Ethical Codes and Professional Practice

Question 1

What is the primary function of a code of conduct in an organization?

Answer 1

To guide decisions, clarify expectations, and reinforce shared values across departments, locations, and hierarchies.

A code of conduct serves as a practical tool for shaping ethical behavior and ensuring compliance with legislation like the Sarbanes-Oxley Act.

Question 2

What is meant by the ‘tone at the top’ in an organizational context?

Answer 2

It refers to the leadership behavior of executives and the board of directors, which sets the foundation for the company’s ethical culture.

Leadership behavior influences what actually happens within the company, beyond written policies.

Question 3

Why is a written code of ethics particularly important for international organizations?

Answer 3

It provides a shared reference point for decision making and reinforces the company’s commitment to integrity across all locations.

A written code is crucial for employees in remote environments who may not have direct contact with leadership.

Question 4

Name the overarching ethical principles included in the IMA Statement of Ethical Professional Practice.

Answer 4

• Honesty
• Fairness
• Objectivity
• Responsibility

These principles express values that guide member conduct and encourage ethical behavior within organizations.

Question 5

What are the four standards IMA members must uphold according to the IMA Statement of Ethical Professional Practice?

Answer 5

• Competence
• Confidentiality
• Integrity
• Credibility

Failure to comply with these standards may result in disciplinary action.

Question 6

What does the standard of competence entail according to the IMA Statement?

Answer 6

Maintaining professional leadership and expertise, performing duties in accordance with laws and regulations, and providing accurate and timely decision support information.

Competence includes keeping up with changes in laws and accounting standards.

Question 7

Define the principle of integrity in the context of the IMA Statement of Ethical Professional Practice.

Answer 7

Integrity involves adhering firmly to a code of ethics, avoiding conflicts of interest, and placing the integrity of the profession above personal interests.

Integrity means refusing to compromise on principles and values.

Question 8

What does the IMA Statement require regarding confidentiality?

Answer 8

Keep information confidential unless disclosure is authorized or legally required, and refrain from using confidential information for unethical advantage.

Confidentiality involves safeguarding information and ensuring it is handled appropriately.

Question 9

Fill in the blank:

The IMA Statement’s principle of ______ requires acting in an impartial manner and being free from bias.

Answer 9

fairness

Fairness requires a person to be just, equitable, and impartial.

Question 10

According to the IMA Statement, what does credibility require?

Answer 10

Communicating information fairly and objectively and providing all relevant information that could influence a user’s understanding.

Credibility is essential for maintaining trust and transparency in financial reporting.

Question 11

What are the key components of an organization’s integrity?

Answer 11

• Organization’s values
• Unwillingness to deviate from standards set by the firm and the industry

Integrity involves adherence to ethical standards and applicable laws and regulations.

Question 12

What should businesses avoid to prevent harm?

Answer 12

• Deceiving customers, clients, employees, or competitors
• Misrepresenting products or services
• Practicing coercion

Businesses should not distribute products or services that can cause physical or other harm.

Question 13

Define credibility in the context of ethical business practices.

Answer 13

The quality of being believable and trustworthy, involving maintaining competence, providing regular updates, presenting bad news timely, and disclosing professional limitations.

Credibility requires thorough analysis, risk assessment, and communication of constraints that may impair performance.

Question 14

What steps should a member take when encountering unethical issues?

Answer 14

• Follow established organizational policies
• Use anonymous reporting systems if available
• Discuss with immediate supervisor or next level of management if necessary
• Consider consulting own attorney for legal obligations
• Consider dissociating from the organization if resolution is unsuccessful

Members should actively seek resolution and consider risks of retaliation.

Question 15

How do governments influence ethical business practices?

Answer 15

Through mandates backed by law, ranging from laissez-faire to detailed regulations, often codified when organizational behavior fails to meet acceptable standards.

Regulations aim to enforce minimum ethical standards within organizations.

Question 16

What are the two main sections of the Foreign Corrupt Practices Act (FCPA)?

Answer 16

• Anti-bribery provisions
• Accounting provisions

The FCPA addresses improper payments and the need for accurate financial records.

Question 17

What does the anti-bribery provision of the FCPA prohibit?

Answer 17

Payments to foreign officials, politicians, or political parties intended to obtain or retain business.

This includes payments made directly or through third parties with corrupt intent.

Question 18

What are facilitating payments under the FCPA?

Answer 18

Small payments for expediting or securing non-discretionary routine governmental actions.

These payments are not illegal under the FCPA but may violate local laws.

Question 19

What is required by the accounting provisions of the FCPA?

Answer 19

• Maintain complete, accurate, and reliable accounting records
• Devise and maintain a system of internal accounting controls

These provisions aim to deter improper payments by ensuring transactions are properly authorized and recorded.

Question 20

What actions are companies required to take under the FCPA’s accounting provisions?

Answer 20

• Ensure transactions are executed with management’s authorization
• Record transactions to permit preparation of financial statements
• Limit access to assets to management’s authorization
• Regularly inventory and reconcile assets

The goal is to maintain accountability and address discrepancies in assets.