Session 5 - Ethics

Question 1

What determines behaviour of everyone in society

Answer 1

law

Question 2

What determines behaviour of an organisation

Answer 2

rules and regulations

Question 3

What determines behaviour of professionals

Answer 3

ehics

Question 4

What are the 3 main sources of rules that regulate behaviour of individuals or organisations

Answer 4

1. Law
   2.Non legal rules and regulations(contract of employment)
2. Ethics

Question 5

What are the 8 concepts/ideologies that corporate governance is based on

Answer 5

1. Fairness- take into a/c everyone’s interest
2. Openness/ Transparency- clear disclosure of relevant info
3. Honesty- tell truth & not misleading stakeholders
4. Responsibility- mgt accept credit or blame for decisions
5. Accountability
6. Reputation- fulfil principles of corporate governance
7. Integrity- straightforward dealings and completeness
8. Judgement- decisions taken enhance prosperity of the organisation

Question 6

What is the fiduciary responsibility of managers of an organisations

Answer 6

This refers to the duty of faithful service of managers

1. Duy of good faith
2. Duty of avoiding conflict of interest
3. Duty of not making any secret profit

Question 7

Define ethics/morality

Answer 7

a set of moral principles that guide our behaviour and perception about what is right or wrong.

Question 8

What are the 2 western approach to ethics

Answer 8

1. Consequence approach - ends justify the means- judges actions by referring to their outcomes
2. Duty approach- absolute moral values /ethical principles
   treat others how you would like to be treated.

Question 9

Define utilitarianism

Answer 9

action that will result in the greatest good for greatest number of people
-consequence approach

Question 10

What are the 2 ethical principles under consequence approach

Answer 10

1. 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

Question 11

Define ethical relativism

Answer 11

-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.

Question 12

Define sustainable development

Answer 12

society will keep on developing without affecting rights of future generations.

Question 13

What are the 4 ethical problems faced by managers

Answer 13

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

Question 14

What are the costs of being socially responsible to a firm

Answer 14

1. Higher costs
2. lower revenue
3. diversion of effort(by managers)
4. Diversion of funds

Question 15

What are 6 specific environmental responsibilities

Answer 15

1. Environmental auditing
2. Economic action
3. Accounting action
4. Ecological approach
5. Production
6. Quality management

Question 16

What are the 5 influences of the ethics of an organisation

Answer 16

1. Personal ethics of staff
2. Organisational culture
3. Professional ethics- ACCA
4. Organisational system- mission statements
5. Example set by a senior manager

Question 17

A leader can set an example of what(8) to promote an organizational culture

Answer 17

1. Openness
2. Trust
3. Honesty
4. Respect
5. Empowerment
6. Accountability

Question 18

What are the 7 principles of public life

Answer 18

1. selfless
2. integrity
3. objectivity
4. accountability
5. openness
6. honesty
7. leadership

Question 19

what is compliance based approach

Answer 19

1. 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

Question 20

What is integrity based approach

Answer 20

.in addition to following laws and regulations
. managerial responsibility for ethical behaviour
.offer protection/confidentiality to whistleblowers

Question 21

who does ethical behaviour of an accountant serve to protect

Answer 21

work in public interest and follow the law

• need to uphold ethical and moral responsibilities- be objective and independent in preparation of financial statements

Question 22

How is the profession

Answer 22

self regulating- its own regulations/ethics

Question 23

why does accountant have a code of ethics/ code of conduct

Answer 23

to help them and guide them through concept of ethical behaviour

.conduct themselves and provide services to the public according to certain standards

Question 24

What are the 5 questions to be asked to judge the ethics of a business decision

Answer 24

1. is it legal
2. Does it follow company’s adopted code of ethics
3. Does it follow official code of ethics(ACCA)
4. Would you mind the reaction of other people knowing your decision
5. Does the person affected by the decision consider it as fair

Question 25

What are the 4 distinguishing factors of a profession

Answer 25

1. Extensive training- specialised skills 2. governed by a professional association-accounting bodies 3. ethical code 4. process of certification/licensing

Question 26

What are the 4 roles of accounting bodies

Answer 26

- 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

Question 27

What are the 5 roles of an accountant

Answer 27

.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

Question 28

What is the IFAC

Answer 28

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

Question 29

What are the 5 IFAC code of ethics

Answer 29

.accountants owe an obligation to society above their duty to their client-independent FUNDAMENTAL PRINCIPLES 1. Integrity/Honesty- no secret profit 2. Objectivity-reach conclusion without influence/bias 3. professional competence and due care- maintain high skills and knowledge 4.Confidentiality- don't share info unless suspicion of terrorism or money laundering 5. professional behaviour- code of conduct- reputation of profession

Question 30

What must ACCA members do

Answer 30

1.comply with the fundamental principles 2.identify threats to compliance with the principles 3.apply safeguard to reduce/eliminate the threat

Question 31

What are the 5 personal qualities of an accountant

Answer 31

1. reliable- get work done and meet professional standards 2. responsible- take ownership for work 3.timeliness- delays can be costly and disruptive 4.courtesy- considerate to clients 5.respect- to develop constructive relationships

Question 32

What are 4 professional qualities of an accountant

Answer 32

1. Independent- Work without bias or prejudice 2. Scepticism - question info and data about reliability and quality 3. Accountability - for judgements and decisions 4. Social reponsibility- public duty as well as duty to client

Question 33

What should be done following a conflict of interest

Answer 33

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

Question 34

What are the 5 threats to an accountant's independence

Answer 34

1. Intimidation 2. Familiarity 3. Advocacy 4. Self-interest 5. Self-review

Question 35

what is intimidation threat

Answer 35

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

Question 36

What is familiarity threat

Answer 36

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

Question 37

What is advocacy threat

Answer 37

-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

Question 38

What is self-interest threat

Answer 38

member of assurance team has financial/any other interest in an assurance client -gifts -relationships -employment/recruitment -high % of fees/overdue fees -loans/guarantees

Question 39

Define an ethical dilemma

Answer 39

-2 ethical values are incompatible - occur due to tension between these 4 values: societal values, personal values, professional values, corporate values

Question 40

What is self-review threat

Answer 40

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

Question 41

when does conflict of interest arise

Answer 41

a person has a duty to 2 or more parties

Question 42

When does ethical tension arise

Answer 42

conflict between 1. societal values and corporate values 2. personal and corporate 3. professional and corporate

Question 43

How can ethical conflicts be solved

Answer 43

by adopting an ethical code of conduct- ACCA may not always work if organisations have other way to evaluate a decision

Question 44

what are the 2 approaches inn developing code of conduct and code of ethics

Answer 44

1. Rules based- specific rules for members to follow 2. Framework - based on valuesand qualities 1. exams -ethics module 2.give training on ethics