(CMA Class Note on GES: Fundamentals of Ethics, Corporate Governance and Business Law GE 05: Fundamentals of Ethics, Corporate Governance and Business Law Course Teacher: Md. Monowar Hossain, CPA, ACA, FCS, FCMA General Manager & Head of internal Control and Compliance (ICC) Agrani Bank Limited Dhaka-1000, Bangladesh. e-Mail: md.monowore@ gmail.com(CMA Class Note on GES: Fundamentals of Ethics, Corporate Governance and Business Law GOS: Fundamentals of Ethics, Corporate Governance ond Business Law IGE05 — A. Ethics and business (15° a7 moll > Syllabus structure, Topics Study weightings Efhies and business 5% Ethical conflict 0% Corporate govenance 0% ‘Comparison of English law with alternative legal systems 0% The law of contract 20% The law of employment 0% ‘Company administration and finance 25% 100% Learning outcomes On completion of their studies students should be able to: lead ‘Component Tevel Indicative syllabus content demonstrate an understanding of the importance of ethics to business generally and to the professional accountant, Tal apply the values and 3 attitudes thal provide professional accountants with a commitment fo act in the public interest and with social resoonsbil (5) explain the need fora 2 framework of laws, regulations and standards in business and their application: Te) explain the nature ofethics 2 ‘and its application to business and the accountancy profession {al cistinguish belween 2 detailed rules based and framework approaches to ethics, The imporiance of ethics. Values and alfiludes for professional accountants Legal frameworks, regulations and standards for business. The role of national ‘Professional Oversight Boards for Accountancy’ and ‘Auditing Practices Boards’ The role of inteational accounting bodies e.g. IFAC. The nature of ethies and its relevance to business and the accountancy profession, Rules based and framework approaches to ethics. The ‘Seven Principles of Public Life selflessness, integily, objectivity, accountability, openness, honesty and leadership. ‘oxplain the need members to adopt the highest slandards of ethical behaviour, ‘oxplain the need for 2 continual personal improvement and lifelong learning: TE] explain iheneedto develop | 2 the vitues of reliabilty, responsibil, timeliness, courtesy and respect: Tel explain the ethical principles |__2 of integity, objectivity, professional competence, ue core and confidentiality: Ta] ideniily concepts of 2 independence, scepticism, ‘accountability and social responsibil Personal development and lfelong leaming, The personal qualities of reliability, responsibilty imeliness, courtesy and respect The ethical principles of integrity and objectivity. Professional competence, due care and confidentiality, Disclosure required by law: The concepts of independence. scepticism, accountability and social responsibilty. The CIMA and IFAC ‘Code of Ethies for Professional Accountants Paget 2 October 3, 2015(CMA Class Note on ‘G05: Fundamentals of Ethics, Corporate Governance and Business Law Te) explain the reasons why 2 CIMA and IFAC each have ‘Code of Ethics for Professional Accountants! EEN nee Teaming outcomes ‘On completion of their studies students should be abi Indicative syllabus content Lead ‘Component evel T, explain he | (a) explain the relationship between 2 | + The relationship between efhics and various means ethics, governance, the law and of regulating social responsibility: the low, The distinction between ethical codes ethical TE] describe the consequences of | 2 and contracts behaviour, unethical behaviour fo the + Corporate governance and social individual, the profession and responsibility. society, + Unethical behaviour + The consequences of unethical behaviour, 2 explainhow | (a) identi siuationswhere ethical | 2 | + The nature of efhical dilemmas ethical dilemmas and conflicts of + Conflicts of interest and how they arise. Gilemmas and___ interes! oceur: + Ethical confict resolution, conticts of [TB] explanhow efficaldiemmas [2] + Tho CIMACode of Ethics for interest arise and conflicts of interest can be Professional Accountants ~ and may be resolved, Fundamental Principles’ resolved, eee eee Teaming outcomes ‘On completion oftheir studies students should be able to: Indicative syllabus content lead ‘Component level T. explain the (a]_define corporate governance; + The ole and key objectives of development [~{6) explain the interaction of 2 Corporate governance. of corporate corporate governance with +The interaction of corporate governance to| business elhics and company governance, ethics and the law. meet public law: + The development of corporate concem in {e] describe the history of corporate |_2 governance interationally €.. in the relation to the govemance intemationally Uk, Europe, South africa and the USA. management ay inguin botwoan dotalodures 2] * ules. and principles based of companies, a eee ere ooas approaches to govemance. ‘approaches to governance. 2, explain the | (a) explain the effects of corporate_| 2 | + The Impact of corporate govemance impact of governance on directors’ powers on directors’ powers and duties. corporate ‘and duties: + Types of board structures, the role of governance on|(b) deseribe aifferent board the board and corporate social the directors siructures, the role of the board responsibilty (CSR). ang ‘and corporate social + The role of the board in estabishing management responsibilty corporate govemance standards. structure of [{e] describe the types of policies end) 2 | * Corporate govemance codes e.g. public limited procedures that constitute ‘best The UK Corporate Governance Code. companiesend practice’: + Policies and procedures for ‘best how this Ta] explain the regulatory 2 practice’ companies. benefits governance framework for + The regulatory governance slakeholders ‘companies and benefits 10 framework for compories. stakeholders + Stakeholder benefits Paget 3 October 3, 2015(CMA Class Note on Teaming outcomes On completion of their studies students should be able fo: Indicative syllabus content lead ‘Component level T. explain he | (} explain the mannerin which 2 | + The purpore of the eiiland eriminal essential behaviour within society s law. elements of regulated by the civl and the The sources of English law: custom. the English criminal laws cease law, sialule, European law and legalsysiom [[B[ explain ine sources ofEngishiaw | 2 | _othersourees and the tort |e) ilustrate the operation of the 2] * The distinction between the common of doctrine of precedent by law and equity. negligence reference to the extential elements The system of judicial precedent. of the tor! of negligence and is he essential elements of the for of application to professional negigence, including duty, breach advisers and damage/loss/njury and the liabitly of professionals n respect of negigent advice 2, dexeribe the | (a) describe the characteristics fine | 2 | > Allemative legal ssveme, including essential legal systems found in other codifies (civil law) systems elements of countries he general characterises of the aliemaive [Tb] aeseribe clement ofshaFahtaw: | 2 legal systems of France. Germany, legal systems. (je) deserbe merole ofinlemational | 2] Poland, Italy, Denmark, Greece and regulations Cyprus The general characteristics of the legal syslems of the USA, Malaysia, China and Si Lanka, jements of Shari'ah law incluing sources of Shari'ah law and the Five Pitars of iam, he benelils of international regulations for commerce and professional practice through the wort of key bodies 6.9. FAC, SO, FEE. eat PEE eee ek) Teaming outcomes On completion of their studies students should be able to: Indicative syllabus content iead ‘Component level T, explain how | (a) identiy the exenfaleiements ofa | 2 |» The exeniial elements of a vat smpia the low valid simple contract and situations contract, determines where the law requires he The legal totus of statements made the pointat |__ contract fo be ino porficular form, by negotiating portes. Offers and whicha [TB] explainnow the law determines | 2] acceptances and the application of contract whether negotiating parties have the rules fo standard form contracts formedand | reached agreement ond the role using modem forms of the legal of considerationin making Ihat communication. stotus of agreement enforceable The principles for establishing that the contractual [Te] explain when the pariies wile | 2] parties intend their agreement to have| terms. regarded as intensing the Contractual force