Ethics Ch3 Flashcards
Conceptual framework
A set of principles to help accountants act ethically
Principles based approach
To use the conceptual framework to identify and evaluate threats to the fundamental ethical principles and put in safe guards to minimise or eliminate the threats
Rule based approach
The approach to professional ethics that means that you apply any rules exactly as stated regardless of the circumstances
Objectivity
Not allowing personal be,Ives or feelings or pressure from others affect decisions made.
Every point of view is taken into consideration equally. To remain objective all accountants need to be free from conflicts of interest. Should not allow their own self interest or that of an organisation that they work for influence any decisions
Independence of mind
Only taking into account points that are relevant to decisions to be made or work that is being undertaken - very similar to objectivity
Independence in appearance
Ensuring that to a third party the actions taken by the accountant appear to be objective and free from influence of others
Professional scepticism
An attitude which includes a question mind. Being alert to conditions which may indicate possible misstatement due to error or fraud, and a critical assessment of evidence
Inducement
Something offered to encourage or motivate a person to do something
Fraud
Intentional deception for professional gain or to damage another individual
Loyalty
Being firm and not changing in support for another person or organisation
Conflict of loyalties
This arises where and employee s loyalty to their employer clashes with their loyalty to the accounting profession
Ethical conflict
When there is a fundamental disagreement between what has been requested or the accountant and what their ethical principles indicate what they should do
What sets out the fundamental ethical principles
The code of ethics
When faced with ethical issues, accountants should consider their decisions based on the fundamental principles rather than using rigid systems of rules and regulations
Which approach is this
Principles based approach
Identify, evaluate and address the threat
Independence
The principle of objectivity goes hand in hand with the need for independence.
Independence means ‘freedom from control of influence of others’
Often independence and objectivity are used interchangeably to mean the same thing
Professional scepticism is an attitude that includes what?
Questioning mind, ie not taking what is said at face value but asking questions until satisfied that the info is correct.
Being alert to conditions, which may indicate possible misstatement due to error/fraud. Ie using professional experience and training to identify signs that a mistake has been made either by accident or deliberately
Making critical assessment of evidence that is provided.
If an accountant is concerned that inducements could threaten there fundamental principles, What action should be taken
▪️Immediately inform high management
▪️Inform a third party of the offer. Eg a professional body such as the AAT (accountant should also consider taking legal advice before doing this)
▪️tell a close friend, colleague or relation if they are likely to benefit from the inducement
▪️ inform higher management in the organisation in which the person works for
Fraud by false representation (fraud act 2006)
Where a person makes any representation which they know is misleading
Fraud by failing to disclose information (fraud act 2006)
Where a person fails to disclose any info to a third party which they have legal duty to disclose
Fraud by abuse of position (fraud act 2006)
Where a person occupies a position where they are expected to safeguard the financial interest of another person and abuses that position
Bribery ( bribery act 2010) and what is the maximum penalty
The 4 bribery act offences are, bribing another, receiving a bribe, bribing a foreign official, failing to prevent bribery
The max penalty is 10 years and/or an unlimited fine. There is also potential for property to be confiscated
Conflict of interest between accountants clients
Ie an accountant may have clients that work in the same market sector.
2 problems
- accounts may provide services and give professional advise to one client were they know it will have an adverse effect on the other
- info is gained about 1 client could potentially be beneficial to another and vice versa (confidentiality)
Both clients should be informed if this is the case
Resigning due to conflict of loyalties
The code of ethics strongly recommends rev employed accountant should obtain advise from their professional body or legal advise before taking the step to resign.
The law protects the employee. The employee should not be out in a position of losing their job when the matter is serious enough to be made public
If after consulting to a colleague about an issue and nothing is resolved, what can they do next
If the organisation is large enough, the employers ethics helpline. However for accountants in smaller organisations they may need to contact the helpline of their professional accounting body. The aat has a confidential helpline available for its members
Conflict between the accountant and another member of staff or the organisation that they work for.
They may need to report this to the persons charged with governance. (Management) of the business for resolution. This may be the board of directors ie the audit committee
It’s important to document the details of ethical issues involved with details of any discussions held or taken concerning the issue
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Suspected fraud
The accountant may then have to consider having to submit a report to NCA or to their money laundering reporting officer (MLRO)
If this is still unresolved, it’s best for the accountant to dissociate away from the clients or resign
