Applying ethical principles

Doing the wrong thing

Doing the right thing

Fraud

Bribery and corruption

Why are problems

Conflicts of interest

Responsible leadership

Corporate codes of ethics

Professions and the public interest

The code of ethics for accountants

Principles-based approach

The fundamental ethical principles

Threats and safeguards for accountants

Advocacy threat

Self-interest threat

Intimidation threat

Familiarity threat

Self-review threat

Definition

lying to get something by breaking the law on purpose

say or do something false to get what you want

• The difference between fraud and a mistake is that you want to do fraud

types

• Fake workers — getting paid for people who don't work

• Lying about expenses — alone or with others

• Taking things — in real life or online (like 'phishing' scams)

• Changing financial reports — for yourself or the business

Factors

• Cressey (1973) said that a normal person needs three things to do fraud:

• Pressure: They have a problem with money or status that they can't solve the right way (like debts, drugs, gambling, or wanting to be better)

• Opportunity: They can do fraud because they think they won't get caught or they can hide it

• Rationalisation: They can make excuses for doing fraud to themselves or others, like they have no choice or they deserve it because someone did them wrong

Example

the possible risks of fraud in choosing suppliers

• Suppliers:

• Contract terms:

• Bid and choosing process:

• After the contract is given:

leaving out good suppliers

having few choices

using the same suppliers or one supplier all the time

any personal ties between staff and suppliers

contract details that don't make sense

contracts that have special but not needed details that only one supplier can meet

unclear rules for choosing, taking late bids

changing the contract details after some bids have been made

reasons for choosing the contract are not clear

the contract goes to a supplier who does a bad job or who doesn't seem to have enough resources to do the contract

Changes to the contract after it is given + many changes in contract details or limits later on => should be checked carefully

one of the risk areas that the company can control best, by having a clear strategy in a fraud policy statement and setting up strict controls

Definition:

Corruption

• Undermining trust and integrity:

• Creating conflicts of interest between duties to others and own benefit

• Challenging international risk management:

• Distorting economic outcomes:

Bribery influences others to act against their obligations.

Corrupt people abuse their power or position for personal gain, violating their duty of service and fairness.

Impact:

Corrupt people

face a clash between their personal interests and their professional responsibilities (e.g. to shareholders)

benefit from illicit activities directly or indirectly, such as through inflated bonuses from rigged bids.

act unethically to avoid exposure or blackmail, harming their organisation or its stakeholders.

UK Government advises some commercial organisations may have to make 'facilitation payments' to foreign officials in some regions and sectors.

main challenge is to distinguish between acceptable and unacceptable payments or gifts to officials across different cultures. (extortion, bribery, grease money, and gifts)

• Economic issues: costs may be higher and quality could be worse

divert resources from the most efficient or deserving producers to the most corrupt ones.

increase the costs of doing business and distort the functioning of markets.

discourage economic participation and innovation by creating unfair competition and reducing returns on investment.

• Damaging reputation:

organisation may lose its credibility and goodwill with its suppliers, customers, employees, and other stakeholders

Corrupt accountants may also tarnish the image and professionalism of the accounting profession, implying a lack of objectivity and integrity.

Trust is an important part of all professional occupations

and referees as professionals in football should apply the same principles.

stakeholders might see themselves as the victims and choose to remove their support from the

if the company has a public profile and a professional approach is not adopted, stakeholders perceive it as dishonest; outcome is unfairly influenced; staff not officiate with integrity

More resources might be required to effectively regulate and maintain the current level of operations

if the company has a public profile: Regulators might intervene which could lead to fines and penalties and affect the overall financial position of the company

lower the ethical standards and morale of the organisation and erode public confidence in its work.

impact employee morale: The behaviour at the company is sending the message that corrupt business practices like bribery are not serious concerns and that everything can be solved with incentives rather than through hard work and building relationships.

Senior managers will need to spend valuable time and resources to monitor the fallout, or Public relations efforts to reassure stakeholders that integrity is still a core aim for the company, that the company is still viable and that its products and services are still worth paying for. But in turn, this requires re-routing important resources from other operations and lead to an inefficient use of the company's funds and personnel.

