Ethics

Question 1

Define Ethics

Answer 1

Ethics can be thought of as the ‘moral principles that govern a person’s behaviour’
In simple terms, acting ethically means nothing more than doing the right thing - at work, in relationships and in life in general

Question 2

Why do accountants need to act ethically?

Answer 2

Ethical behaviour plays a vital role in ensuring public trust in financial reporting and business practices and upholding the reputation of the accountancy profession. Accountants are expected to demonstrate the highest standards of professional conduct and take into consideration the public interest.

Question 3

What happens when an accountant is seen to act unethically?

Answer 3

If accountants fail to act ethically they risk bringing themselves, their governing body (AAT) and the profession as a whole into disrepute. Meaning the public and peers will lose faith not only in the individual who as acted unethically but potentially in the profession.

Question 4

Apart from an employer who else must an accountant take into consideration when faced with an ethical dilemma?

Answer 4

Accountants have a duty to act not only in the best interest of their employer and/or client but also in the public interest - they have a duty to society as a whole.

Question 5

Unethical behaviour may be caused by?

Answer 5

Deliberate acts or by omissions

Question 6

Not all unethical behaviour is illegal - what would happen if an accountant is found to have acted unethically without breaking the law?

Answer 6

Accountants that act unethically are likely to face disciplinary charges by their professional body (E.g. AAT) for misconduct.

Question 7

What are the sanctions that an accountant could face if found to have acted unethically from their professional body?

Answer 7

Sanctions can include -
Warnings
Suspensions
Fines
Or Expulsion

Question 8

What are the repercussions if an accountant is found to have acted unethically from their employer

Answer 8

These repercussions can include -
Formal Warnings
Demotion
Suspension
Dismissal from their job

Question 9

If an accountant is found to have acted unethically and illegally they are likely to face?

Answer 9

Criminal charges and if found guilty face financial penalties or imprisonment.

Question 10

Most Professional Bodies have a principles-based approach to ethics - define this

Answer 10

A Principles-Based Approach aims to identify the key types of ethical behaviour, the issues that can threaten ethical behaviour and the safeguards that can be put in place. By following the Code of Professional Ethics, an accountant should be able to deal with any situation which may arise. It is always wise to adopt a methodical approach in dealing with an ethical dilemma, working through different possible options in determining what to do.

Question 11

What are the Five Fundamental Principles of Ethics

Answer 11

Integrity
Objectivity
Confidentiality
Professional Behaviour
Professional Competence and Due Care

Question 12

Define objectivity

Answer 12

Means that all members must not compromise their professional or business judgement because of bias, conflict of interest or the undue influence of others. This means being able to take a balanced view of any given situation.

Question 13

Define Integrity

Answer 13

Integrity means that all members must be straightforward and honest in all professional and business relationships. It also implies fair dealing and truthfulness. Accountants must be seen to work in ways which are honest, transparent and fair.

Question 14

Define Independence in appearance in terms of objectivity

Answer 14

An accountant not only should be objective but should also appear objective. They must be able to prove their objectivity in any decisions to anybody who questions it.

Question 15

Define confidentiality

Answer 15

Means that all members must refrain from disclosing confidential information acquired as a result of professional and business relationships without proper and specific authority or unless there is a legal or professional right or duty to do so.

Question 16

What are the 3 reasons why an accountant can disclose confidential information?

Answer 16

When there is a express authority from the client to do so
When there is a legal obligation to do so
When there is a professional obligation to do so

Question 17

What are the 2 reasons why an accountant can disclose confidential information as a result of a legal obligation?

Answer 17

A. Where the information is required by law (such as providing evidence in court)
B. Where the law has been broken and information has to be disclosed to relevant authorities (I.e suspicions of money laundering)

Question 18

Define professional competence and due care

Answer 18

Means that all members must maintain professional knowledge and skill at the level required to complete the job they’ve been asked to do. Clients expect accountants to be competent (already possess the knowledge)to complete their work with due care in an accurate and timely manner.

Question 19

Define professional behaviour

Answer 19

Means that all members must comply with relevant laws and regulations and avoid any action that may bring the profession into disrepute.

Any breach of relevant laws or regulations or any of the four other fundamental principles would automatically be considered a breach of the fifth principle of professional behavior.

These also go for actions that one may make outside of work and in their personal life.

Question 20

What are the 5 potential threats to the fundamental principles?

Answer 20

Self-interest
Self-review
Advocacy
Familarility
Intimidation

Question 21

What are self-interest threats?

Answer 21

These occur when an accountant knows that they or someone close to them will benefit by taking a particular decision.

Question 22

What is one particular issue which often arises that can threaten objectivity?

Answer 22

One particular issue that can threaten objectivity is the offer of gifts/hospitality from clients. Problems occur when the value or benefit of the gift exceeds the value of the reason its been given (usually as a thank you) this could potentially be seen as a bribery.

Question 23

Define a intimidation threat to the fundamental principles

Answer 23

A intimidation threat is where an accountant fears they will be harmed in some way by taking a course of action. These could be physical or emotional threats, blackmail or the threat of losing a client

Question 24

Define familiarity threats

Answer 24

These occur when an accountant is ‘closest someone who will be affected by a financial decision

Question 25

Define a self-review threat

Answer 25

A self-review threat is where an accountant is in a position to audit/check over financial accounts that they have previously been involved in or originally produced themselves. This is a potential threat as the accountant may not devote sufficient time or care to check the records throughrally or worse may not disclose and errors.

Question 26

Define the threat of advocacy

Answer 26

Occurs when an accountant publicly supports the position of a client, this could be by supporting their campaign or it could be by close association with the client; by recommending their services or advertising the clients business.

Question 27

What are the 3 safeguards which protect the accountant from the potential threats against their fundamental principles?

Answer 27

Professional safeguards
Legislation and Regulation
Organisational

Question 28

How could a organisation help protect against the fundamental principles

Answer 28

An organisation can ensure that it has an ethical culture by implementing strong internal controls and effective policies (Code of Conduct) and procedures which are maintained through regular staff training.

Question 29

What are the 4 stage approach to resolving conflicts of interest

Answer 29

Stage 1 - apply the conceptual framework
Stage 2 - apply a resolution
Stage 3 - obtain external support
Stage 4 - consider further action

Question 30

What is the definition of sustainability according to the Brundtland Report?

Answer 30

Development that meets the needs of the present without compromising the ability for future generations to meet their own needs

Question 31

What are the 3 key objectives set out by the Brundtland report?

Answer 31

Environmental
Social Equality
Economic

Question 32

What is the purpose of a Corporate Social Responsibility (CSR)

Answer 32

Is a report that sets out a companies objectives and policies adopted to help support sustainability and sustainable development - this is a voluntary report

Question 33

Why do accountants have a responsibility to uphold sustainability?

Answer 33

Accountants not only have the responsibility to act ethically in all aspects of their professional lives but have a duty of care to society as a whole. The The accountants’ public interest of protecting society as a whole means that they must consider that economic, social and environmental aspect of their work to support sustainability.

Accountants should also promote sustainable practices and raise awareness of social responsibility in their workplace.