and how a contract agreement to be legally binging is affected by o misrepresentation. cand how an agreement may be Incorporation of express and implied avoided because of terms, conditions and warranties, misrepresentations ‘Tho main provisions of the Sale of {d) explain how the terms of a 2 Goods Act 1979 and the Supply of contract ore established ond their status determined: Goods and Services Act 1982. Excluding and limiting terms; the Unfair Paget s October 3, 2015(CMA Class Note on ‘GEOS: Fundamentals of Ethics, Corporate Governance and Business Low [e} describe the effect of terms implied | 2 Contract Terms Act 1977 and the into contracts by sale of goods and Unfair Terms in Consumer Contracts supply of goods and services Reguiations, legislation describe how the law conirelsthe_| 2 Use of excluding, limiting and unfair 2, explain when | (a) describe the factors which cause a | 2 Discharge of a contract by the law contract to be discharges: performance, agreement and breach. regordsa [76] explain how the law of frustration | 2 The law relating fo frustration. contract as provides an excuse for non- The law relating to damages. discharged performance of the contract: The remedies of specific performance, ond the Te] explain the remedies which ore 2 injunction, rescission, and reauting a remedies available for serious and minor contract party to pay the agreed available for breaches of contract. price breach ond nonperforma ea PEM nee Teaming outcomes On completion of their studies students should be able to: Indicative syllabus content jead ‘Component evel T. explainthe | fa) explain the differences belween 2 The Tests used lo distinguish an essential employees and independent ‘employee from an independent ‘oloments of contractors: contractor. an TB) exolain how the contenis ofa 2 The express and implied terms of a employment conlract of employment are coniract of employment. contract and |__ established: The rights and duties of employers and the remedies [Te] explain the disinclion belween 2 employees. available Unfair and wrongful dismissal. Notice and dismissal following Unfair and wrongful aismissal termination of the contract, 2 explain the | (G) explain how employers and 2 The main rules relating fo heath and impact af employees are affected by health safety at work, sanctions on employers health and and safely legislation: for nor-compliance, and remedies for safety law on {76} describe the consequences of a 2 employees. employers failure to comply with health and Social security compensation, and sofety legislation, Civil billy for occupational injuries. employees, CEE eer nee ne nes Teaming outcomes On completion of their studies students should be able to: Indicative syllabus content lead ‘Component Tevel T, explain the | fa) describe the essonfial characteristics, 2 Tho essenfial charactorislics oF sole nature, legal | of the different forms of business traderships/practitionerships, status and ‘organisations and the implications of parinerships, companies limited by ‘administration|__ corporate personal shares and corporate personality ofbusiness [{o) explain the aifferences between] 2 ifing the corporate veil both at organisations. public and private companies and establishing a company by registration or purchasing ‘of the common law and by statute. The distinction between public and private companies. shel ‘Company registration end the advantages of purchasing a company| Pages October 3, 2015(CMA Class Note on ‘GES: Fundamentals of Ethics, Corporote Governance and Business Low {c} explain the purpose andlegol status ‘ff the shel of the articles of association: The purpose and contents of he Td) exploin the ability of a company To aricies of axiciation contract: Corporate capacity to contract Te] explain the main advantages and The advantages and disadvantages of disadvantages of carrying on the company mited by shores business through the medium of a Board meetings: when used and the company limited by shares: procedure a! he meeting, TT explain Ine use ond procedure oF General Meetings of shareholders board meetings and general when used and the procedure at the meetings of shareholders meeting Tal explan the voiing rights of dveciow The voting tights of directors and ‘and shareholders shareholders. TAY identify the various ypes of Ordinary, special and waitten Shareholder resolutions. resolutions and their uses, 2. explain the (a) explain the nature of different types ‘The rights attaching to different types law relating fo] of shares the procedure for he of shares. the financing | issue and aeceplable forms of The procedures for issuing shores, ond payment The sve of shares for an improper management] {6} explain ine maintenance of capital purpose. of companies} principle and the reduction of Payment for shares limited by share capital The maintenanee of capital principle shares. TE) exolain ihe abiliy of a company To the purposes for which shores may be fake secured and unsecured loans, the different types of securty and the registration procedure: Ta) explain the procedure for the appointment, retirement, disqualification and removal of directors: Te) explain the powers and duties of directors when in office: T) explain the rules dealing wih ihe possible imposition of personal liability upon the directors of insolvent companies T@) explain the rights of majorly and minority shareholders: TAT exolain the division of powers belwoen the board of a company ang the shareholders: T)_ explain the quaifications, powers and duties of the company secretary. ‘sued, redeemed or, purchased and the provision of financial assistance for the purchase of the company's own shares. The reduction of capital The ability of a company to borrow money and the procedure to be followed, Unsecured loans, and the nature and effect of fixed and floating charges. The appointment, retirement and removal of directors and their powers ‘and duties during office. Fraudulent and wrongful trading, preferences and transactions at an undervalue, The rights of majority and minority shareholders The division of powers between the board and the shareholders. The quaitications, powers and duties of the company secretary. Recommended Book: CMA Study Tex! on Paper IE 01: Principles of Accounting 1 Steven J. Skinner, John M, lwancevich (2002), Business 212! Century Mallin, Christine, A 2010. Corporate Governance (3 edition), Oxtord: Oxford University Press MeKendiick, Law of Contract, ‘A Tex! Book on Law of Conlract , under National Law Book Company, Nilkhel Dhaka, by Md. Haider Al, 2° Edition, 201 A text book on Easy understanding of The Low of Contract {Theory and Practice} hos been published, publisher: Hira Publication, by Syed Sorlaraj Hamid , 4" Edition,2011 Paget s October 3, 2015(CMA Class Note on .GEOS: Fundamentals of Ethics, Corporate Governance and Business Law cma Business Level GE 05: Fundamentals of Ethics, Corporate Governance and Business Law 7 The importance of ethics Class | GE0s- A. % Values and attitudes for professional accountants. No. 01 | Ethics and ¥ Legal frameworks, regulations and standards for business. 202 | business % The role of national Professional Oversight Boards for fase ‘Accountancy’ and ‘Auditing Practices Boards. The ole of intemational accounting bodies e.g. FAC. % The nature of ethies and ilsrelevance to business and the accountancy profession ¥ Rules based and framework approaches to ethics. % The ‘Seven Principles of Public Life’ ~seflessness integfiy, objectivity, aecountabilly, openness. honesty and leadership. Ethic: Ethics refers fo human Atils simplest, ethicsis a system of moral condvet as fo make principles. They affect how people make judgments between what is Gecisions and lead their ives. Ethics s right and what is wrong, concemed wilh what is good for should have individuals and society and is also © Honesty described as moral philosophy. The term is ¢ Objectivity derived from the Greek word ethos which * Integrity can mean custom, habit, character or + Carefuiness aispostion S Contidentinty Ethics covers the following dilemmas + Social Responsibility how to live a good life + Competence * Legality ourrights and responsibilities the language of right and wrong moral decisions - what is good and The basic concepts and fundamental principles of bade decent human conduct. It includes study of universal values such as the essential equality of Our concepts of ethics have been derived al men and women, human or natural rights, from religions, philosophies