• Causes:

• Consequences:

• Definition:

• Implication:

• Examples:

• Corruption at Cornflower

• Employment of inferior building materials

• Bribes to officials for weak inspection

• Lack of escape routes

• Over-occupation of the building

• Motive: to reduce capital outlay and completion time


• Consequence: compromised safety and integrity of the building

• Motive: to avoid detection and compliance with regulations

• Consequence: failed public interest and accountability

• Motive: to save space and costs

• Consequence: reduced evacuation capacity and increased risk of casualties

• Motive: to maximise production and profits

• Consequence: increased safety hazards and evacuation time

Facilitation payment

Bribery

Extortion

Grease money

Gifts

• Definition:

payment for services that a company has no legal right to get

Paying someone to act wrongly with money, goods or services

• Example:

political contributions that influence policy decisions

• Implication:

illegal and unethical practice that undermines fair competition and public trust

• Who is involved in bribery?

• The person who pays the bribe (UK Bribery Act 2010 makes the organisation responsible for employees actions)

• Other parties? Guilty if they know about the bribe but don't report it

• The person who is paid to act wrongly

• The bribe (can be cash, gifts, services or even just a promise)

• Definition:

payment for avoiding harm or threats from officials

• Example:

paying to prevent the closure of local operations or the seizure of assets

• Implication:

illegal and unethical practice that violates human rights and the rule of law

• Definition:

payment for services that a company has a legal right to get but are delayed by officials

• Example:

speeding up bureaucratic procedures or permits

• Implication:

questionable and risky practice that may violate anti-corruption laws or norms

• Definition:

payment or items of value that are part of polite negotiation in some cultures

• Example:

offering or accepting tokens of appreciation or goodwill in Japan

• Implication:

acceptable and respectful practice if done within reasonable limits and without expectation of favours

Deviation from honest behaviour and ethical standards

Acting wrongly for some other benefit

Illegal or unethical practices that damage the society

dishonest dealing, self-serving bias, underhandedness, lack of transparency, abuse of systems and procedures, undue influence

To save money and time

to avoid regulations

to get contracts and services

Building collapse

loss of life

damage to reputation

legal penalties

employee morale

Measures to combat bribery and corruption / • Six principles for adequate anti-bribery procedures

• Establish a culture of top-level commitment

• The board does not tolerate corruption and enforces clear consequence. foster a culture in which bribery is never acceptable; the achievement of business objectives should never be at the expense of unethical and corrupt behaviour; should not make the $1 million payment to the foreign official as it would be a clear case of bribery

Senior management develops and implements bribery prevention procedures.

Presence of a
• Code of conduct

• A key element of communication that expresses the organisation's ethical standards and expectations

• A public document that reassures stakeholders and deters misconduct

• A specific anti-bribery code or a general ethical code that covers bribery issues

• Risk assessment
which involves

• Reassessing risks regularly

• Considering the internal control environment and its effectiveness

• Five areas of high risk of bribery and corruption

• Country: countries with high levels of corruption, lack of anti-bribery legislation, and lack of transparent policies

• Sectoral: sectors such as extractive and large-scale infrastructure

• Transaction: transactions involving charitable and political contributions, licences and permits, and public procurement

• Business opportunity: projects with high value, many contractors or intermediaries, or unclear objectives or pricing

• Business partnership: situations involving intermediaries, joint venture partners, or politically exposed persons

• Internal failings that could add to risk

• Deficiencies in employee training, skills and knowledge

• Bonus culture that rewards excessive risk taking

• Lack of clarity in the organisation's policies on hospitality, promotional expenditure, and donations

• Lack of clear financial controls

• Conduct of business
which involves

• Reporting of transactions and whistleblowing

• seeking and disclosing guidance on questionable activities

• reporting suspicions of bribery and corruption

• making suggestions for improving bribery-prevention procedures.

