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Accounting > The Importance Of Ethical Considerations > Flashcards

The Importance Of Ethical Considerations Flashcards

1
Q

What are the fundamental principles of ethical behaviour?

A

Integrity
Objectivity
Professional competence and due care
Confidentiality
Professional behaviour

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2
Q

Examples of how the principles of ethical behaviour impact the behaviour of accounting professionals and organisations?

A

The role of the accountant in business
The role of the accountant in public practice
The role and composition of board of directors
The role of auditors and the audit report
The role and composition of remittance committee
Corporate governance
Corporate social responsibility

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3
Q

What legal and regulatory frameworks must accountants have an understanding of?

A

Finance reporting council (FRC)
Government (Department of business, innovation and skills -BIS)
European Union

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4
Q

What professional bodies establish and enforce codes of conduct?

A

Consultative committee of accountancy bodies (CCAB)
Chartered institute of management accountants (CIMA)

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5
Q

What must you understand and apply when acting ethically with clients, suppliers, colleagues and stakeholders?

A

Principles of ethical behaviour
Codes of practice of CCAB and CIMA
Regulatory framework (companies act, FRC etc)

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6
Q

What are the appropriate courses of action if there is a suspicion of an unethical or illegal act?

A

Ensure safeguards are in place
Evaluate the significance of threats to the fundamental principles
Resolve conflicts of interest
Seek external/ professional help when necessary

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7
Q

What is accounting ethics?

A

Study of moral values and judgements as they apply to accounting.

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8
Q

What does it mean to be ethical?

A

Acting in ways consistent with what society and individuals think are good values

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9
Q

Is ethical behaviour good for the business?

A

Typically

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10
Q

What moral principles must a business demonstrate too be seen as ethical?

A

Honesty
Fairness
Equality
Dignity
Diversity
Individual rights

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11
Q

Why does accountancy require a high level of ethics?

A

Shareholders, potential shareholders and other users of the financial statements rely heavily on the yearly financial statements of a company to make informants decisions about investment

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12
Q

Who in a business is responsible for presenting a true and fair view of the company?

A

Accountants and auditors

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13
Q

What have corporate collapses led to?

A

Attention has been drawn to ethical standards accepted within the accounting profession
Resulted in widespread disregard of the accounting profession

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14
Q

What is corporate social responsibility?

A

Businesses affect all our lives, directly or indirectly, consumers and society are becoming more aware of environmental damage from business activity
All more conscious of depleting non-renewables
Both financial and non-financial factors need to be considered

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15
Q

What is social awareness?

A

Consumers have become more aware of the environmental implications, producers are under pressure to show they are accepting social responsibility and not just considering financial factors
Profitability isn’t only concern

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16
Q

What are ‘hidden costs’?

A

The costs inflicted on people outside the business as well as people within it and the costs to the immediate environment and the wider world

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17
Q

What are social costs?

A

The cost to the whole of society the costs to the business and the wider community

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18
Q

What are some examples of the social costs involve din running a business?

A

Machinery for new production facilities
Stress in the workforce
Pollution in the workplace (Fumes, dust etc/ health and safety issues)
The effect on the immediate environment (noise, traffic congestion)
Global impact (acid rain)

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19
Q

What are social costs and responsibility?

A

The business has consider its actions as certain conditions could have a negative impact on the business

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20
Q

What are some examples of the responsibility of social costs?

A

Bad publicity can affect sales so a business can’t afford to ignore the views of the consumer they may veto the company
If they buy a new computer system they know the cost financially but harder to measure distress of redundant workers

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21
Q

What are the effects of building a factory on farmland? (Benefits examples)

A

Employment for local people, more income in area, more money to spend in local area, more local jobs created in shops and suppliers’ businesses, extra revenue for the government

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22
Q

What are the costs of building a factory on farmland?

A

Possible pollution and traffic congestion, spoiling view and damaging health
Loss of farm production may increase quantity of imported food, possibly impacting cost and quality

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23
Q

What is integrity?

A

The quality of being honest and having strong moral principles and sticking to them, therefore being straightforward and honest in all professional and business relationships

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24
Q

What is objectivity?