and cultures. Gbedience to They infuse debates on topics like abortion, human rights and professional conduct. the law of land, concem for health and safety and, increasingly, also for the natural environment. Code of Ethics of a Professional Accountant Fundamental Principles - A Professional Accountant shall comply with the following fundamental Principles: (a) Integrity — to be straightforward and honest in all professional and business relationships. {b] Objectivity - 10 not allow bias, conflict of interest or undue influence of others to override professional or business judgments. (c} Professional competence and due care - to maintain professional knowledge and skill at the level required fo ensure that a client or employer receives competent Professional Services based on current developments in practice, legislation and techniques and act diligently and in accordance with applicable technical and professional standards. (d) Confidentiality - to respect the confidentiality of information acquired as a resull of professional and business relationships and, therefore, not disclose any such information to third parties without proper and specific authority, unless there is a legal or professional fight of duty to disclose, nor use the information for the personal advantage of the accountant or third parties. Paget? October 3, 2015(CMA Class Note on .GEOS: Fundamentals of Ethics, Corporate Governance and Business Law {e) Professional behaviour - to comply with relevant laws and regulations and avoid any action that discredits the profession. Y The Importance of ethics: Good Ethics is a fundamental requirement of any profession. Itis integral to the success of the business as well. Etnics is a system of moral principles governing the appropriate conduct of a person oF a group. Maintaining good ethics is being consistent with the principles of correct moral conduct constantly 1. Satisfying Basic IMPORTANCE OF ETHICS Human Needs © I assists in availing legal representation to all in the 2. Creating Credibility _society. within the © Te sets out the mi organization towards his client, the court and to his counter parts 3. Uniting People and __ in the profession Leadership © It spells out the minimum standards of practice. 4, Improving Decision © Enhances public confidence in the legal profession Making ® It builds loyalty between the advocate and his client 5. Able toachieve —® It-gives the lawyer a guide line on how to act in cases Long Term Gains of conflicts of interest 6. Securing the © It Assists in the protection of fundamental human Society interests like life, liberty and property The importance of ethics in professional life can be evidenced by a number of instances showing failure of businesses and several scandals. It may be rightly said that the situations would not have been so worsened had there been observance of ethical standards. Therefore, maintaining ethical standards is must for the prosperity of an organization as well as the development of one's personality. Good ethics wil lead us to maintain our honest image. It will enable us to retrain from such activities that may discredit to our profession. Thus, adhesion to good ethics is to let our conscience be our guide at all times, Ethics is the activity of man directed to secure the inner perfection of his own personatity. Y Values and attitudes for professional accountant: Values: Important and lasting beliefs or ideals Attitudes: A predisposition or a tendency to shared by the members of a culture about _respond positively or negatively towards a certain what is good or bad and desirable or idea, object, person, or situation. Attitude undesirable. Values have major influence on _ influences an individual's choice of action, and @ person's behavior and attitude and serve as responses fo challenges, incentives, and rewards. broad guidelines in all situations. Some Four major components of attitude are common business values are faimess, 1. Affective: emotions or feelings. innovation and community involvement. 2. Cognitive: belief or opinions held consciously. Conative: inclination for action Evalvative: positive or negative response to stimvl. The monetary worth of something in areas such as accounting, economics, marketing or mathematics. Professional accountants, whether practicing in public or private practice have an important leadership role in society. Society expects professional accountants to behave and act in the public interest. Proper ethical behaviour is therefore as important as technical competence and together forms the basis to the definition of professional behaviour. This is one of the fundamental principles in the CIMA ‘Code of Ethies' and Is defined as ‘a professional accountant should comply with relevant laws and regulations and should avoid any action that discredits the profession’. An individual's values and attitudes underpin that person's behaviour or manner in which they conduct themselves. Value words such as integrity, honesty and transparency; and attitudes, such as Pages October 3, 2015(CMA Class Note on (GES: Fundamentals of Ethics, Corporate Governance and Business Law desire to ‘do the right thing’ will help guide that individual. In professional life, values and attitudes are codified in a code of ethics which clarifies the behaviour expected of members of that profession Business life, in whatever sector, can throw up many changes and challenges to professional accountants; throughout which professionals need fo demonstrate consistency in their application of ethical values, attitudes and in their behaviour towards others. It is primarily in the relationships with others that values and attitudes are demonstrated. Professionals always need to behave with integrity, to be reliable and werk in a timely fashion in his/her dealings with colleagues, customers, clients, suppliers and all others they come info contact with. However against a backdrop of being constant despite change, professionals need to be aware of the wider expectations of society in order to fulfil their public role. Society values and expectations do however change from time to time, usually in reaction to events such as where there has been evidence of corporate failure due to misdemeanour or fraud. Professional accountants, therefore, need to understand and be sensitised to ethical issues and Pressures, such as ethical implications when taking decisions, to play their role in protecting against such instances. This is important in helping to build public confidence and trust in business and the profession directly. If such confidence falters, society through the democratic process may introduce new laws to curb excessive behaviours. The failure in public confidence brought about by Enron was ‘the genesis of the introduction of the Sarbanes-Oxley Act in 2002. In real life applying values and demonstrating the right altitude of doing the right thing because it is ‘the right thing to do can be difficult and takes courage. Example-1 MUTTAKEEN is a qualified management accountant in a light engineering company. It is a family-run, company but does have a number of minority shareholders owning 15% of the company's shares. It is the year-end and the company has been through a difficull time having lost a key client this year, but a memorandum of understanding has now been signed with a new customer which bodes well for the future. Whilst future sales seem assured, the MOU is not legally binding. MUTTAKEEN’s Boss, who is not an accountant and is also married to the owner's daughter, asks MUTTAKEEN to book a proportion of future sales into this year's accounts, telling him the paperwork will be following by the year-end and the factory is fo begin making the products required What should MUTTAKEEN do? MUTTAKEEN's options: 1) Do as requested 2) Challenge the request 3) Ask for the request in writing 4) Refuse 5) Bring this to the attention of the owner 6) Seek a second opinion from a fellow professional accountant 7) Start looking for another job. Given the background to this situation, MUTTAKEEN will need 1o demonstrate courage in challenging the request that has been made, until he has seen a written order for the new customer. To do otherwise would be wrong as the year-end accounts would be false, if the transactions were booked before orders were received. MUTTAKEEN would be demonstrating the fundamental principles of integrity (being straightforward and honest). objectivity (fusing undue influence} and