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BA4 - CIMA > Chapters 1&2 > Flashcards

Chapters 1&2 Flashcards

1
Q

Define Ethics

A

The difference between right and wrong
or
doing the right thing when no one is watching

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2
Q

How do morals differ from ethics

A

Morals relate to a persons individual beliefs and can be derived from religious or cultural influences.
Therefore issues can arise where its morally justifiable but unethical eg refusing to bake a wedding cake for a gay couple (discrimination) because her religious beliefs don’t agree with same sex marriage.

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3
Q

Society and ethics?

A
  • standard of living increases with mutual co-operation
  • Laws set the minimum expectations for regulating the behaviour of our society
  • acting altruistically is voluntarily acting above the min requirement in a fair/civilised society
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4
Q

Business and ethics?

A

‘good ethics can be good business’ eg financial paybacks for going above and beyond. So companies will develop their own unique ethical values in their corporate code of conduct. May even have an ethics / compliance officer to oversee this.

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5
Q

unethical companies

A

Therefore unethical companies are breaching societys trust -> bad reputation-> lose sales. Eg avoiding tax, creative accounting, copying, product defects, misleading marketing, environmental/social issues, aggressing selling, employee discrimination, data protection issues, bribery, business intelligence/spying, donations to political parties for fame.

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6
Q

Accountancy profession and ethics

A

accountants = leadership role in society so should act to protect public interest and uphold standards. Public sector accountants are duty bound to protect tax payers money. and IF unethical -> can ruin their career, the company itself and the whole industry reputation.

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7
Q

What are the broad schools of ethics?

A
  1. Virtue Ethics (CIMA advocates, following virtues eg justice/charity/generosity)
  2. Deontological Ethics ( duty central concept ie obeying rules aka normative approach)
  3. Utilitarianism (greatest benefit/utility to the most people - branch of consequentialist theory)
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8
Q

Personal approach’s to ethics

A
  1. Egotists (max personal outcomes and own needs)
  2. Pluralists (outcomes that benefit everyone)
  3. Relativists (context & are flexible / pragmatic)
  4. Absolutists (laws and regulations)
  5. Consequentialists (possible consequences decide what to do)
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9
Q

What factors influence ethical obligations

A
  1. The law (primary influence, min standard of behaviour)
  2. Gov Regulations
  3. Ethical codes
  4. Social Pressure (eg environmental/discrimination issues)
  5. Corporate culture
  6. Personal policies and values (moral issues)
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10
Q

Benefits and costs of business ethics

A

B:

  • attracts customers (rep and brand)
  • productivity and effectiveness of workforce
  • cost reduction (eg less wastage)
  • risk reduction

C:

  • increased costs (eg fair trade produce)
  • lost business (eg turning down work with unethical customers)
  • resource costs
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11
Q

Who provides the ethical framework for accountants in the UK?

A

Financial Reporting Council (FRC)

  • independent regulator in the UK Financial Services Sector
  • high quality corporate governance in order to promote UK investment
  • audit & assurance council AND Accounting council are parts and provide advice in their areas
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12
Q

FRC Sub Bodies that monitor the accounting profession?

A

Codes and Standards Committee (councils)
- advise upon drafts and standards
- comments on proposed developments
Audit and Assurance Council, Corporate Reporting Council, Actuarial Council

Conduct Committee (committee's)
- audit quality reviews
- corporate reporting reviews
- discipline and regulation
Corporate Reporting Review Committee, Audit Quality Control Committee, Case Management Committee
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13
Q

Globally who regulates the accounting profession?

A

International Federation of Accountants (IFAC)

  • their code of ethics compiled by the IESBA eg integrity, objectivity etc
  • their role is to ensure consistent minimum standards in areas eg Education, Examinations, Experience
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14
Q

The Seven Principles of Public Life = governance for public sector accountants

A

Leadership (promote/respect other principles)
Honesty (declaring conflict of interests)
Objectivity (awarded on merit)
Accountability (responsible for own actions)
Integrity (not influencing decision making)
Selflessness (act in public interest)
Openness (decision making info = available)

LetsHelpOurAsianIndianSelvesOkay

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15
Q

CIMA’s work focuses on the concept of ‘responsible business’

A

= an organisation committed to operating in a way that’s economically, socially and environmentally sustainable while still upholding the interests of its various stakeholder groups.

CIMA assess if their partner organisations follow that

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16
Q

Rules Based (Or Compliance) Approach

A
  • Ethical codes set out in detail what can/cannot be done
    ( - black & white - law - compliance )

+ rules for specific outcomes
+ consistent application
+ easy to identify breaches / non compliance and so issue clear penalties
+ people comply as they fear consequences

  • lengthy rulebooks which may become outdated
  • cannot cover ever eventuality so what to do in those
  • cannot learn every rule
  • removes member discretion (judgement)
17
Q

Framework Approach

A

-Ethical code sets out values / principles designed to help individuals how to act by instilling the idea of what the correct thing is to do
( - CIMA/IFAC use it - flexible -discretion - guidelines)

+ proactive actions
+ members as individuals capable to decide
+ flexibility helps in complex situations
+ harder to see loopholes
+ less prone to becoming outdated

  • subjective interpretations
  • potential for inconsistency
  • may just become rules based if enforced
  • difficult to monitor compliance
18
Q

Rules Based vs Framework Approach

A 
mandatory vs discretionary
obedience vs judgement
explicit vs implicit
fear driven vs value driven
law based vs principles based
detection vs prevention
rules vs values / principles
19
Q