• Monitoring and review
which involves the board

• receiving reports on compliance and questionable behaviour

• reviewing and improving anti-bribery systems as needed
as the risk environment changes

• evaluating the effectiveness and issues of the procedures
using feedback mechanisms, audits, reviews or external verification

Top-level management prevents bribery and rejects it as unacceptable, leads and supports anti-bribery procedures and a culture of integrity and compliance

• Assessing and prioritising
internal and external bribery risks

• Identifying problem areas

(2) Top-level management consists of the CEO or managing director and other senior executives who make strategic decisions and oversee the organisation.

(1) The board of directors is a group of members who represent the shareholders or stakeholders and monitor the top-level management.

(3) Senior managers are below top-level management and report to them and lead a department or a function within the organisation and supervise lower-level managers and employees.

assessing the nature and extent of internal and external exposure to bribery on a regular basis

identifying and prioritising the potential sources of bribery risk such as country, sector, transaction, business opportunity, and business partnership

identifying circumstances where bribery may be a problem, such as intermediaries, agents, hospitality, or promotional expenditure

as they may change over time or with new markets

proportionate measures
mean that the measures taken should be

due diligence on partners or intermediaries
mean that the organisation should

policies on hospitality, charitable
and political donations and promotional expenditure

mean that the organisation should

proportional to the risks and the nature, size and complexity of the organisation; Procedures should be implemented which are proportionate to the bribery risks faced by the firm and its activities

clear/transparent, practical, accessible, effectively implemented and enforced by management

accompanied by detailed guidance on the implementation of anti-bribery procedures

carry out due diligence procedures on potential business partners or intermediaries who perform services for it or on its behalf, such as agents, intermediaries, consultants, contractors, suppliers, joint venture partners, etc

apply an appropriate level of due diligence according to the level of risk and the nature of the relationship

include contractual terms with consultants and intermediaries to reflect internal rules and zero tolerance of bribery

have clear and consistent policies on these matters to prevent or detect any improper influence or advantage.

• Communication
which involves

embedding and communicating clear and proportionate policies and procedures throughout the organisation.

through internal and external communication and training

ensuring that the policies and procedures are clear, practical, accessible and effectively communicated to all relevant parties and effectively implemented and enforced

• A formal and documented audit of both the internal and external risks of bribery and corruption should be periodically undertaken
• The audit should cover factors such as country, sector, transaction, business opportunity, and business partnership risks
• The audit should be incorporated into the firm's generic risk management procedures and reported upon annually to shareholders

ethical perspectives

• Deontological perspective

• Rightness vs outcome

• Teleological perspective

• Consequences vs action

• Situationalism vs absolutism

• Trade-off vs exploitation

• Absolutism vs relativism

saying that child labour is 'always' wrong

adopting an absolutist rather than a relativist or situational stance

an act is right or wrong in itself and does not depend on any other considerations

• Child labour is wrong in all situations because of the Kantian principle of generalisability (in the categorical imperative)

• The fact that it may cause favourable outcomes in some situations does not make it ethically right, because the deontological position is not situational and the quality of the outcome is not taken into account

an act is right or wrong depending on the favourableness of the outcome

sometimes called the consequentialist perspective because the consequences of the action are considered more important than the act itself

• Ethics is situational and not absolute in the teleological perspective

• Child labour is morally justified if the outcome is favourable, such as providing economic support for a child's family

• There is an ethical trade-off between the importance of the family income from child labour and the need to avoid exploitation and interfere with the child's education

• Child labour may be ethically acceptable if the negative consequences can be addressed and overcome, such as ensuring fair wages and working conditions, and providing education opportunities for the child

Kohlberg's ethical behaviour

• Conventional ethical behaviour

• Post-conventional ethical behaviour

• Definition: a stage of ethical development in which the ethical right is to comply in full with whatever regulations apply or whatever orders are given in the context they are operating in

• Assumption: the highest ethical position is to be in compliance with whatever rules, regulations or requirements are applicable at the time

• Focus: positioning themselves so as to maximise their ability to comply by learning how to adopt compliant behaviour, learning about compliance requirements and familiarising with the cultural norms

• Example: Mahmood would follow his manager's order to 'say nothing' and 'conduct his job as normal' without questioning the morality of the decision to include inferior meat in the company's products

• Definition: a stage of ethical development in which the ethical right is to follow a 'higher' ethical duty despite whatever laws, regulations, norms or instructions apply at any given time

• Assumption: the ethical right is based on 'universal principles' that are essentially subjective and may involve concepts such as justice, fairness, compassion, decency, etc.

