disclosure – Public interest (fraud)
Prof qual: Sceptism
Question info supplied to them
Prof qual: Accountability
accountable for own actions - open to scrutiny
Prof qual: social responsibility
aware work may affect public
Prof qual: independence
produce work free from bias and prejudice
key benefit of acting ethically
key benefit of acting ethically
What is the difference between conflict of interest and ethical dilemma?
An ethical dilemma is a moral conflict that involves deciding how to act when there are conflicting professional values and responsibilities. A conflict of interest is a conflict between a person’s private interests and their official or professional responsibilities
What ethical stance:
focus on consequences any action might have.
Must understand consequences of actions.
Consequentialism
What ethical stance:
measures quality of outcome in terms of
greatest happiness for greatest number
utilitarianism
What ethical stance:
What is best for me?
Any act is justified if any decision is based on theneeds/interests of the individual making the decision
egoism
ethical relativism
ethical absolutism
Ethical stance: several values which may be equally correct and fundamental yet in conflict with each other
pluralism
Ethical stance:
The virtues of justice and generosity
enable us to act in ways
that benefit both the person possessing them and that persons society
Applies to accounting
Virtue ethics
Ethical stance:
Humans are rational and have a duty to respect other rational beings
deontological