CIMA code of ethics for professional accountants

A
  • 2006 -> - 2010 -> 2015
  • reflects IFACS principles and is a framework approach
  • sets the standards it expects of its students and members
  • 3 main aims (personal responsibility, guidance on situations where there might be ethical pitfalls, how tp address these)
  • arranged in 3 parts: A is general to everyone
    B to public practice and C to business’
20
Q

Examples of issues where there may be ethical pitfall’s to those in the public practice and those in business

A

PP
conflicts of interest, second opinions, fees, marketing, gifts, hospitality, custody of client assets, objectivity, independence

B
preparation and reporting of info, acting with sufficient expertise, financial interests, inducements

21
Q

CIMA code of ethics 5 fundamental principles

A

O P P I C

  1. Objectivity
    - judgements/decisions free from bias and avoid conflict of interest
  2. Professional Competence and Due Care
    - technically competent, taking care and being up-to-date through continuous development
  3. Professional Behaviour
    - no behaviour that would discredit CIMA or wider profession, following all laws
  4. Integrity
    - honest and straight forward conduct at all times
  5. Confidentiality
    - safe guarding information unless theres a legal or professional duty to disclose (eg permitted by law, the client, the employer, a professional duty/right or required by law eg criminal)
22
Q

CIMA 5 groups of threats to professional ethics

A

ASS IF

  1. Self Interest
    - other interest (eg financial) will inappropriately influence the accountant’s judgement
  2. Self Review
    - not appropriately evaluating the results of their own or others work
  3. Advocacy
    - promoting a client or employers position whereby objectivity is compromised
  4. Familiarity
    - long or close relationship will affect the work eg too sympathetic to their interests or too accepting of work
  5. Intimidation
    - will be deterred from being objective due to pressures and attempts to influence
23
Q

CIMA Safe guards to tackle the 5 threats (ASS IF)

A

general

  • education and training
  • CPD (continuing professional development)
  • standards
  • regulatory monitoring / disciplinary procedures
  • corporate governance requirements
  • external review by a legally empowered third party

work

  • organisational system
  • internal control
  • codes of conduct
  • recruitment procedures to get high calibre staff and then followed with enough education / training
  • ethical leadership (able to be honest with)
  • communication channels for reporting (eg formal dispute) and gaining advice
  • employee performance system
24
Q

CIMA - Personal Qualities

A

Triple R, T, C

Reliability - trustworthy and dependable

Responsibility - ownership of actions and decisions

Respect - listening and understanding

Timeliness - work in agreed timeframes

Courtesy - good manners and consideration

25
Q

CIMA - Professional Qualities

A

IP AS

Independence of Mind - (or appearance) integrity

Professional Scepticism - Questioning veracity of information, being alert to error and challenging assertations

Accountability - answerable for own actions

Social Responsibility - Acting with integrity, courtesy, respect and due care

26
Q

CGMA Responsible Business Report Terms

A

Chartered Global Management Accountant

TERMS INCLUDED
Responsible Business - organisation operating in an economic, socially and environmentally sustainable way

Business Ethics - ‘business principles’ application of ethical values to business behaviour and activities

Ethical Performance - extent to which an organisation’s behaviour corresponds to its ethical values

Ethical Management Information - All the numerical and written information that allows the assessment of how ethical an employees activities are

Integrated Reporting - an approach to corporate reporting that allows readers to get a wide ranging view of the companies performance (eg ethics) not just financials.

27
Q

CGMA Responsible Business Report Ethical Issues

A

ETHICAL ISSUES

  • data and info security
  • equality and discrimination
  • human rights
  • conflict of interest
  • bribery
  • supply chain management
  • responsible marketing
  • remuneration policies (fairness and equality)
  • Whistleblowing
  • employee safety and security
28
Q

CIMA and The Institute of Business Ethics -> Guidance = Embedding ethical values - a guide for CIMA partners

A

How to form an ethical policy and embed it

  • Ensures Business Behaviour reflects ethical values
  • Code of ethics importance
  • Need to be embedded into the organisation’s culture

GOOD PRACTICE
- core values, given to all employees, in all languages, system for reporting, monitored by a board committee, compliance should be in contracts, implementation, regularly reviewed, seniors should embody it

BAD PRACTICE
- allowing exceptions, just putting a copy up for display, not investigating breaches, not using it in training, not integrating it into day to day, leaving it with HR, seniors not following, keeping it internal and not to partners too, no review procedure

29
Q

CIMA and The Institute of Business Ethics = Business Ethics for SMEs

A

some practical ethical challenges and some benefits of making values explicit

eg
EC
whether to meet a customer deadline and supply faulty goods OR extend deadline and discuss issues

getting employees to work properly and ethicallly

balancing work and personal obligations

B
open and innovative culture

attraction of higher calibre staff

increased employee loyalty & commitment

reduces integrity risks

30
Q

CIMA Professional Development Cycle

A

DA DARE

Define - Assess - Design - Act - Reflect - Evaluate

members should DEFINE current (+desired) roles

use current capabilities to ASSESS knowledge gaps and create learning objectives

DESIGN an activity programme

ACT on learning activities (eg reading, training, researching, attending events)

activities should be REFLECTED on to see if further training is needed

EVALUATE if any gaps should be rolled into the next cycle

31
Q

CIMA Professional Development and Life Long Learning

A
  • The development of personal qualities eg communication skills, assertiveness, time management, relationship building. Skills to be developed by an individual and must come from deep within them.
  • The concept that an individual never stops learning and should be open to new ideas, decisions, skills and behaviours

BA4 - CIMA (7 decks)

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