• Focus: questioning the morality of the decision to include inferior meat in the company's products in the light of their higher principles and acting upon their belief

• Example: Mahmood would consider informing an external source, such as a newspaper, about the company's unethical practice even if it means losing his job and causing others to lose theirs

• Compliance vs questioning

• Learning vs acting

• Duty vs law

• Subjectivity vs objectivity

Construct an ethical case to take this matter directly to an external source such as a newspaper

• Customer deception

• Internal resistance

• Quality control falsification

• Public interest

• The company is acting in a concerted manner to deceive customers by selling food which is not what they believe it to be

• The inferior meat may be unsuitable for some diets or offend some personal or cultural beliefs

• The deceit is a breach of customers' trust and may cause offence or illness to some

• The board of Tzo Company is complicit in the decision and unlikely to change their mind

• The normal grievance procedure by observing the chain of command would be ineffective and risky for Mahmood

• Going to a newspaper may be the only way to highlight the deceit and seek justice

• The division is falsifying quality control reports and intentionally misleading whoever receives them, such as a food standards agency or a regulator

• The falsification means that normal quality procedures are being systematically subverted and this is a very serious matter

• The board of directors has sanctioned this and made it difficult for Mahmood to raise his concerns internally

• It is in the public interest to highlight a situation in which a company is mislabelling food, deceiving customers and shareholders, and requiring its employees to take part in the deceit and remain quiet about it

• This is not how business should behave and it could erode society's trust in business in general

• Employees have an ethical right to work for a company which is not structurally deceitful and were such a situation to persist, it could undermine management-employee relations and open the company up to legal and reputational damage

• A quicker rather than protracted conclusion is preferable as the situation is likely to be disclosed eventually

• Internal and external communications ensure that bribery prevention policies and associated procedures are embedded into the firm's culture and understood by everyone

• Employees at all levels should undertake regular anti-bribery compliance training so that they remain constantly aware of the risks and their responsibilities

• The firm should also communicate its anti-bribery stance to its stakeholders, such as customers, suppliers, regulators, and the public, and seek their feedback and support

• Internal audit, tasked by the audit committee, should monitor and review bribery prevention procedures and recommend improvements where necessary

• This control loop can then gauge if actions taken have been effective in reducing bribery and corruption at MRA

• The firm should also use external verification or assurance mechanisms, such as independent audits or certifications, to enhance its credibility and transparency


• Corruption, of which the offering and acceptance of bribes is an example, is a serious departure from the highest standards of integrity in the operation of an organisation

• Mr Tong, the chief executive of Xuland Oil, has shown himself to be corruptible in his pursuit of irregular payments in exchange for the offering of supply contracts

• The effect of this is to reduce the efficiency of company operations and to undermine the confidence shown in Mr Tong by the shareholders of the company

• Culture change and support for challengers: there needs to be a recognition in Xuland that all forms of corruption are wrong and this would require a change in what are seen as ethical norms in the country; those willing to challenge corruption or the taking of bribes should be supported by senior management in whatever organisation they are working in and by the 'tone from the top'

• Barriers to improving the corrupt practices in Xuland

• Diversity and transparency: public sector vacancies should be open to all ethnic groups in Xuland and not concentrated to one ethnic group, which would encourage diversity, scrutiny and conversation in public policy; government and business contracts should be awarded based on transparent and public tendering processes that are available to the public, which would create more confidence and accountability

