code of ethics

Question 1

What are Ethics

Answer 1

 Deciding what is “right and “wrong”.

 Sometimes it is easy to decide, sometimes not.

Question 2

Why Ethics are Necessary in Business

Answer 2

 Employee commitment
 Investor confidence
 Customer satisfaction
 Profits

Question 3

Approaches to solve Ethical Issues:

Answer 3

1. ICAP’s Code of Ethics
2. Americal Accounting Association Model
3. Tucker’s Model

Question 4

TUCKER’S MODEL:

Answer 4

Tucker provides a 5-question model against which ethical decisions can be tested.
1. Is it Profitable (i.e. it should increase revenue or decrease cost because company is owned
by shareholders and exists because of them).
2. Is it Fair (i.e. it should consider all stakeholders, not just shareholders)
3. Is it Legal (i.e. it should not violate any law or regulations)
4. Is it Right (is it morally good to do this)
5. Is it Sustainable (i.e. it should be environment friendly).

Question 5

THE AMERICAN ACCOUNTING ASSOCIATION (AAA) MODEL:

Answer 5

American Accounting Association (AAA) Model states that ethical decisions should be made in 7 steps

1. Establish Facts of the Case
2. Identify Ethical Issues at Stake:
3. Identify Norms, Principles or Values related to Case:
4. Identify Alternative Courses of Actions/Options:
5. Match Norms, Principles or Values to each Option
6. Consider Consequences of Options
7. Make Decision

Question 6

Integrity:

Answer 6

Integrity means truthfulness and fair dealings. A chartered accountant should be straightforward
and honest in all professional and business relationships.
A chartered accountant should not be associated with any reports, returns, or other communication
if he believes that these:
 omit necessary information.
 are false, misleading, or prepared recklessly

Question 7

Objectivity

Answer 7

Objectivity means not to compromise professional judgments because of:
 undue influence of others, or
 bias, or
 conflict of interest.

Question 8

Confidentiality:

Answer 8

Confidentiality Principle:
A chartered accountant shall ensure the confidentiality of information acquired in the course of
business or professional relationship.
He shall:
 not disclose such information to any third party.
 not use such information for personal advantage or for advantage of third parties.
 ensure that individuals working under him (or whom he has obtained advice/assistance)
also ensure confidentiality of information.
Confidentiality principle applies:
 to information acquired from “ex” or “prospective” employing organizations..
 within the firm, and in social environment (e.g. to a family member).

Question 9

Exceptions of Confidentiality Principle:

Answer 9

Confidential information may be disclosed in following circumstances:
− If disclosure is authorized by client.
− If disclosure is required by law/court.

Question 10

Professional competence and due care:

Answer 10

 It requires to attain and maintain professional knowledge and skill at the level required to
ensure that clients receive quality service based on current laws and standards.
 In complying with this principle, a chartered accountant shall ensure appropriate training
and supervision of staff working under him.

Question 11

Professional behavior

Answer 11

A chartered accountant should:
 comply with relevant laws and regulations, and
 avoid actions that may discredit profession i.e. that may adversely affect good reputation of
the profession

Question 12

1. Establish Facts of the Case

Answer 12

Gather all relevant information to ensure that there is no ambiguity about what is under
consideration to identify what is the problem.

Question 13

2. Identify Ethical Issues at Stake:

Answer 13

Examine facts (in step 1) and make list of ethical issues which are involved and may be breached.

Question 14

3. Identify Norms, Principles or Values related to Case:

Answer 14

Understand social, professional, ethical, legal requirements or expectations which general public
expect from accountant.

Question 15

4. Identify Alternative Courses of Actions/Options:

Answer 15

This involves stating each possible course of action whether appropriate or inappropriate.

Question 16

5. Match Norms, Principles or Values to each Option

Answer 16

Selecting that action (identified in 4) which fulfils social, ethical and professional requirements
(identified in 3)

Question 17

6. Consider Consequences of Options

Answer 17

All consequences of option (identified in 5) are considered whether:
 Positive or Negative
 Short-run or Long-run

Question 18

7. Make Decision

Answer 18

Now, make a final decision based on professional judgment.