A

Not allowing personal feelings, opinions or conflicts of interest, the influence of others or any form of bias to influence professional judgment

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25
Q

What is professional competence?

A

Maintain professional knowledge and skill at the level required to ensure that clients or employers receive competent professional service

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26
Q

What is due care?

A

Effort made by an ordinarily prudent or reasonable party to avoid harm to another, taking the circumstances into account
Level of judgment, care, prudence, determination and activity that a person would reasonably be expected to do under particular circumstances to remain professional

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27
Q

What is confidentiality?

A

Information obtained as a result of a professional relationship should not be disclosed to a third party, except where authority has been given or there is a legal or professional right to do so. Information should not be used for personal gain

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28
Q

What is professional behaviour?

A

Form of etiquette in the workplace that is linked primarily to respectful and courteous conduct
Accountants should act within the laws and regulations in a way that does not bring the professions in to disrepute

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29
Q

What is a stakeholder?

A

Anyone, internal or external, who has an interest in a business

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30
Q

What is corporate social responsibility?

A

CSR aims to ensure companies conduct business ethically
Taking into account social, economic, and environmental impact and consideration of human rights

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31
Q

What is the role of the accountant in business and public practice and how is it affected by ethics?

A

preparing their accounts, handling tax issues, undertaking audits, or providing specialist advice and support on financial and business matters. , act as a third party to review the financials of a company for public disclosure
require accounting professionals to comply with the laws and regulations that govern their jurisdictions and their bodies of work.

32
Q

What is the role and composition of board of directors and how are they affected by ethics?

A

Responsible for the overall strategy and performance and manages business requirements through a formal schedule of matters reserved for its decision
Board of directors is responsible for setting ethical standards and values, and ensuring that they are embedded in – and become part of the DNA of – their organisation

33
Q

What is the role of auditors and the audit report and how is it affected by ethics?

A

Verification of accounts to check for any evidence of errors or fraud

trust, independence and integrity

34
Q

What is the role and compositions of the remittance committee?

A

Advise the Commission on the financial remit for each year’s financial planning round, and the pay remit ahead of each year’s pay negotiations.

35
Q

What is remit?

A

send (money) in payment

36
Q

What is corporate governance and how is it affected by ethics?

A

System by which companies are directed and controlled.
Ensures that managers avoid abusing their power or undertaking improper actions that could result in questionable behaviours and practices within organisations

37
Q

How is corporate social responsibility affected by ethics?

A

shapes decisions concerning social responsibility with respect to the external environment.

38
Q

What is fair and faithful presentation?

A

Financial statements are fair when free of falsification
And faithfully represent the position of the business

39
Q

What is creative accounting?

A

the exploitation of loopholes in financial regulation in order to gain advantage or present figures in a misleadingly favourable light.

40
Q

What is impression management?

A

the processes by which a business control how they are perceived by others.

41
Q

What is financial fraud?

A

An incorrect valuation of the business to make in look stronger than it actually is

42
Q

What is regulatory framework?

A

Forms the rules of accounting that all accountant must follow when preparing a companies financial statements, reducing variety of accounting treatments a company could use allowing for comparisons between companies

43
Q

What is corporate governance?

A

the system by which companies are directed and controlled.

44
Q

What two statements where created in 1970 as the UK’s former accounting standards?

A

Statement of standard accounting practice (SSAPs)
Financial reporting standards (FRSs)

45
Q

What have the SSAP and FRS been combined into?

A

Largely been combined into one standard FRS102

46
Q

What is the FRS102?

A

The financial reporting standard applicable in the UK and Republic of Ireland

47
Q

Who commonly uses FRS102?

A

Used by smaller limited companies

48
Q

What frameworks were developed from 1973 onwards?

A

International accounting standards (IASs)
International financial reporting standards (IFRSs)

49
Q

Who developed the IAS and IFRS?

A

The international accounting board since 1973

50
Q

What was the purpose of the IAS and IFRS?