• Culture: there is a culture of offering and accepting corrupt payments in Xuland among police officers, public servants and others, which makes it hard to challenge them in public


• Money: Mr Tong and other senior officials in Xuland can make a lot of money from what is seen as normal business activity and do not see the case for change or their moral failure


• Power: the senior members of society in Xuland are often highly interconnected and make facilitation payments for the award of public sector contracts and other capital investments, which excludes new entrants and concentrates power in a small group

• Legislation and education: any form of corruption should be outlawed and there should be high profile prosecutions of officials and public servants who engage in corrupt practices, which would deter others from doing so; it should be explained in public places that corruption creates inefficiencies, undemocratic outcomes and ethical failures, and that it keeps people in poverty and excludes Xuland from becoming a developed country

• Call to action: The international media should raise awareness of these issues and pressure Xuland to take action against corruption for the benefit of its people and its future development

• Definition:

• Dealing with question in the exam: read the scenario, identify the issue, apply appropriate ethical guidelines, make feasible recommendations

• Conflicts of interest are not uncommon in a business context given the varied range of stakeholders that exist and the different interests that they hold

• Conflicts of interest may also give rise to ethical conflicts that need to be addressed by practical measures

• Common examples of conflicts of interest:

• Employees vs management: employees may demand better pay and conditions, whereas management want to maintain the employees pay and conditions at existing levels to achieve profit targets

• Suppliers vs organisation: suppliers want to sell goods at higher prices, whereas organisation's management want to buy goods at lower prices to reduce costs

• Organisation vs environment: organisation may wish to create new jobs by building a new factory on a piece of land designated as environmentally important, whereas environmental protection groups want to preserve the land and its biodiversity

• Customers vs organisation: customers want to pay lower prices for the products and services provided by the organisation, whereas organisation's management want to maximise profits by charging higher prices. Management may also be incentivised by profit-related bonuses to charge higher prices

• Read the relevant task information/ Exhibit

• Identify the ethical issues at stake, such as:

• The proposed course of action or strategy and its impact on the stakeholder groups specified in the scenario, such as employees, customers, suppliers, etc.

• The potential conflict of interest or contradiction with the featured entity's own published code of ethics and/or business model

• Make use of any appropriate ethical guidelines, such as:

• The ACCA Code of Ethics and Conduct

• The Fundamental Principles of Professional Ethics

• The Conceptual Framework for resolving ethical dilemmas

• Make clear, logical and appropriate recommendations for action, such as:

• Avoiding or disclosing the conflict of interest

• Seeking advice from an independent third party

• Following the entity's internal policies and procedures

• Considering the consequences and stakeholders' interests

• Ensuring that the recommendations are consistent, realistic and implementable by the management at the featured entity

when one party is in a position to derive some form of benefit from actions or decisions made when acting in an official capacity, or when one party's actions or objectives are incompatible with the objectives of another party

a conflict of interest occurs when a person's freedom of choice or action is constrained by a countervailing interest, which means that the most objectively correct course of action cannot be taken

• Example:

Jack Hu experienced a conflict of interest between carrying out the agreed policy of dismissing all students assessed as 'poor' and his familiarity with the Shah family and his making a personal gain from the family in the form of free holidays

• Consequences

• For the firm and the partners

• For the clients and the shareholders

• Mr Hu acted against the best interests of the firm including his fellow partners by retaining a poor performer and compromising the quality and integrity of the audits

• Mr Hu compromised the other committee members and made them compromise their own professional values by bullying them into accepting his view

• Mr Hu gave the appearance of unfairness and a lack of objectivity, which could damage the reputation of the firm as a provider of training contracts and audit services

• Mr Hu owed a professional duty to the shareholders of the companies that Jojo audits to conduct audits diligently and accurately

• Mr Hu allowed a technical weakness to potentially weaken the effectiveness of the audit and hence be a failure of a duty of care to the client's shareholders

• Mr Hu undermined the confidence in the assessment process at Jojo and hence in the services provided by the firm