dilgence {acting in accordance with applicable ond technical standards} Pages October 3, 2015(CMA Class Note on .GE05: Fundamentals of Ethics, Corporate Governance and Business Law Example-2 MONYEM Properties is a mendium-sized property development company specialising in buying up inner city sites and redevel-oping them. They mostly build houses on these sites. They have recently purchased a large site which was a former town gasworks. The price was very good and MONYEM has immediately put in for planning permission. They have a cerificate from the vendor regarding the environmental cleanup that was done, which they intend to rely on in their planning application. What do you think they should do? Options: (o] MONYEM Properties continue to seek planning permission (b] MONYEM Properties could commission their own environmental survey, MONYEM Properties, acting responsibly, would need to satisfy themselves thal the environmental cerlificate was valid and the site had been cleaned up to make it suitable for housing. To do otherwise would potentially be a risk to their reputation if subsequently the land was proved to be unsuitable for housing use. Y Legal frameworks, regulations and standards for business: The combination of legal Elements of the Regulatory Framework frameworks, regulations, guidelines and standards for business ore needed to provide guidance on Enabling Laisiaton behavious. They exs for individuals, and collective bodies to adhere to, and are ‘a means of engendering public trust and integrity in the profession, Requiomante They are administered through and by a number of regulatory bodies as decreed by parliament and the accountancy profession, in the case of self regulatory guigen guidelines which the accountancy profession has collectively set itself There are two categories of framework: (1) The first is legally binding and therefore is mandatory on all governed by them, to comply. (2) The second is voluntary in nature, where it is good or best practice to follow the. gvidelines/standards and to adhere to them as well There are a number of frameworks in existence which govern the accounting profession. With respect to ethical considerations, in the UK the lead has been taken by the Financial Reporting Council (FRC). The FRC is the UK's independent regulator for corporate reporting and governance, with the aim of promoting confidence in these areas. Two further bodies forming part of the FRC are ‘the Professional Oversight Board (P08) and the Audit Practices Board (APB). Each has a number of stated objectives but they include an oversight and review function on ethical matters. eget 10 ctober 3, 2015,(CMA Class Note on GES: Fundamentals of Ethics, Corporate Governance and Business Law Financial Reporting Act -2015 (Banglades! The Bangladesh National Parliament passed the Financial Reporting Act -2015 on September 6, 2015. The Institute of Chartered Accountants of Bangladesh {ICA8) was the one and only governing body for the country’s chartered accountants. From now onwards the Financial Reporting Council (FRC) of 12 members under the act will ensure accountabilly and performance among the chartered accountants of Bangladesh. Moreover, the counci will be a statutory body with members from various government bodies, institutions and professional groups. The FRC will be the watchdog body in order to monitor the function of auditors and ensure transparency and accountability in accounting and auditing of financial organisations, including various government, aulonomous and non-government instilutions. The act will monitor both chartered accountants and cost and management accountants of Bangladesh. ¥ The role of national ‘Professional Oversight Boards for Accountancy’ and ‘Auditing Practices Boards’, The Professional Oversight Board for Accountancy (UK) — Regulation In relation to the reguaation of the accountancy profession, the Board intends to achieve its aims by: Auditing Practices Board Reviewing the regulatory activities of the professional | + Sets auditing standards (based on accountancy bodies in relation fo thelr members, International Standards on Auditing) and a including education, training, continuing professional | code of ethios for auditors development, standards, ethical matters (except those which are the responsibility of the APB) Professional Oversight Board professional conduct and discipline, registration and “+ Has oversight of professional bodies and monitoring, including making recommendations on accountancy firms. how these activities might be improved The Auditing Practices Board (UK) (www.frc.org.uk/apb/about/aims.cfm] The Board intends to achieve its aims by: ® Establishing Auditing Standards which set out the basic principles and essential procedures with which extemal auditors in the UK and the Republic of Ireland are required to comply: # Issuing guidance on the application of Auditing Standards in particular circumstances and industries and timely guidance on new and emerging issues: * Establishing Standards and related guidance for accountants providing assurance services; © Establishing Ethical Standards in relation to the independence, objectivity and integrity of extemal auditors and those providing assurance services; Taking an appropriate role in the development of statutes, regulations and accounting standards which affect the conduct of auditing and assurance services, both domestically and intemationally: Contributing to efforts to advance public understanding of the roles and responsibilifies of extemal auditors and the providers of assurance services including the sponsorship of research. Y The role of international accounting bodies e.g. IFAC. [wwwitac.org] The Intemational Federation of Accountants (IFAC) strives to serve the public interest by establishing and promoting International adherence to intemational standards, facilitating Federation cooperation with member bodies, and serving as a of Acountants spokesperson forthe intermational profession on relevant public policy issues. The worldwide organization for the accountancy profession. Paget 11 ctober 3, 2015,(CMA Class Note on .GE05: Fundamentals of Ethics, Corporate Governance and Business Law IFAC’s boards set intemational standards in a number of areas including auditing, quality control, education, public sector accounting and ethics for professional accountants. While IFAC was founded on October 7, 1977, in Munich, its headquarters have been located in New York City since its inceptions, The International Federation of Accountants (IFAC) reviews the profession worldwide and published Code of Ethics. This Code of Ethics establishes ethical requirements for professional accountants. The framework of laws, regulations and standards are applied to the accountancy profession by the bodies mentioned above, and through matters brought to their attention by professional firms. They test the efficacy of the framework through consultation with interested parties (professional firms and others) and review the professional accountancy bodies' practices. A turther source of guidelines ond standards with which the professional accountant must be awore is the code pertaining to their place of employment. A majority of large corporate entities and number of smaller companies now have codes of ethics giving guidance to company personnel as to expected levels of behaviour of their staff. Y The nature of ethics and its relevance to business and the accountancy profession, In busines, eis defined as he application of ethical oe Valves to business behaviour ethical values re words sich ar inept, honesty, espondity,Nansporency ard tomes mong cihen. I's how the busines or ently bens thats values ‘alive' or applies them within their organisation as it transacts its business that is key. How it conducts its relation- ships with its employees, its shareholders. its customers, its suppliers and with those in the communily in which and Code of Ethics wherever it operates. Its therefore about how the entity does its business not what it does, so it is not about the product or service the company provides. Ethical values play out through behaviours. They are highly relevant to business and those operating in it, especially professional people. There is the expectation in the public mind that professionals within organisations wil play a leadership role in ensuring that those entities will act ethicaaly in transacting their business. That expectation is rooted in ‘trust’ that businesses