ethical conflict and reporting unethical behaviour Flashcards
How can a conflict of interests occur for the accountant’s clients ? P143
- public practice work =Several different clients
- chance- conflict- two or more clients
- same market- same customer - success of 1 = failure for others
What fundamental principles are affected by an accountant working for clients with conflicting interests ? P143
- Objectivity
- Confidentiality
What are the two potential problems facing an accountant working for a client with conflicting interests ? P143
- Advice to one - adverse affect on other (objectivity)
- information gained on one - beneficial to other client (confidentiality)
How can the risks associated with working for clients with conflicting interests be reduced ? P143
- safeguarding:
- Compartmentalising - reponsibiltiy and knowledge each client - use different staff each assignement
- no safeguards = not accept/ continue - one / more appointments
What should an accountant do before taking on a new client/ there are changes in circumstances of existing client ? P143
- Reasonable steps - conflict interests exists / could arise
- client fully informed - if conflict
- client decision - use of accountant
What is a definition of loyalty ? P144
- Firm / not changing
- support - person
- support organisation
- belief in your principle
What are examples of an employer pressuring an accountant not to comply with their fundamental principles ? P145
- Law break
- rulees and standards break - profession
- part - unethical / illegal earnings plan
- lie/mislead (silence) - auditors/ regulators
- name/association - misrepresenting statements
What options does the accountant have if the employer puts pressure on them to break their fundamental principle or the law ? P145
- employer broken law - persuade employer not to
- difference of opinion - accounting / ethical matter - senior staff / employer’s dispute resolution
- resign - remain confidential
What should an accountant do before offering their resignation for non compilance with employer demands to break fundamental ethical principles ? P146
- Advice - professional body/ legal
- now legal protection against dismissal - whistleblowing
How should an accountant go about solving an ethical conflict when applying their fundamental principles ? P148
- formal conflict resolution process
- solve informally
What factors should an accountant consider when attempting to resolve the ethical conflict, which arises when trying to apply fundamental ethical principles ? P148
- facts relating to conflict
- ethical issues involved
- fundamental principles involved
- established internal procedures
- alternative course of actrion available
- advice from others
What if the accountant cannot resolve the ethical issue, when applying fundamental principles, by themselves ? P148
- Consult other appropriate colleagues
- line manager raising - discreet & confidential
What should the accountant do if they are still unable to resolve the ethical dilemma through consulting an colleague? p148
- seek further advice
- larger organisation - employer’s ethics helpline
- smaller organisation - not own helpline - professional accounting body contact E.G. aat confiedential ethics helpline
Who should the accountant report to if the conflict is between the accountant and another member of staff/ organisation that they work for ? P148
- Person charged with governance management - directors / audit committee
What must the accountant always remember throughout dealing with ethical dilemmas? P149
- Document - ethical issue detail and discussions
What advice can the professional accoutant get if the ethical issue has not ben resolved ? P150
- professional advice - professional accounting body
- Legal advice
- on confidential basis
What if the accountant is still unable to resolve the issue after reporting it to a professional accounting body ? P150
- Disassociate from issue
- withdrawing from engagement team - working on assignment
- resigining - engagement/ firm / employer
How do organisations comply with relevant laws and regulations ? P150
- Own code of conduct
- business code of practice / conduct - organisational values included
What are the key organisational values that should be included in a business’ code of conduct ? P150
- transparency - colleagues, customers, suppliers
- reporting info clearly & on time - financial and regulatory
- open and honest - appropraite to accept gifts and hospitality
- supplier fair & timely pay
- fair treatment, good wage, good working condition
- appropriate social media use
What should an accountant ensure when complying with organisational ethics and values ? P151
- Application of own ethical values and fundamental principles
- conflict:
- feelings known - management in business
- conflict resolution process use (referenced earlier)
What is a consequence of a business not being transparent with colleagues, customers, and supplier ? P151
- customer/ supplier reluctant to trade
- e.g. small print contract - later enforce
What is a consequence of a business failing to report financial and regulatory information clearly and on time ? P151
- inaccurate & untimely financial info = Poor management decision by business
- untimely tegulatory info = fines
What are the conseqeunces of not having clear policies regarding gifts and hospitality ? P152
- Adverse affect - business image
- accusations - unethical business dealings
What are the consequeces of not paying a supplier fairly and on time ? P152
- Adverse affect - supplier relationship
- e.g. supermarkets negative publicity - low price from farmers
What are the consequences of not providing fair treatment, decent wages, and good working conditions from employees ? P152
- Employees leave - high staff turnover
- poor working conditiions = poor staff morale, poor quality , poor commitment from staff
What type of leverage does an organisation’s values and code of practice have ? P152
- Not legally enforceable
What leverage do regulations have ? P152
- fines - failure to comply
- health and safety at work act 1974 - significant penalities
What is whistleblowing defined as ? P153
- Tells - to someone in authority
- misconduct / alleged dishonesty / illegal activity
- has or may occur
- in organisation
What can the misconduct referenced in the whistleblowing definition mean ? P153
- Breaking the law - E.G. fraud
- contravening regulations - health and safety regulations
- contrary public interests - e.g. corruption
How can the allegations of misconduct by a whistleblower be made ? P153
- Internally
- Externally - regulators / police
What should be consider if someone is to whistleblow internally ? P153
- Have facts for issue & evidence
- follow internal procedure - prescribed internal department
- explained to management - concerns if not addressed
WHat should an individual accoutnant do if they’ve raised the issue internally but it’s not been addressed / the matter is so serious ? P154
Appropirate regulator - financial reporting council
Why should an external whistleblower seek third party advice before whistle blowing ? P154
- Legal protection limited
What protection agaisnt dismissal is there for external whistleblowers ? P154
- The public interest disclosure act 1998
- disclosure - otherwise confidential information
In order for the employee to gain protection from PIDA, they must believe at least one of these incidents has or is likely to occur. What are these ? P154
- Criminal offence
- breach of legal obligation
- miscarriage of justice
- individual’s health and safety endangerment
- environmental damage
What must the employee show in order to be protected from PIDA ? P154
- Disclosure - good faith
- information dislcosed is true
- victimised employee / evidence concealed or destroyed- info not disclosed
Where are the main places an employer can seek advice from externally when reporting unethical behaviour ? P155
- Citzen advice bureau
- Protect
- AAT ethics helpline - BEFORE WHISTLE BLOWING
What is the definition of liability ? P156
- legal responsibility for something
- possibility having to pay damages
What are the main facotrs causing liability ? P156
- Criminal acts
- breach of contract - supply of services
- breach of trusts
- professional negligence & fraud
What is negligence in law ? P156
- Breach - implied duty of care - situation / relationship
- accountant - assignements - skilled & professional manner
What is professional negligence ? P156
- client - accountant duty - financial loss
- proven accountant fault
- breach of contract
- accusations - fraud & money laundering
What rules should be followed for all assignments, to minimise the possibility of the accountant committing professional negligence ? P156
- Letter of engagement - excluded & included duties
- further duties - written down & agreed - both parties
- limitation to advice - advising without required info
- unaudited accounts/ financial statements - confidential & for private use
- complex assignement - take specialised advice/ tell client to take
What is professional indemnity insurance ? P157
- Legal liability cover
- third party compensation - injury , loss , damage
- student accountants, self-employed work
What should professional indemnity insurance NOT be used as ? P157
- Safety net
- no necessary skills