• Resolving the conflicts

• Introduction

• Factors influencing the approach to resolve ethical conflicts

• There is no single, universal best way of resolving ethical conflicts in business as no two situations are likely to be exactly the same

• Doing the right thing is seldom clear cut and tends to be highly subjective

• When analysing ethical conflicts, organisations may follow some of the steps: such as identifying the ethical issues, applying appropriate ethical guidelines, and making feasible recommendations

• The tone and style of leadership

• The culture and codes of the organisation

• The laws and regulations governing conduct

• The guidelines governing the work performed by particular professions

• The power and interest of the stakeholder groups in conflict

the board sets the tone at the top for ethical matters and influence the culture and values of the organisation, should be committed to preventing and resolving ethical conflicts and promoting a culture where ethics is viewed as important

leadership style can be autocratic, where decisions are imposed by authority, or participative, where decisions are made with input from others

Both affect decision making and conflict handling

organisational culture: reflects its shared beliefs, norms and values

organisational code of ethics or code of conduct: expresses its ethical standards and expectations

provide a legal framework for conduct in certain matters and reflect the societal norms and values

provide a professional framework for conduct in certain matters and reflect the professional norms and values

affect their ability to influence or affect the organisation and its decisions and the legitimacy of their rights, claims or expectations

SRO's business objective is to provide unbiased and comprehensive reviews of online stores, but their revenue streams depend on the online stores that they review (commission and advertising). This creates a commercial conflict of interest, because SRO faces a dilemma between being honest and objective or being biased and selective to maintain their revenue streams.

• Definition:

• Characteristics:

considers all stakeholders' needs and concerns and works with them to achieve sustainable and beneficial goals.

Responsible leadership is driven by the need for sustainable development and social responsibility.

It recognises that a business should focus on values and ethics as well as financial objectives.

uses an effective leadership style and 'tone from the top' to manage and resolve ethical dilemmas

balances shareholder returns with long-term environmental and societal impacts

faces difficult choices when satisfying different stakeholder needs

helps to solve societal problems that the public sector cannot

• Questions: Responsible leaders should be asking themselves the following questions:

• Is the workforce well looked after?

• Do business decisions have a long-term focus?

• Are decisions upholding the company’s ethical principles and values?

• Is the company effectively managing risk?

• Tucker’s 5 questions:

a framework for testing the ethicality of a decision by asking if it is profitable, legal, fair, right and sustainable.

It is used after making a decision using another model, such as the American Accounting Association (AAA) model, which provides a series of questions to guide the ethical decision-making process.

• Profitable: Is the decision profitable for the business and its stakeholders?

• Legal: Does the decision break any laws or regulations in any jurisdiction?

• Fair: Is the decision fair and equitable for all parties involved?

• Right: Is the decision right according to personal or professional values and standards?

• Sustainable: Is the decision sustainable or environmentally sound for the present and future generations?

• Secrecy option: The option for SHC to keep the sink method secret and not license it to others.

Value created by an organisation

• Democratic value: providing trusted and impartial news and information allowing viewers to understand global issues.

• Cultural and creative value: encouraging talent and breaking new ground to enrich the UK’s cultural life.

• Educational value: offering formal and informal education to all age groups.

• Social and community value: building tolerance and cohesion between different communities in the UK.

• Global value: being the world’s most trusted provider of international news and information whilst also aiding understanding of the UK as a whole.

• Public value: the social impact that organisations create through their focus on stakeholder and customer value, corporate social responsibility and sustainability.

• Tucker’s model: A tool for testing the ethicality of a decision by asking if it is profitable, legal, fair, right and sustainable.

• Route A: The option to avoid Mr Krul’s farm and save $1 million but destroy the birds’ feeding site.

• Profitable? Yes, for SHC, in the short to medium term, as it would eliminate competitors and increase profits. No, in the long term, as it may face new threats.

• Legal? Yes, no legal problems for SHC, as it is normal competitive behaviour. No regulation against monopolies or trade secrets.

• Fair? It depends. Yes, for SHC’s shareholders. No, for competitors and their stakeholders. No, for customers.

