Ethical Considerations Flashcards
3 main sources of rules:
- Law (Min. required)
- Non-legal rules and regulations
- Ethics
Transparency means…
…open and clear disclosure of relevant information to shareholders and stakeholders
…not concealing information when it may affect decisions
Corporate accountability is…
…whether an organisation (and its directors) are answerable in some way for the consequences of their actions
Integrity is…
…straightforward dealing and completeness
Ethics are…
…a set of moral principles to guide behaviour
Egoism is…
…where an act is ethically justified if decision-makers freely decide to pursue their own short-term desires or their long-term interests (subject is the self)
Relativism is…
…the view that a wide variety of acceptable ethical beliefs and practices exist
Absolutism is…
…the view that there is an unchanging set of ethical principles that will apply in all situation, at all times and in all societies
Payments by companies to government or municipal officials: 4 fine distinctions
- Extortion (Threats of closure)
- Bribery (Payment for unentitled services)
- Grease money (Deliberate stalling)
- Gifts (Japan - gifts are essential)
6 areas for action in safeguarding the natural environment:
- Environmental auditing
- Economic action
- Accounting action
- Ecological approach
- Production (minimise inputs)
- Quality (Continuous improvement)
Examples of social and ethical objectives:
Minimum wage Job security Control pollution Financial assistance to charities No undesirable goods
Ethical systems within an organisaton
- Personal ethics
- Professional ethics
- Organisation culture
- Organisation systems
The 7 principle of public life:
- Selflessness (solely in public interest)
- Integrity
- Objectivity (choices made purely on merit)
- Accountability (subject to scrutiny)
- Openness (Reasons for decisions freely available)
- Honesty (Declare private interests)
- Leadership (Promote and respect the 6 other principles)
2 approaches to managing ethics:
- Compliance-based
2. Integrity-based
Compliance-based ethics management:
- Act within the letter of the law
- Violations are prevented, detected and punished
(Procedures; audits; whistle blowing systems)
Bureaucratic control
Integrity-based ethics management:
- Emphasis on managerial responsibility
Cultural control
Reasons for accountants to behave ethically:
- Accountants are expected to apply the law and regulations
- The professions requires members to conduct themselves and provide services according to certain standards
- Ethical behaviour serves to protect the public interest
Fundamental principles of the ACCA Code of Ethics:
- Integrity
- Objectivity
- Professional competence & due care
- Confidentiality
- Professional behaviour
ACCA expects certain qualities of you:
Personal and Professional qualities
Personal qualities:
- Reliability
- Responsibility
- Timeliness
- Courtesy
- Respect
Professional qualities:
- Independence
- Skepticism
- Accountability
- Social responsibility
Financial interests exist where…
…an audit firm has a financial interest in a client’s affairs
Contingent fees are…
…fees calculated on a predetermined basis relating to the outcome or result of a transaction or the result of the work performed
Public Interest Companies are those that…
…for some reason, are in the ‘public eye’. Auditors should treat these as if they are listed companies
A valuation comprises…
…making assumptions with regard to future developments, the application of methodologies and techniques and the combination to compute a certain value, or range of values, for an asset, a liability or a business as a whole
Ethics in business is…
…the application of ethical values to business behaviour
3 elements of ethics:
- I - individuals professional responsibility to act
- Do - Practical actions; how they act
- Best - Choices between courses of action
Ethical dilemmas occur as a result of tensions between 4 sets of values:
- Societal values - Law
- Personal values - values and principles
- Corporate values - Ethical codes
- Professional values - Professional body’s ethical codes
Methods of evaluating a decision:
- Transparency: Do I feel comfortable with others knowing about my decision, is my decision defensible?
- Effect: Have I considered all partied who may be affected? (mitigating circumstances)
- Fairness: Would a reasonable 3rd party view the decision as fair?
