midterm quiz Flashcards
Is concerned with the responsibilities and obligations of businesses to people.
Corporate Social Responsibility
The application of ethical principles and standards in a business environment.
Business ethics
Arises when an officer or employee of the employing organization takes advantage of their position to improperly obtain an unjust advantage over the interest of the employing organization.
Conflict of Interest
> Non payment of taxes
Deliberate understatement of taxable income
Failure to register one’s business with BIR
Tax evasion
> Paying employee wages below the minimum wage rate
Failure to pay for employee’s social security premiums
Violation of labor and social security laws
> Corporate officers buy and sell company shares by taking advantage of information that I snot yet disclosed to the public
Violation of Securities Regulation Code that governs trading of shares
Insider Trading
> Making and selling a product that is patented by another company (without having a paid franchise fee)
Patent infringement
> Concealing and converting money obtained from illegal source in order to show that it was generated legally
Money-laundering
> Not implementing anti-pollution devices
Letting factory and other wastes flow into bodies of water
Violation of environmental laws
> Obtaining sensitive information including passwords about a person without their consent.
Using said information to make unauthorized bank transactions such as cash withdrawals and money transfers.
Cybercrimes
Modes of communicating the ethical code
- Employee orientation program
- Posting in the company website
- Newsletters and publications
- Bulletins
- Official memoranda
- Employee manual
Major contents of code of ethical conduct
- Company profile
- Objectives of the code of ethical conduct
- Ethical principles adapted by the company
- List of instances of unethical acts
- Process for identifying the threats or risks of unethical acts
- Process for determining whether the threats are significant
- Resolving ethical conflicts
- Reporting of ethical issues and concerns
- Sanctions for violations of the code of ethical conduct
- Approval of the code of ethical conduct
Resolution of Ethical Issues in the field of Accounting
- Identify the Facts
- Identify the ethical issue
- Analyze the alternative courses of action
- Make a decision
The likelihood that an event will occur.
Risk
What does COSO stand for?
Committee of Sponsoring Organizations of the Treadway Commission
What are the types of risk?
- Financial Risks
- Non-financial Risks
The likelihood that a company might incur a financial loss, or suffer a decline in profit, capital, investments, or cash flows, on account of the occurrence of events or transactions
Financial Risks
Types of Financial risks
- Credit risk
- Liquidity risk
- Market risk
> Interest rate risk
> Foreign currency risk
> Price risk
The risk that a counter-party such as customer or a borrower might fail to pay its account in the due date.
Credit risk
The risk that the business will be unable to meet its financial obligations as they fall due because of insufficient cash, inability to liquidate assets, or obtain adequate funding given a short period of time.
Liquidity risk
The risk of volatility in the market brought about factors of interest rate, foreign currency, and market prices.
Market risk
The potential decline in earnings and capital arising from changes in interest rates in the market.
Interest rate risk
The risk that fluctuations in exchange rates could affect the profit of the business.
Foreign currency risk
Risk that changes in specific prices (stock, price of other investments) could affect the profit or cash flows of the business
Price risk
Possibility that the business may not be able to generate sufficient revenue, or an increase in production and increased operating costs might occur
Business risk
Types of nonfinancial risks
- Operational risk
- Legal or Compliance risk
- Health and safety risk
- Environmental risk
- Strategic risk
- Reputation risk
The risk that business operations will be disrupted due to inadequate or failed systems, processes, people, breached in internal controls, or other unforeseen catastrophes
Operational risk
The risk that the company might fail to comply with applicable laws and regulations such as tax laws, labor laws, anti-money laundering laws, and environmental laws among others
Legal or Compliance risk
Risk that unforeseen events could result to injuries, illnesses, or even loss of lives
Health and Safety risk
Risk that the company may fail to control or minimize factory wastes, emissions, and other pollutants arising from its business activities.
Environmental risk
Risk of selecting an inappropriate corporate strategy or the failure of implementing an appropriate one
Strategic risk
Risk that reputation or image of the company will be damaged due to reasons such as improper acts of corporate officers, poor financial performance, and bad news about the company among others
Reputation risk