• Right? It depends. Yes, for SHC’s mission and vision. No, for social responsibility and sustainability. No, for professional integrity and honesty.

• Sustainable or environmentally sound? It depends. Yes, for SHC’s operations, as it would reduce emissions per unit. No, for the industry and the environment, as it would prevent others from reducing emissions. No, for decommissioning the old plant.

• Profitable? Yes, for RDC, more than Route B. No, if environmental costs or legal challenges are considered.

• Legal? Yes, has planning permission. No, may face legal action from pressure group.

• Right? It depends. Yes, for RDC’s shareholders and Mr Krul’s farm. No, for environmental responsibility and sustainability.

• Fair? It depends. Yes, for Mr Krul and his employees. No, for the birds and other environmental stakeholders.

• Sustainable or environmentally sound? No, harms an endangered species and its ecosystem. Yes, reduces car journeys and emissions.

• Coombe Valley: The option to obtain water from Lambria by building a dam and a reservoir. This would displace locals, destroy wildlife, and tax Lambrians. This would also provide water to Livermouth and create jobs in Lambria.


• Housewater: The alternative option to obtain water from a groundwater source near Housewater. This would transport water to Livermouth and purchase a farm. This would also avoid harming Coombe Valley and its inhabitants and wildlife.

• Profitable? No, for Livermouth Water Authority, more costly than Housewater. Yes, if long-term benefits are considered.

• Legal? Yes, has Deeland government’s support. No, may face legal challenges from environmental or human rights groups.

• Fair? It depends. Yes, for Livermouth Water Authority and its customers. No, for Coombe Valley inhabitants and wildlife. No, for Lambrian population.

• Right? It depends. Yes, for Livermouth Water Authority’s mission and vision. No, for environmental responsibility and sustainability. No, for professional integrity and honesty.

• Sustainable or environmentally sound? No, damages an area of outstanding natural beauty and threatens an endangered species and its ecosystem. Yes, reduces car journeys and emissions in Livermouth.

• Definition:

Documents that state the organisation’s values and responsibilities towards its stakeholders.

Published to show ethical commitment and respond to external pressures.

• Features:
Corporate codes of ethics usually have these features:

• Guidance on acceptable and unacceptable behaviour: Provide clear and specific examples of them.

• Links to the organisation's mission and objectives and communicate them to stakeholders.

• Clear guidance on consequences and sanctions:

• Standards for the ethical treatment of suppliers, customers, employees:

Specify the outcomes and penalties for breaching the code of ethics.

Explain how the organisation will monitor, enforce and report on compliance.

Provide ways for reporting and resolving ethical issues or dilemmas.

Set standards for how the organisation will treat its stakeholders ethically.

Address issues such as human rights, labour rights, environmental protection, anti-corruption, fair competition, diversity and inclusion, etc.

• Approach:

• Identify and analyse the ethical issues or dilemmas using relevant theories or frameworks (such as Tucker's model, AAA model, etc.).

• Evaluate the impact on the organisation's reputation and stakeholder relationships. Consider both internal and external stakeholders and their expectations and interests.

• Provide recommendations for resolving or preventing similar issues or dilemmas. Consider both short-term and long-term actions to improve ethical performance and reputation. Refer to relevant codes of ethics or best practices.

• Definition: Strategic positioning: how a whole company fits with its environment.
different from the operational level, which looks at the individual parts of the organisation

• Importance:

Ethical reputation and practice can be part of environmental ‘fit’, along with other strategic issues such as generic strategy, quality and product range.

The ‘fit’ helps the company to meet its stakeholders’ expectations, needs and demands.

The ‘quality’ of the ‘fit’ affects business performance and success.

• Example: HPC uses a code of ethics as part of its strategic positioning. It has these features:

• It is the highest ethical performer locally and wins orders on that basis. It is the ethical ‘benchmark’ in its industry locally.

• It has a code of ethics that shows its values and principles, such as honesty, integrity, respect, responsibility and sustainability. It defends this code against its parent company’s new code that may lower its ethical standards.

