Ethics (Chapter 1) [P1+2]

Question 1

What is the King Code?

Answer 1

A report, drawn up by a South African committee chaired by former High Court judge, Mervyn King, that sets out the principles and guidelines relating to good and ethical corporate governance.

Question 2

List three fundamental aspects of King III

Answer 2

• accountability
• transparency
• sustainability

Question 3

Define accountability

Answer 3

Acknowledging and assuming responsibility for your actions, duties and decisions. It is the obligation to account your activities and to be held responsible and answerable for the quality and accuracy of the results.

Question 4

Define accountability in the financial environment

Answer 4

Accountability relates to employees, management and directors performing their duties in a professional manner, and being held responsible for the results of these activities.

Question 5

Why is accountability important in the business environment?

Answer 5

The business environment requires behaviour in accordance with good practice, ethics and integrity. It expects tasks to be carried out accurately, efficiently and timeously. If these expectations are not met, then it will demand accountability and call for explanations, reasons and answers. Accountability also extends to individuals being held responsible for the protection of assets and financial information of a business.

Question 6

Define transparency

Answer 6

An honest way of doing things that allows other people to know exactly what you are doing

Question 7

Define transparency in the financial environment

Answer 7

Conducting business activities in an open manner without withholding information or having any hidden agendas. This also means that financial statements should be prepared in a transparent manner, so all material information should be fully disclosed and this information should be true, accurate and complete. This is particularly important in the case of companies where the various stakeholders (management, shareholders, etc.) make financial decisions based on the data in the financial statements. They rely on the accuracy and integrity of this information.

Question 8

Explain one way in which businesses can provide transparency

Answer 8

Maintain an accurate, reliable and complete set of accounting records, supported by suitable source documents. The accounting records will help to provide confirmation of transactions that took place.

Question 9

Why should you conduct business in an open and transparent manner?

Answer 9

It can help to avoid conflict and misunderstanding and create a fair and harmonious business environment. It can also play a role in preventing and detecting accounting errors or financial fraud

Question 10

Define sustainability

Answer 10

The ability to maintain economic, social and environmental resources, aka “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”

Question 11

Define sustainability in the financial environment

Answer 11

Businesses operating in a manner that doesn’t jeopardize our current and future social, environmental and economic well-being.

Question 12

Define integrated reporting

Answer 12

Aka “triple bottom line” accounting and requires a shift in mindset away from a purely “bottom line” approach that is exclusively concerned with financial profit. The term “bottom line” refers to the last line of the I/S which lists the net profit. “Triple bottom line” accounting implies that companies should disclose information not only about their economic performance,but also about their social and environmental performance. Triple bottom line is also known as “people, planet, profit”