Chapters 3&4 Flashcards
CIMA code and law
CIMA CODE OF ETHIC’S is a law of the institute so a breach = disciplinary action
Code is not part of national law and wont automatically = civil / criminal actions
Interaction between CIMA code, national law, individual’s employment contract?
LAW OVER RIDES everything (statutory obligations)
Secondary obligation = CIMA code(even if it causes a breach in your employment)
Employment contracts etc are voluntary so you can choose whether to comply or not
Consequences of unethical behaviour to ACCOUNTANTS
- professional disciplinary proceedings
- fines or being struck off
- loss of job / career
- loss of personal reputation
- prosecution if behaviour is criminal
- liable for damages to affected parties
Consequences of unethical behaviour to THE ACCOUNTANCY PROFESSION
- loss of reputation / trust from society
- reduced employability of accountants
- pressure by outside bodies to tighten up regulations
- imposed regulations by government
- loss of ‘chartered status’
Consequences of unethical behaviour to THE BUSINESS
- loss of reputation (sales/contracts)
- threat of legal action / investigation by regulators
- resignation of key ethically-minded staff
- business closure, redundancy
Consequences of unethical behaviour to SOCIETY AS A WHOLE
- society wouldn’t function without ethical accountants
- unethical companies would fail as they would lose public confidence
- financial markets would be affected if investors couldn’t rely on audit reports / financial statements
- commercial organisations wouldn’t work if they were unable to rely on their accountant’s work
- criminals may gravitate towards the field to make money through financial crime
- tax authorities may question tax computations ie less tax/duties collected
What are Ethical conflicts?
Ethical Conflicts arise in situations where two ethical values or requirements seem to be incompatible. They often arise from tensions between societal, personal, corporate and professional values. They can also be where the interests of different stakeholders clash.
What are the 4 sets of values?
Societal Values
- obligations imposed by national law and customs
Personal Values
- values and principles held by the individual
Corporate Values
- values and principles of the place of work ie corporate ethical code (SKY)
Professional Values
- values and principles of the professional body that you’re a member of (CIMA)
(contractual obligations can also add a level of complexity)
Ethical Dilemma
When the boundaries between right and wrong are unclear and/or there’s a choice between a good choice or the least wrong choice.
BUT NOT A choice between personal preferences/compromises (EG friendships/ politics) and the law as accountants should avoid thinking about themselves personally when making ethical decisions.
centred around conflicts of interest which occur when an individual is faced with two competing demands eg professional duty and personal incentive. or dealing with contrasting demands of stakeholders.
Its good for the individual to declare it or withdraw from the situation that is causing the conflict.
Stakeholders
Financial - groups that would directly suffer if something happened to an organisation as they have a financial relationship with it eg shareholders, employees, customers, government, suppliers
Interest/Non Financial - Interested in how an organisation behaves eg media, competition and regulators.
Practical examples of ethical dilemmas
- pressure from an overbearing colleague
- members asked to act contrary to technical/professional standards
- divided loyalties between colleagues and professional standards
- publication of misleading information
- members having to do work beyond their expertise/experience
- personal relationships
- gifts/hospitality offered
stakeholder conflict can also occur due to differing perspectives eg shareholders focus on financial returns/employees on job security
CIMA Conflict resolution based on CIMA’s Ethical Checklist
Silence/Inactivity in itself is a breach of the code. So ensure to be transparent, consider the effect on others and whether the decision is fair.
- Gather and record all facts
(don’t rely on assumptions or word of mouth) - Decide if the issue is ethical
(refer to CIMA’s code of ethics) - Decide if the issue is legal in nature
(national laws and regulations) - Identify any of CIMA’s fundamental principles that may have been affected
(OPPIC) - Identify any affected parties
- Consider possible courses of action
- If necessary seek professional or legal advice (CIMA ethics helpline, personal legal advice, whistleblower hotlines but be aware of confidentiality regulations)
- Refuse to be associated with the conflict (move departments/resign/seek legal advice)
Corporate Governance
The system by which organisations are directed and controlled.
The FRC explains the purpose of corporate governance is to:
- facilitate effective, entrepreneurial and prudent management that can deliver the long term success of the company.
3 aspects of an organisation
- collective goals
(profit making companies = maximisation of shareholder wealth or charities = maximising benefits of beneficiaries) - social arrangements
(organisations are structured to allow people to work together towards a common goal) - controlled performance
(systems and procedures will be developed to ensure collective goals are met)
Types of organisation? Public vs Private
Public sector = provision of public services and controlled by gov organisations eg police, military, public transport, education or health care
Private Sector = owned by groups/individuals.
Eg;
- Profit Orientated (sole traders, partnerships, private, public limited companies)
- Not for profit orientated (charities/clubs)
- Non governmental (charities no link to gov providing services to certain areas)
- co-operatives (owned and democratically controlled by their members who buy the company goods/services)