A

Provide a framework of rules for companies to follow when preparing and presenting financial stamens
Reduce number of techniques for companies making it harder to manipulate accounts improving the quality of financial accounting for users
Aid comparisons between companies

51
Q

What act was created in 1985?

A

Companies act (1985,1989 and 2006)

52
Q

Hat does the companies act of 2006 regulate?

A

Requires directors of companies state the financial statements have been prepared in accordance with the applicable accounting standards.

53
Q

What standard/ framework was created in 1989 (revised 2010)?

A

Conceptual framework for financial reporting

54
Q

What is the conceptual framework for financial reporting?

A

Not a standard but developed by international accounting board to detail the concepts that underline the preparation and presentation of financial statements for external users

55
Q

What is the purpose of the conceptual framework for financial reporting?

A

Assist with the development and review of international standards and promote harmonisation of standards by reducing of techniques
Help those preparing accounts deal with issues not covered by standards
Help users of accounts interpret information presented

56
Q

How can employees act ethically when working with clients, suppliers, stakeholders or colleagues?

A

straightforward and honest in all professional and business relationships. A professional accountant should not allow bias, conflict of interest or undue influence of others to override professional or business judgments.

57
Q

Why is it important that the regulations are adhered to?

A

As if they aren’t followed this could negatively affect the reputation of the business

58
Q

What happens if you are unethical in the workplace?

A

lose your job and reputation, organizations can lose their credibility, general morale and productivity can decline, or the behaviour can result in significant fines and/or financial loss.

59
Q

What major accounting company is being investigated?

A

Deloitte / Go-ahead

60
Q

Why are Deloitte being investigated?

A

Wrongly auditing Go-ahead who were withholding £50m of tax payers money

61
Q

What are the consequences of Deloitte being investigated by FRC?

A

The government stripped them f their right to run the southeastern railway
Chief financial officer quit when allegations emerged

62
Q

What is social accounting?

A

A means of reporting how a business affects society as a whole

63
Q

What does social accounting involve?

A

Measuring and assessing the impact of a business not just on its shareholders but on its stakeholders in the wider community

64
Q

What sort of stakeholders need to be considered for social accounting?

A

Employees
Customers
Suppliers
Local population

65
Q

How is social accounting provided for in the uk?

A

Uk legislation does not provide a framework for social accounting left to individual businesses to decide whether or not to report social issues

66
Q

What are the two extremes of social accounting and where do most business fall?

A

Some companies only include the minimum amount of information required by law
Some companies produce detailed reports that describes their companies actions on stakeholders
Majority of companies fall in between these extremes

67
Q

Why would social responsibility lead to a production of social accounts?

A

Owners and directors take into account the interests of society in general rather than purely the interests of their shareholders
Business decisions not made just to make profit also how they impact employees, local community

68
Q

What is an example of a company that adopts s high social responsibility?

A

The co-operative bank
Partnership report 2000 states the bank aims to conduct business in a socially responsible manner

69
Q

What is sustainable development?

A

That economic activity should take place in a way in a way that does not harm future generations

70
Q

What is the point of having a good corporate image?

A

Being seen as a good corporate citizen and developing a reputation of caring for its stakeholders can improve pubic perception

71
Q

What can a good image of a company lead to?

A

Higher sales and profits

72
Q

What is an example of how a company struggled due to having a poor image?

A

1990s shell disposed of oil platform by sinking it in the north Atlantic
Environmental protestors protested to pollution and organised a boycott

73
Q

How do social accounts affect a businesses workforce?

A

Loyalty and motivation of the workforce can be improved if companies make efforts to identify, improve and report on employees needs

74
Q

How will consumers be affected by social accounts?

A

Companies can try increase sales and improve competitiveness by appealing to potential consumers sense of responsibility

75
Q

What have companies had to do because of ethical consumerism?

A

Offer new products and services

76
Q

What can the financial sector offer to be ethical?

A

Offer ethical investments

77
Q

What legal requirements are there for businesses in terms of social accounts?

A

Do not need to be produced
Must disclose:
Any political of charitable gift over £200 per year
Larger companies info on employment of disabled people

Accounting (30 decks)

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