know what they are doing and are doing it in society's interest, as part of wealth creation for all. Thisis the ‘trust me! model. This model has been eroded as society recognised ass it could not trust business to ‘do the right thing’ particularly in the arena of non-financial focussed activity. So after the 1960s/1980s when major companies became manager-run and led rather than family-owned and led, the model evolved to ‘involve me". This model has continued to evolve through the stages of ‘show me’, asking companies to demonstrate how they do their business; to ‘prove 1o me; where society expects companies to provide independent verification and assurance of how they do their business. The ultimate model, if companies do not behave, is to impose law on them to do so: ‘obey me’. The law is a blunt insirument in curing behaviour because it cannot define or cover all instances of poor behaviour, and leads fo a compliance or tick the box cullure rather than one based on ‘doing the right thing’ naturally. Y Rules based and framework approaches to ethics. There is a different approach to those codes and standards that are compliance based and those ethics based. This is human nature. Ihe former tends to be tick box and the latter principle based. Pages 12 ctober 3, 2015,(CMA Class Note on .GEOS: Fundamentals of Ethics, Corporate Governance and Business Law These are two different aspects of internal culture which organisations sign up to: compliance because they have to and ethics because they feel they ought to. In governance terms they are deemed an important way of engendering trust from others. Given a strong regulatory background within which professional accountants have to operate there can be confusion as to which might be the ‘chicken’ and which the ‘egg’ in the debate. So which does come first? A professional body has an overriding commitment as a Chartered Institute in the UK to protect the public interest. It, therefore, has agreed an ethics code based on principles and ethics as specific guidance for members in business and practice as to ‘how they will behave in camying out their role’ =the chicken, This leads to reinforcing the culture and behaviour expectations of everyone working in the profession. It is this on which reputations are built and trust engendered. Compliance, the egg isa mechanism for reporting to others how the profession is measuring up to those expectations. This can be demonstrated in the following table contrasting the characteristics of a compliance- driven framework versus one primarily driven by values, principles and ethics. Ethics Complian Slow bumer Constant monitoring Long time frame Short time frame Prevention Detection Principles based Law based Values driven Fear driven Implicit Explicit Spit of the law Letter of the law Grey Black and white Alignment with values Requires obedience Discretionary Mandatory More difficult Easier ‘An example of applying the different approaches above would be a company which has a strong rules-based cullure where individuals clearly have a sense of what they can and cannot do (letter of the law, black and white, mandatory, explicit) and what will hap-pen if they do not (fear-driven, requires obedience, mandatory). However, if an employee is faced with a situation not covered by the ‘tule book’ they will be required to use their own judgement as to what fo do. In most instances, the decision they take will be the right one but any potential for the wrong decision being made will be reduced if the employee has guiding values and principles which will underpin that cifficult deci- sion-making. So an ethical framework of guidance is likely to be more wide-ranging in its applicability than a fully rules-based one. ‘A key aspect of compliance is measurement in addition to ‘ticking boxes! that all is well. This, of course, is difficult with ethical issues which tend not to be conveniently black and white. There is therefore a need to develop and use proxy indicators by those assuring them-selves that individuals are acting in a proper fashion. In a wider context the same is true in the public and private sectors, where organisations equally, as ‘though they were individuals, seek to build trust with their employees, customers, suppliors, shareholders and all others who have a legitimate interest in how they perform. But the essential question remains: Is trust beller engendered by principled behaviour based on ‘doing it because it is ‘the tight thing to do” or because the individual, the company or the public body has to? The compliance cultural approach to ethics and CR is well developed in the US following the introduction in the early 1990s of Sentencing Guidelines for judges. These allowed a judge to mitigate a fine if tne company could demonstrate it had ethical guidelines in place and endeavoured to guide employees’ behaviour. Pogo 13 ctober 3, 2015,(CMA Class Note on .G£05: Fundamentals of Ethics, Corporate Governance and Business Law The ‘Seven Principles of Public Life’ selflessness, integrity, objectivity, accountability, ‘openness, honesty and leadership. In the public sector in the UK, employees are governed by ‘The Seven Principles of Public Life’ issued by the Committee of Standards in Public Life 2 Selflessness - Holders of public office should act solely in terms of the public interest Integrity - Holders of public office must avoid placing themselves under any obligation to people or organisations that might try inappropriately to influence them in their work. They should not act or take decisions in order to gain financial or other material benefits for themselves, their family, or their friends. They must declare and resolve any interests and relationships. Objectivity - Holders of public office must act and take decisions impartially, fairly and ‘on metit, using the best evidence and without discrimination or bias. Accountability - Holders of public office are accountable to the public for their decisions and actions and must submit themselves to the scrutiny necessary to ensure this. Openness - Holders of public office should act and take decisions in an open and transparent manner. Information should not be withheld from the public unless there are clear and lawful reasons for so doing, Honesty - Holders of public office should be truthful. Leadership - Holders of public office should exhibit these principles in their own behaviour. They should actively promote and robustly support the principles and be wiling to challenge poor behaviour wherever it occurs Professional accountants need to adhere to all these codes. They also need fo be aware that if they ind themselves in situations where they might not be able fo comply wilh the legal, regulatory or standards frameworks they have a duty to raise these concems fo themselves and their profession. They need to speak up and be heard. Paget 14 ctober 3, 2015,(CMA Class Note on (GES: Fundamentals of Ethics, Corporate Governance and Business Law cma Business Level GE 05: Fundamentals of Ethics, Corporate Governance and Business Law 7 Personal development and lifelong learning, Class | GE05—A. Y The personal qualities of reliability, responsibilty, timeliness, courtesy and No. 03 | Ethics and respect. business ¥ The ethical principles of integrity and objectivity (15%) Professional competence, due care and confidentiality. Disclosure required by law. The concepts of independence, scepticism, accountability and social responsibilty ~The CIMA and IFAC ‘Code of Ethics for Professional Accountants’ Y Personal development and lifelong learning. TSE FAGINENN Every professional person has a duty in maintaining thet role of Se ee ig singin the pubic inert in keeping themselves up 10 date cess, professionaly’ that 1s technically as well developing their “ife-LONG Process; ‘competencies to be better informed. This has grown in : importance as the pace of change develops and the role of Can't SCPArate — Frovessional accountant grows more complex m. This is one of the fundamental principles in the CIMA ‘Code of Ethics’, where the professional accountant has the duty to ‘maintain professional knowledge and skill at the level required to ensure that a client or employer receives competent professional service based on current developments in practice, legislation and techniques. The concept of competent professional service is based not only on attaining professional competence but also in maintaining it. This requires a continuing awareness of up-to-date