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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
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1. A framework of rules
Three main sources of rules that regulate behaviour ofindividuals and businesses:
The law
Non-legal rules and regulations
Ethics
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1. A framework of rules
Corporate governance concepts: Fairness
Openness/ transparency
Probity/ honesty
Responsibility
Accountability
Reputation
Judgment
Integrity
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2. Management accountability
Fiduciary responsibility Business objectives and management discretion
The stakeholder view of company objectives
The consensus theory of company objectives
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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
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3. The ethical environment
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.
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3. The ethical environment
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.
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3. The ethical environment
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.
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3. The ethical environment
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
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3. The ethical environment
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
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3. The ethical environment
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.
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4. Ethics in organisations
Ethics in organisations: Personal ethics
Professional ethics
Organisation cultures
Organisation systems
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4. Ethics in organisations
Leadership practices and ethics: Openness
Trust
Honesty
Respect
Empowerment
Accountability
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4. Ethics in organisations
The seven principles of Public life: individualsemployed in the public sector must follow:
Selflessness
Integrity
Objectivity
Accountability
Openness
Honesty Leadership
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4. Ethics in organisations
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
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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’
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6. A code of ethics for accountants
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.
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6. A code of ethics for accountants
Fundamental principles of the ACCA Code of Ethics andConduct:
Integrity
Confidentiality
Objectivity
Professional behaviour
Professional competence and due care
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6. A code of ethics for accountants
Personal qualities expected of an accountant: Personal qualities
Professional qualities
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6. A code of ethics for accountants
Personal qualities
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6. A code of ethics for accountants
Professional qualities
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6. A code of ethics for accountants
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.
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6. A code of ethics for accountants
Threats to independence: Self-interest threat
Self-review threat
Advocacy threat Familiarity threat
Intimidation threat
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6. A code of ethics for accountants
Self-interest threat:
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6. A code of ethics for accountants
Self-review threat:
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6. A code of ethics for accountants
Advocacy threat:
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6. A code of ethics for accountants
Familiarity threat:
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6. A code of ethics for accountants
Intimidation threat:
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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
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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.
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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.
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9. Resolution of ethical conflicts
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
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9. Resolution of ethical conflicts
Individual should ask themselves: Transparency
Effect
Fairness
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9. Resolution of ethical conflictsRaising and dealing with ethical dilemmas: