Session 5 - Ethics Flashcards
What determines behaviour of everyone in society
law
What determines behaviour of an organisation
rules and regulations
What determines behaviour of professionals
ehics
What are the 3 main sources of rules that regulate behaviour of individuals or organisations
- Law
2.Non legal rules and regulations(contract of employment) - Ethics
What are the 8 concepts/ideologies that corporate governance is based on
- Fairness- take into a/c everyone’s interest
- Openness/ Transparency- clear disclosure of relevant info
- Honesty- tell truth & not misleading stakeholders
- Responsibility- mgt accept credit or blame for decisions
- Accountability
- Reputation- fulfil principles of corporate governance
- Integrity- straightforward dealings and completeness
- Judgement- decisions taken enhance prosperity of the organisation
What is the fiduciary responsibility of managers of an organisations
This refers to the duty of faithful service of managers
- Duy of good faith
- Duty of avoiding conflict of interest
- Duty of not making any secret profit
Define ethics/morality
a set of moral principles that guide our behaviour and perception about what is right or wrong.
What are the 2 western approach to ethics
- Consequence approach - ends justify the means- judges actions by referring to their outcomes
- Duty approach- absolute moral values /ethical principles
treat others how you would like to be treated.
Define utilitarianism
action that will result in the greatest good for greatest number of people
-consequence approach
What are the 2 ethical principles under consequence approach
- Egoism- an act can be justified if decision-makers freely decide to pursue their short-term desires or long-term interests.
-can produce a desired outcome for society
2.Pluralism- accept that different views can exist on morality but a consensus may exist in certain circumstances
satisfy many people
Define ethical relativism
-ethics that are most appropriate in a given situation will depend upon the conditions at that time
-a wide variety of acceptable ethical beliefs and practices exist.
Define sustainable development
society will keep on developing without affecting rights of future generations.
What are the 4 ethical problems faced by managers
conflict between profitability and ethical standard
1. Extortion- officials being threatened if payments are not made
2. Bribery (payment for services the organisation is not legally entitled to)
3. Grease money- money given for services which the organisation is legally entitled to (get project quicker)
4. Gifts
What are the costs of being socially responsible to a firm
- Higher costs
- lower revenue
- diversion of effort(by managers)
- Diversion of funds
What are 6 specific environmental responsibilities
- Environmental auditing
- Economic action
- Accounting action
- Ecological approach
- Production
- Quality management
What are the 5 influences of the ethics of an organisation
- Personal ethics of staff
- Organisational culture
- Professional ethics- ACCA
- Organisational system- mission statements
- Example set by a senior manager
A leader can set an example of what(8) to promote an organizational culture
- Openness
- Trust
- Honesty
- Respect
- Empowerment
- Accountability
What are the 7 principles of public life
- selfless
- integrity
- objectivity
- accountability
- openness
- honesty
- leadership
what is compliance based approach
- Compliance- based approach
.follow letter/requirement of the law
.procedures to detect misconduct
.procedures to deal with those who don’t follow requirements
.employees can report criminal misconduct without fear of retribution
. audit of contracts
What is integrity based approach
.in addition to following laws and regulations
. managerial responsibility for ethical behaviour
.offer protection/confidentiality to whistleblowers
who does ethical behaviour of an accountant serve to protect
work in public interest and follow the law
- need to uphold ethical and moral responsibilities- be objective and independent in preparation of financial statements
How is the profession
self regulating- its own regulations/ethics
why does accountant have a code of ethics/ code of conduct
to help them and guide them through concept of ethical behaviour
.conduct themselves and provide services to the public according to certain standards
What are the 5 questions to be asked to judge the ethics of a business decision
- is it legal
- Does it follow company’s adopted code of ethics
- Does it follow official code of ethics(ACCA)
- Would you mind the reaction of other people knowing your decision
- Does the person affected by the decision consider it as fair
What are the 4 distinguishing factors of a profession
- Extensive training- specialised skills
- governed by a professional association-accounting bodies
- ethical code
- process of certification/licensing
What are the 4 roles of accounting bodies
- professional association of the accountancy profession
1. determine entry requirements
2. regulation of members - follow regulations and work is up to the standard
3. continuing professional development
4. set accounting standards
What are the 5 roles of an accountant
.act in public interest, employer and shareholder
1.not party to unethical decisions
2. challenge unethical behaviour
3. report unethical behaviour
4. train colleagues in ethic
5. promote development of corporate code of ethics
What is the IFAC
international framework for accountants
-international body which represents accountants globally
-over 175 member organisations(including ACCA)
-aims accountants worldwide have consistent standards of professionalism
- by upholding standards- profession reputation and standing is maintained
What are the 5 IFAC code of ethics
.accountants owe an obligation to society above their duty to their client-independent
FUNDAMENTAL PRINCIPLES
- Integrity/Honesty- no secret profit
- Objectivity-reach conclusion without influence/bias
- professional competence and due care- maintain high skills and knowledge
4.Confidentiality- don’t share info unless suspicion of terrorism or money laundering - professional behaviour- code of conduct- reputation of profession
What must ACCA members do
1.comply with the fundamental principles
2.identify threats to compliance with the principles
3.apply safeguard to reduce/eliminate the threat
What are the 5 personal qualities of an accountant
- reliable- get work done and meet professional standards
- responsible- take ownership for work
3.timeliness- delays can be costly and disruptive
4.courtesy- considerate to clients
5.respect- to develop constructive relationships
What are 4 professional qualities of an accountant
- Independent- Work without bias or prejudice
- Scepticism - question info and data about reliability and quality
- Accountability - for judgements and decisions
- Social reponsibility- public duty as well as duty to client
What should be done following a conflict of interest
evaluate threats and apply safeguards
-whether a 3rd party having knowledge of relevant info would consider the conflict of interest likely to affect the judgment of firms
-disclosure of info is the most important safeguard
What are the 5 threats to an accountant’s independence
- Intimidation
- Familiarity
- Advocacy
- Self-interest
- Self-review
what is intimidation threat
when members of assurance team have reason to be intimidated by client(wrong work done in the past-can be sued, 2nd opinion)
- litigation
-pressure to get less work done due to fees
-close business relationships
-assurance staff members move to client
-family and personal relationships
What is familiarity threat
independence is threatened by audit firm and staff becoming too close/too sympathetic to others’ interests
-family and personal relationship with client
-employment/long association with assurance client
-recent service with client
What is advocacy threat
-assurance firm can also act as advocate of client/take part in legal dispute
-promote a position or opinion such that objectivity can be compromised
-legal services
-contingency fees
-corporate finance
What is self-interest threat
member of assurance team has financial/any other interest in an assurance client
-gifts
-relationships
-employment/recruitment
-high % of fees/overdue fees
-loans/guarantees
Define an ethical dilemma
-2 ethical values are incompatible
- occur due to tension between these 4 values:
societal values, personal values, professional values, corporate values
What is self-review threat
a previous judgement needs to be re-evaluated by members responsible for that judgement
-tax services
-corporate finance
-internal audit services
-valuation services
-preparing accounts
when does conflict of interest arise
a person has a duty to 2 or more parties
When does ethical tension arise
conflict between
1. societal values and corporate values
2. personal and corporate
3. professional and corporate
How can ethical conflicts be solved
by adopting an ethical code of conduct- ACCA
may not always work if organisations have other way to evaluate a decision
what are the 2 approaches inn developing code of conduct and code of ethics
- Rules based- specific rules for members to follow
- Framework - based on valuesand qualities
- exams -ethics module
2.give training on ethics