developments in the profession. This can be met through continuing professional development. CIMA has developed the CIMA Professional Development framework which addresses both the requirements on members and the institute regarding CPD, and the ways in which CIMA is supporting members in their professional development. For example, the public expectation is that all accountants are ‘up to speed all the time’ which requires commitment from all those in x ws x ( \W . . \ ( the profession. This is because the ssues a professional faces do ) change over time. For instance, given the rapid advance in technology, retums may be fled electronicaly puting greater emphasis on professional review. In matters of security of J (, customerclent data where confidential information is wansferred via e-mail, there is always the potential for that information to be corrupted if the computer system does not have up-to-date firewall and virus protection and so forth Members of the profession need, or need to develop, certain qualities and virtues in order to meet the expectations of CMA and the public served in the wider context. In upholding the highest standards of ethical behaviour, members are contributing to the promotion of the integrity of CMA’s qualification and supporting CMA’s purpose. Y The personal qualities of reliability, responsibility, timeliness, courtesy and respect. Paget 15 ctober 6, 2015,(CMA Class Note on .GE0S: Fundamentals of Ethics, Corporate Governance and Business Law The particular qualities and virtues sought are reliability, responsibilty, timeliness, courtesy and respect. These are taken from International Education Standard for Accountants, published by IFAC Values, Ethics & Attitudes. Types of Reliability ~~, Thisis the concept of nan maple being able to be trusted | {Carenttownin measures | {twentantto wich measure by others and to be Soettene wtninwele ‘es rom one use to soather) Reliability S~ dependable through the | _ sputetrmetn testrectest: measures the ability to deliver what ae eee and when it has been Tent contbute equaty agreed with another. to which different raters oY + This is the concept of Responsibility ~~ being accountable for one’s actions and Timeliness Quality This is the concept of delivering in a timely J decisions. manner without delay Timeliness and meeting the expectations of others. ~)__ Thisis the virtue of demonstrating Courtesy >= politeness and good manners towards — others. Respect admiration of others in > RESPECT Give respect Get respect dealing with them especially where their attudes might citer. This is the virtue demonstrating an attitude of esteem, ™% deference, regard or Y The ethical principles of inteqrity and objectivity. ‘The CIMA ‘Code of Ethics’ identifies five fundamental principles and a professional accountants requlred to comply with the following fundamental principles: (a) Integrity A professional accountant should be straightforward and honest in all professional and business relationships. (b) Objectivity A professional accountant should not allow bias, conflict of interest or undue influence of others to override professional or business judgements. Paget 26 ctober 6, 2015,(CMA Class Note on .GE05: Fundamentals of Ethics, Corporate Governance and Business Law (c) Professional competence and due care A professional accountant has a continuing duty to maintain professional knowledge and skill at the level required to ensure that a client or employer receives competent professional service based on current developments in practice, legislation and techniques. A professional accountant should act diligently and in accordance with applicable techni-cal and professional standards when providing professional services. (d) Confidentiality A professional accountant should respect the confidentiality of information acquired as a result of professional and business relationships and should not disclose any such information to third parties without proper and specific authority unless there is a legal or professional right or duty to disclose. Confidential information acquired as a result of professional and business relation-ships should not be used for the personal advantage of the professional accountant or third partes. (e) Professional behaviour A professional accountant should comply with relevant laws and regulations and should avoid any action that discredits the profession, Integrity Integrity is a holistic term implying other values too so in addition to being straightforward and honest in all professional and business. relationships, this principle implies fair dealing and truthfulness. It particularly relates to reporting where a false or misleading statement might be made, or provided without care or attention, or a report might omit information, or be obscure and dense such that the report becomes misleading, Objectivity Itis important for students and members to avoid putting a themselves in positions where they or their work could become ~ 39> compromised. This might be through bias, conflicts of interest of : interest or through the undue influence of others. In these types of ~ situations an individual's objectivity may be impaired, The sorts of situation that could arise are numerous, from forming an illicit relationship that may cause ‘embarrassment, to accepting lavish hospitality which is later used to influence behaviour. It is impracticable to define and prescribe all such situations but students need to be aware of, and resist, any such potential comprises of their objectivity It a threat to objectivity is identitied, safeguards should be considered and applied to eliminate or reduce the threat to an acceptable level. Such safeguards could include with-drawing from the engagement, introducing more supervision into the process, terminating the relationship giving rise to the threat, and discussing the issue with higher management and those reviewing the governance of the client relationship. Y Professional competence, due care and confidentiality. Professional competence and due care SSS) Professional competence implies knowledge, sl, dligent delivery and an awareness o all the relevant issues in ’pertorming tasks. The professional is expected to maintain ‘the competence through continuing professional sdevelopment to maintain their capabilities to act responsibly at all times. There is also an expectation of acting diligently which encompasses acting in accordance with the requirements of an assignment carefully, thoroughly and on a timely basis. Paget 27 ctober 6, 2015,(CMA Class Note on GES: Fundamentals of Ethics, Corporate Governance and Business Law Due care covers the wider responsibilty the professional accountant has to ensure that those working Under their authority have the necessary skills and capabilities to do so, and in particular have the professional capacity and appropriate training and supervision In accordance with the other principles and virtues expected of a professional accountant, they should ‘ensure that clients or employers are aware of limitations inherent in services being provided to them so as to avoid the misinterpretation of an expression of opinion as an assertion of fact. Confidentiality “pperece The professional accountant is bound by he principle ofconderialty Private” cy iat tat tey do ness ered by lam peso gto duyto” mam tase gesere Suhcorceiniy ow ecenrgomaen aioe cron — 6 eM re frm or empoying organization and using information for personalor 4 yyy > third party gain. Confidentiality extends to situations in a social rte ealec environment too where the professional accountant should be alertto. = “Ft FY sacs - the possiblity of inadvertent disclosure to a close friend or family Om the Fae, OY secret member Jovert Con.” Private Confidentiality also extends after the end of a relationship between a professional accountant and a client or ‘employer. The professional accountant may use prior experience but not prior information gained in a previous role. Y Disclosure required by law. In identifying whether confidential information can be disclosed itis necessary to consider whether any parties would be harmed by such disclosure, whether all relevant information is known and substantiated and the type of disclosure and to whom it is to be made. ‘The following are circumstances where professional accountants are or may be requited to disclose confidential information or when such disclosure may be appropriate: (a) Disclosure is permitted by law and is authorized by