ETHIC

Ethics is the system of moral principles that examines the concept of right and wrong.
S
HOW DO THE RULES FIT TOGETHER: There are three main sources of rules that regulate behaviour of
individuals and businesses. These are:
● The law
● Non-legal rules and regulations
● Ethics
Approaches to ethics:
1. Consequentialist versus pluralist:
 Ethics based on consequences:: This approach judges actions by reference to their outcomes or consequences. For example
if an individual needs to food their family, stealing may be seen as morally acceptable if there is no other way of obtaining
food. This approach can be broken down into two further perspective.
 Egoism: states that 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.
 Utilitarianism: choosing the action that is likely to result in the greatest good for the greatest number of people.
 Pluralist approach: this approach involves trying to cater to the needs of all stakeholders without seriously compromising
the interest of any one group.
2. Relativism versus absolutism
 Relativism is the view that a wide variety of acceptable ethical beliefs and practices exist. The ethics that are most
appropriate in a given situation will depend on the conditions at that time. The relativist approach suggests that all moral
statements are essentially subjective and arise from the culture, belief or emotion of the speaker.
 Absolutism is the view that there is an unchanging set of ethical principles that will apply in all situations,
at all times and in all societies.
3. Deontological ethics
We use duty as a label for the ethical approach technically called deontology (which means much the same thing as 'duty' in
Greek). This set of ideas is based upon the idea that behaviour should be governed by absolute moral rules that apply in all
circumstances.
4. Normative ethics
Normative ethics, also known as normative theory, or moral theory, intends to find out which actions are right and wrong, or
which character traits are good and bad. The focus is on deriving a set of good character traits, regardless of the situation or
environment.

BUSINESS ETHICS:
Business ethics is the study of proper business policies and practices regarding potentially controversial issues, such as
corporate governance, insider trading, bribery, discrimination, corporate social responsibility and fiduciary responsibilities

PROFESSIONAL ETHICS
Difference between profession and occupation
 PROFFESSION
A profession requires a degree or completed studies at a university or other institutes of higher education. It
involves extensive training and special knowledge.
 OCCUPATION
An occupation is the job you are paid to do. It is the way you earn a living. Think of it as the activity that occupies your
time and from which you receive money for doing it.
CODE OF ETHICS FOR ACCOUNTANTS
Its mission is to develop the high standards of professional accountants and enhance the quality of
services they provide.
 Professional competence and due care – current development legislation and techniques
 Confidentiality – should not disclose information unless a legal or professional right or duty
 Professional behavior – comply with the law and avoid any action which discredits and profession
 Objectivity – avoid bias, conflict of interest, undue influence
 Integrity – straightforward and honest.

PERSONAL AND PROFESSIONAL QUALITIES EXPECTED OF AN ACCOUNTANT

Personal quality Details
Reliability When taking on work, you must ensure that it gets done and meets
professional standards.
Responsibility In the workplace you should take 'ownership' of your work.
Timeliness Clients and work colleagues rely on you to be on time and
produce work within a specified time frame.
Courtesy You should conduct yourself with courtesy and consideration towards
clients and colleagues.
Respect As an accountant, you should respect others by developing constructive
relationships and recognising the values and rights of others.
Professional Detail
quality
Independence You must be able to complete your work without bias or
prejudice and you must also be seen to be independent.

Scepticism You should question information given to you so that you

form your own opinion regarding its quality and reliability.

Accountibality You should recognise that you are accountable for

your own judgements and decisions.
Social Accountants have a public duty as well as a duty to their
Responsibility employer or client. Audit work, accountancy work and
investment decisions may all affect the public in some way.
DEALING WITH UNETHICAL OR ILLEGAL CONDUCT: If an accountant uncovers unethical or illegal conduct
within the organization they work for, there is a series of steps that they should take to deal with the issue.
●The accountant should first consult with whoever is responsible for governance or ethics within the organization. This
may be a Compliance Office, or the board of directors themselves.
●If the problem remain unresolved, the accountant should take legal advice and or advice from their professional body
(e.g. ACCA)
● If the situation still cannot be resolved, the accountant should consider reporting to the relevant
authorities and withdrawing from the engagement.

ETHICAL THREATS AND Familiarity: Auditor

DILEMMAS: becomes too
‘friendly’ with client by
Self-Interest Threat: working for client for a
Auditor could benefit from number of years
THREATS TO
financial interest in client.
AUDITOR
INDEPENDENC
E
Advocacy: Auditor Self- Review:
promotes an audit Auditor in position
client’s position or of reviewing work
opinion. they have been
Intimidation: Auditor
responsible for .
is subjected to
intimidation.
ETHICAL PROBLEMS FACING MANAGERS: Another ethical problem concerns payments by companies to
government or municipal officials who have power to help or hinder the payers' operations.
●Extortion. Foreign officials have been known to threaten companies with the complete closure of their local operations
unless suitable payments are made.
●Bribery. This refers to payments for services to which a company is not legally entitled. There are some fine distinctions
to be drawn; for example, some managers regard political contributions as bribery.
●Grease money. Multinational companies are sometimes unable to obtain services to which they are legally entitled
because of deliberate stalling by local officials. Cash payments to the right people may then be enough to oil the machinery
of bureaucracy.
●Gifts. In some cultures (such as Japan) gifts are regarded as an essential part of civilized negotiation, even in
circumstances where to Western eyes they might appear ethically dubious.

MANAGING ETHICS
● Compliance-based approach: A compliance-based approach is primarily designed to ensure that the
company acts within the letter of the law, and that violations are prevented, detected and punished.
●Integrity-based programmes: An integrity-based approach combines a concern for the law with an emphasis on managerial
responsibility for ethical behaviour. Integrity strategies strive to define companies' guiding values, aspirations and patterns of
thought and conduct. When integrated into the day-to-day operations of an organisation, such strategies can help prevent
damaging ethical lapses, while tapping into powerful human impulses for moral thought and action.

Whistleblowing: is the disclosure by an employee of illegal, immoral or illegitimate practices on the part of the organisation.
This may appear to be in the public interest, but confidentiality is very important in the accountants' code of ethics. Whistle-
blowing frequently involves financial loss for the whistleblower.