#20 - ethical considerations

8/12/2019 #20 - Ethical Considerations

http://slidepdf.com/reader/full/20-ethical-considerations 1/36



Topic list1. A framework of rules

2. Management accountability

3. The ethical environment4. Ethics in organisations

5. Accountants and ethics

6. A code of ethics for accountants

7. Ethics in business

8. Ethical dilemmas

9. Resolution of ethical conflicts



1. A framework of rules

Three main sources of rules that regulate behaviour ofindividuals and businesses:

The law

Non-legal rules and regulations

Ethics



1. A framework of rules

Corporate governance concepts: Fairness

Openness/ transparency

Probity/ honesty

Responsibility

Accountability

Reputation

Judgment

Integrity



2. Management accountability

Fiduciary responsibility Business objectives and management discretion

The stakeholder view of company objectives

The consensus theory of company objectives



3. The ethical environment

Ethics: a set of moral principles to guide behaviourEthical principles

The certainty of legal rules does not exist in ethical theory. Different ideasapply in different cultures




Ethics based on consequences:Egoism: an act is ethically justified if decision-makers freely

decide to pursue their own short-term desires or their long-term interests. The subject to all ethical decisions is the self.

Pluralism: different views may exist on morality, but suggests aconsensus may be able to be reached in certain situations.

It emphasises the importance of morality as a socialphenomenon.




Ethics based on duty:Ethical relativism is the view that a wide variety of acceptable

ethical beliefs and practices exist. The ethics that are mostappropriate in a given situation will depend on the conditions

at that time.

Ethical absolutism is the view that there is an unchanging setof ethical principles that will apply in all situations, at all

times and in all societies.




Rights and virtues: Individuals have natural inherent rights that should not be

abused led to the development of law to protect certain“human rights”.

Virtue ethics continues to exert a subtle influence. The ideais that if people cultivate virtue, their behaviour is likely to be

inherently ethical. Managers should attempt to incorporatesuch virtues as firmness, fairness, objectivity, charity,forethought, loyalty into daily behavior and decision making.




Social attitudes: such as a belief in the merits ofeducation, progress through science and technology, and faircompetition, are significant for the management of a businessorganisation.

Ethical problems facing managers:

Extortion

Bribery Grease money

Gifts




Social responsibility and businesses:Social responsibility action is likely to have an adverse effect onshareholders' interests.

Additional costs such as those of environmental monitoring

Reduced revenues as a result of refusing to supply certain customers

Diversion of employee effort away from profitable activities

Diversion of funds into social projects




Specific environmental responsibilities:Businesses are widely regarded as having a duty to safeguard the naturalenvironment. There are six areas for action

Environmental auditing

Economic action: charges for environmental damage should be made internally togive managers an incentive to avoid it.

Accounting action: a separate set of accounts incorporating shadow prices torepresent environmental costs is prepared.

Ecological approach: aspects of the business such as a product or a location are

selected for examination to ascertain their environmental impact.

Production is managed to minimise inputs of materials and energy.

Quality management is applied using the principle of continuous improvementin environmental performance.



4. Ethics in organisations

Ethics in organisations: Personal ethics

Professional ethics

Organisation cultures

Organisation systems




Leadership practices and ethics: Openness

Trust

Honesty

Respect

Empowerment

Accountability




The seven principles of Public life: individualsemployed in the public sector must follow:

Selflessness

Integrity

Objectivity

Accountability

Openness

Honesty Leadership




Two approaches to managing ethics: Compliance-based approach: ensure that the company acts within the

letter of the law

Integrity-based programmes:

combines a concern for the law with an emphasis on managerialresponsibility for ethical behaviour

Whistleblowing is the disclosure by an employee of illegal, immoral orillegitimate practices on the part of the organisation



5. Accountants and ethics

As an accountant, your values and attitudes flow througheverything you do professionally.

They contribute to the trust the wider community puts in theprofession and the perception it has of it.

Guidance is usually known as a ‘Code of ethics’ or ‘Code ofconduct’




IFAC and the ACCA: To enable the development of high standards, IFAC’s ethics

committee established a code of ethics.

The code indicates a minimum level of conduct that allaccountants must adhere.

As a member of IFAC, ACCA released its own code of ethics,designed to align to the IFAC code.




Fundamental principles of the ACCA Code of Ethics andConduct:

Integrity

Confidentiality

Objectivity

Professional behaviour

Professional competence and due care




Personal qualities expected of an accountant: Personal qualities

Professional qualities




Personal qualities




Professional qualities




Conflicts of interestConflict between members' and clients' interests might arise if

members compete directly with a client, or have a joint venture with a company that is in competition with the client.

Rules:

Should not accept or continue engagements

Should evaluate the threats arising from a conflict of interest andunless they are insignificant, they should apply safeguards.

Disclosure (ie informing all known relevant parties of the possibleconflict of interest) is the most important safeguard.




Threats to independence: Self-interest threat

Self-review threat

Advocacy threat Familiarity threat

Intimidation threat




Self-interest threat:




Self-review threat:




Advocacy threat:




Familiarity threat:




Intimidation threat:



7. Ethics in business

Three elements to ethics:

Element Explanation

I Ethics concern an individual’s professionalresponsibility to act

DO Ethics concern the ‘real world’ practical actions anindividual can take

BEST Ethics concern choices between different courses ofaction



8. Ethical dilemmas

Ethical dilemmas and conflicts of interest:Ethical dilemmas are situations where two ethical values or requirements

seem to be incompatible. They can also arise where two conflictingdemands or obligations are placed on an individual.

A conflict of interest arises where an individual has a duty to two or moreparties.



8. Ethical dilemmas

Ethical dilemmas occur as a result of tensions between 4sets of values:

Societal values – the law

Personal values – values and principles held by the individual

Corporate values – the values and principles of org where theindividual works, often laid down in ethical codes.

Professional values – the values and principles of the professionalbody that the individual is a member of, often laid down in ethical

codes.




Ethical conflicts may arise from: Pressure form an overbearing colleague/ family

Members asked to act contrary to technical/ professionalstandards

Publication of misleading information

Personal relationship with clients

Gift and hospitality being offered




Individual should ask themselves: Transparency

Effect

Fairness



9. Resolution of ethical conflictsRaising and dealing with ethical dilemmas:



Q&A

#20 - ethical considerations

Documents