the client or the employer; (b) Disclosure is required by law, for example’ Production of documents or other provision of evidence in the course of legal proceedings; or Disclosure to the appropriate public authorities of infringements of the law that come to light; and where required by law or regulations to disclose confidential information, for example as a result of anti-money laundering or anti-terrorist legislation, or in connection with legal proceedings involving either themselves or their employing organization, professional accountants should always disclose that information in compliance with relevant legal requirements. Professional accountants should take care when communicating relevant facts to others relating to known or suspected money laundering or terrorist activities. {c) There is a professional duty or right to disclose, when not prohibited by law: (i) To comply with the quality review of a member body or professional body: (il) To respond to an inquiry or investigation by a member body or regulatory body; (ii) To protect the professional interests of a professional accountant in legal proceedings; or (iv) To comply with technical standards and ethics requirements. A professional accountant may disclose confidential information to third parties, when not obliged to do so by law or regulations, if the disclosure can be justified in the public interest and is not contrary to laws and regulations. Before making such disclosure, professional accountants should obtain legal or professional advice as to their duties and obligations in the context of their professional and business relationships, and possible protection under the Law. Paget 18 ctober 6, 2015,(CMA Class Note on GES: Fundamentals of Ethics, Corporate Governance and Business Law Mandatory disclosu + Money laundering + Ifa court order has been obtained. + itis required by a regulatory body, e.g financial services legislation + Terrorism. + Drug traficking * Confidentiality and privilege is a Voluntary disclosure: complex area, + Ifthe client has given their ‘Goreert For example, information which is confidential may not be privileged and, + Iii in the public interest to do therefore, may be admissible in court 50" proceedings. Privilege is a difficult area, quite distinct from confidentiality, and it is recommended that further advice be taken if a professional accountant is in doubt as to the action that should be taken. + tamember has to defend himself in court or at a disciplinary hearing Y The concepts of independence, scepticism, accountability and social responsibility, Independence Itis in the public interest, and required in CIMA’s ‘Code of Ethics’ that members of assurance ‘engagement teams and their firms (and when applicable extended network firms too) be independent of the assurance clients. ‘Appointment of Services Manner in Ful, Prcudtore pertormed which sorcee | {regulations law, formed standards ‘Acceptance of Planning the ‘Conducting the | [Reporting avest ‘There are two key attributes to independence used in connection with the assurance engagement 1. Of mind 2. In appearance Itis impossible to define all Itis required that the professional accountant has a state of mind that permits a conclusion to be expressed without being affected by influences that would compromise their professional judgement. This allows the individual to act with integrity and exercise objectivity and professional scepticism This is a test reliant on the view that a reasonable and informed third party would conclude a member of the assurance team’s integrity, objectivity or professional scepticism was compromised if significant facts and circumstances were avoided or overlooked. situations where independence i ici mightbeeompromsedsotsn Professional Skepticism the public interest to prepare a + Professional skepticism - auditor's questioning, evaluative, conceptual framework requiring attitude toward evidence firms and members of assurance teams to identity = Management's assertions without sufficient corroboration, Financial wends need investigation evaluate and address threats to = Documents are checked for authenticity or alteration independence. This can be based on identifying relationships between all the parties. For any threats so identified safeguards can be introduced to eliminate or significantly reduce them to an acceptable level. Ask questions, get answers, then veriffthe answers + A potential conflict of interest alwa between the auditor and the client. = Management wants to portray the company and its operations in the ‘best possible light — Auditors want to portray the company and its operations fairly exists Pogo 19 ctober 6, 2015,(CMA Class Note on .GEOS: Fundamentals of Ethics, Corporate Governance and Business Law Accountability The concept of accountability is that of the professional accountant being responsible to someone and for something or action and being able to explain those actions. Its an important aspect of the profession and of leadership in the wider business environment. Accountability is also to every client and ‘employer too for whom the professional accountants providing services. if that accountability fails then the client or employer can seek redress through complaint or disciplinary procedures. Social responsibility ‘The professional accountant has a wider role in flfiling their public duty which is to be aware of their social or comporate responsibilty. This is their role within the community, be it defined as their profession, their firm or place of work, where their place of ‘work or home is located or howsoever the individual cares to , define community. Typically this is in relation to stakeholders listed as shareholders, ve employees, customers, suppliers and the wider community, to whom the ‘company pays taxes and with whom ithas a relationship as part of socely EC aa ead ‘Socal Responsibly of Business Towaids Society. In upholding the principles of CMA’s ‘Code of Ethics’ the individual has a social responsibility to behave with integrity, courtesy, respect and with due care. The CIMA and IFAC ‘Code of Ethics for Professional Accountants’. Based on IFAC’s Code for Professional Accountants reflecting the contribution CIMA made to the preparation of the IFAC Code as the CIMA ‘Code of Ethics for Professional Accountants’. The CIMA Code reflects the standards CIMA expects of its members and students. It is aligned with global standards across the profession. CIMA has its own Code reflecting its status as a Chartered Institute and as a basis for any complaints or cases under CIMA’s disciplinary procedures. Paget 20 ‘tober 6, 2015(CMA Class Note on GES: Fundamentals of Ethics, Corporate Governance and Business Law The Code itself is split into three parts with a list of definitions at the end: Part A — General Applications { This covers an introduction and the fundamental principles of integrity of the Code objectivity, professional competence and due care, confidentiality and professional behaviour {This covers particular issues identified as being of relevance to accountants Part B — Professional in public practice such as professional appointment, conflicts of interest, Accountants in Public 4, second opinions, fees and other types of remuneration, marketing Practice professional services, gits and hospitality, custody of client asses, objectivity in all services and independence in assurance engagements Part C — Professional This covers issues such as potential conflicts, preparation and reporting of ‘Accountants in Business 4 information, acting with suffeientexpertse, financial interests and inducements IFAC published their Code of IFAC Code of Ethics Ethics for Professional Accountants which was prepared by the Ethics Committee of the ee coe core neo Gas Part A estat a a : International Federation of See ee Accountants. That Committee was f cameaee " i Charged wih developing anascuing (ent thoss o compliance wth he fndamertl pints: high-quallyetial standards and other proneuncemenis for professional accountants around the (©) APB stlequars, when aceon mnt te vents reduce them to i the fundamental principles of (©) Evaluate the significance of the threats Identified; and wort. The Code establishes ethical threo ae nota evel 4 which a reasonable and Informed thr party would be requirements for professional italy fo conclude, welghingall the specific acta andcircumetancesavalable to accountants and applies to all the professional accountant at that time, that compliance with the fundamental member firms or bodies of IFAC. Any principles is not compromised. A professional accountant shal use professional ‘such firm or body may not apply less I¥dgment in applying this conceptual framework stringent standards than those stated pars @ and c deserve how the conceptual framework apples in certain situations in this Code. PROFESSIONAL There is an override, coe | shout any tr or ody be prohibited by law or regulation with complying with any parts PROFESSIONAL IFAC CODE OF of the Code. The ‘CONDUCT ETHICS expectation is that all > Fundamental ones] — parts of IFAC Code will ‘be complied with otherwise. Professional ee ee accountants need to familiarise themselves opjectty 8 Contientaty Conniets of with any dierences i independence interest there are any, but to > Prnapie > WaproperGiciosure > embery Ghent comply with the more = Order deneraence Improper > hones Shere Stingent requirements 3 Rethoncnips and guidance unless 5 Sonn iMerests prohibited. Paget 22 ctober 6, 2015,(CMA Cass Note on {GEOS: Fundamentals of Ethics, Corporate Governance and Business Law CMA Business Level GE 05: Fundamentals of Ethics, Corporate Governance and Business Law ¥ The relationship between ethics and the law. Class | GE 05 -B. Y The distinction between ethical codes and contracts. No. 04 | Ethical conflict Y Corporate governance and social responsibility (10%) Y Unethical behaviour. ¥_ The consequences of unethical behaviour. Y The relationship between ethics and the law: Ethies comes from within a person's moral sense and desire to Relationship Between preserve his self respect. It is not as strict as laws. Law and Ethics Laws are codifications of certain ethical values meant to help — regulate society, and punishments for breaking them can be harsh and sometimes even break ethical standards Law Ethies We all know that killing someone is wrong, yet the law punishes people who break the law with death. With this comes the p——— argument about whether laws are necessary at all. But itis Law & Ethies important to note that without laws people are aware of the chaos that might reign in society. Ethics and laws are therefore necessary to provide guidance and stability to people and society as a whole. (1) Ethies are (2) Ethics comes | (3) Eihies are (A) Ethics does rules of conduct. | from people's ‘moral codes not carry any Laws are rules ‘awareness of which every Punishment t0 developed by what is right and | person must ‘anyone who ‘governments in wrong. Laws are | conform to. violates it. The order to provide | enforced by Laws are Law will punish balance in saciety | governments to | codifications of | anyone who ‘and protection to | its people. ‘ethics meant to | happens to its citizens. regulate society. | violate it The distinction between ethical codes and contract Ethical codes are adopted by organizations seale to assist members in understanding the ethics difference between ‘right’ and wrong’ and in applying that understanding to their codes of conduct decisions. International agreements| An ethical code generally implies documents at three levels: national oglation 1. codes of business ethics, 2. codes of conduct for employees, ownership] and 3. codes of professional practice objects/actions Ethical code -a system of principles governing morality and acceptable Conduct Paget 22 ‘rtober 201s(CMA Cass Note on ‘GEOS: Fundamentals of Ethics, Corporate Governance and Business Law Contracts - When creating a contract, a negotiator is not only doing so to reach an agreement between two ‘or more patties, but to create an agreement that is durable; whereby parties of the contract are legally bound and committed to its promises . A legally binding contract is defined as an exchange of promises or an agreement between parties that the law will enforce, and there is an underlying presumption for commercial agreements that parties intend to be legally bound. Professional ethies and codes of conduct ‘Communication Ethical Decision Making Professional ethics are principles that govern the behaviour of a person or group in a business environment. Like values, professional ethics provide rules on how a person should act towards other people and institutions in such ‘an environment. Unlike values, professional ethics are often codified as a set of rules, which a particular group of people use. ‘This means that all those in a particular group will use the same professional ethics, even though their values may be unique to each person, The Code is an example of a codified set of professional ethics for those who choose to enter the immigration advice profession © Bthical principles Ethical principles may differ depending on the profession; for example, professional ethics that relate to medical practitioners will differ from those that relate to lawyers or real estate agents. However, there are some universal ethical principles that apply across all professions, including: (a) honesty Ethical principles underpin all (b) trustworthiness professional codes of conduct. (©) loyalty (@) respect for others (©) adherence to the law (8) doing good and avoiding harm to others (g) accountability Professional codes of conduct provide benefits to: = the public, as they build confidence in the profession's trustworthiness + clients, as they provide greater transparency and certainty about how their affairs will be handled Paget 22 ‘ctber 30,2035(CMA Cass Note on ‘G£OS: Fundamentals of Ethics, Corporate Governance and Business Law = members of the profession, as they provide a supporting framework for resisting pressure to act inappropriately, and for making acceptable decisions in what may be ‘grey areas” + the profession as a whole, as they provide a common understanding of acceptable practice which builds collegiality and allows for fairer disciplinary procedures = others dealing with the profession, as the profession will be seen as more reliable and easier to deal with. Codes of conduct Professional codes of conduct draw on these professional ethical principles as the basis for prescribing required standards of behaviour for members of a profession. They also seek to set out the expectations that the profession and society have of its members. The intention of codes of conduct is to provide guidelines for the minimum standard of appropriate behaviour in a professional context. Codes of conduct sit alongside the general law of the land and the personal values of members of the profession. The primary value of a professional code of conduct is not as a checklist for disciplining non-conforming ‘members, although breaches of a code of conduct usually do carry a professional disciplinary consequence. Rather, its primary value is to act as a prompt sheet for the promotion of ethical decision-making by members of that profession, ¥ Corporate governance and social responsibility: Governance Governance has come to mean the generic way that an organisation is run, with particular emphasis on accountability, integrity and in many instances risk management. Corporate Governance ctices an er ten The system of ules, practices and framework needs to reflect processes by which a company is 1d “the culture, style and issues directed and controlled. eo oe Corporate governance essentially eee involves balancing the interests of pees the many stakeholders in @ company - these include its © shareholders, management, + customers, + suppliers, Since corporate governance also provides the framework for attaining * financiers, a company's objectives, it encompasses practically every sphere of * goverment and ‘management, from action plans and internal controls to performance * the community measurement and corporate disclosure. Corporate governance broadly refers to the mechanisms, processes and relations by which corporations are controlled and directed. Governance structures and principles identify the distribution of rights and responsibilities among different participants in the corporation (such as the board of directors, managers, shareholders, creditors, auditors, regulators, and other stakeholders) and includes the rules and procedures for ‘making decisions in corporate affairs In the UK, Corporate Governance was developed by the Committee on the Financial Aspects of Corporate Governance in 1992 (the Cadbury Report) with a code of best practice attached. It was aimed at listed ‘companies but looked especially at standards of corporate behaviour. It also referred to ethics Paget 23 ‘tober 20, 2015