• It has internalised its ethical principles in its leader, Mr Hogg, and in its culture and practices. This is important for effective strategic implementation and alignment.

• Definition:

Professionalism is performing with competence, integrity and due care.

Professional behaviour: complying with laws and regulations, meeting the expectations of the profession and the public, and avoiding discrediting the profession.

• Obligations:
Professional accountants
have obligations that include:

• Maintaining confidentiality: Respecting the confidentiality of information and not disclosing it without proper authority or duty.

• Upholding ethical standards: Complying with the fundamental principles of ethics and applying a conceptual framework to identify, evaluate and address threats to compliance and apply safeguards.

• Acting in the public interest: Acting in a way that contributes to the collective wellbeing of the people and institutions they serve.

Accountancy profession v the public interest

• Definition:

• Influence: The accountancy profession influences business and society through its roles and functions, such as:

• Financial accounting: Preparing and presenting financial statements that provide reliable and relevant information about an entity's finances.

• Audit: Examining and expressing an opinion on whether an entity's financial statements are true and fair and follow standards. -> ensure the working of capital markets – and hence the value of tax revenues, pensions and investment

• Management accounting: Providing information for planning, decision making and control within an entity.

• Consulting: Providing advice and guidance on various aspects of business operations.

• Taxation: Computing and filing tax returns and payments for an entity or an individual.

• Responsibility: The accountancy profession has a responsibility

Purposes:

• Communicating the organisation’s values into a succinct and memorable form

• Identifying the key stakeholders and the promotion of stakeholder rights and responsibilities

• Conveying these values to stakeholders

• Influencing and controlling individuals’ behaviour

• Defining the strategic purposes of the organisation and how this might affect ethical attitudes and policies

• Using catchy slogans or phrases to capture the essence of the values

• Deciding on the legitimacy of the claims of certain stakeholders and how the company will behave towards them

• Balancing the interests of different stakeholder groups and resolving potential conflicts

• Making the code of ethics accessible and visible to internal and external stakeholders

• Providing regular updates and feedback on the implementation and outcomes of the code of ethics

• Providing for an agreed outcome whenever a given situation arises and to underpin a way of conducting organisational life in accordance with those values

• Establishing mechanisms for monitoring, enforcing and rewarding compliance with the code of ethics

• Building an ethical reputation in society that can enhance the organisation’s competitiveness and attractiveness

• Failed to communicate transparently with stakeholders

• Because of the internal arguments between Coastal Oil and Well Services, it took seven days to make a public statement about the event

• Clearly, there would be many stakeholders eager to hear Coastal Oil’s view on what had happened, including the families of those killed and injured, and the delay caused by the internal arguments was a breach of its own code of ethics on this issue

• Failed to ensure safety and care of employees

• The deaths of eight employees on the Effland Coastal Oil Rig resulted from health and safety failures because of a number of internal control failures

• If Coastal Oil saw the protection of employees as an ethical issue, it might have adopted, or ensured that its JV partners adopted, the ‘highest standards’ of performance in ensuring their safety

• Failed to contribute socially to the affected communities

• The oil spill caused a number of problems to the communities along the Effland coast

• Business was damaged during the important tourist season meaning that communities were less supported, in terms of income, over those important months

• Failed to act responsibly towards the environment

• The valve failure caused an oil leak on the sea floor which took several months to stop

• This is an environmental failure and, given that Coastal Oil stated that environmental responsibility was a key heading in its code of ethics, stakeholders will be reasonably entitled to conclude that it has failed against its own ethical standards

Purpose:

to act in the public interest by upholding professional values: competence, integrity, fairness and independence

combat fraud, bribery and corruption in organisations by applying appropriate standards, procedures and safeguards.

enhance the public's confidence and trust in organisations and their financial information

protect its own reputation and avoid any conduct that may bring discredit to the profession, enhance public confidence in professions

• Criticised for serving capitalism and its elites, not the public interest

• Accountants' prime role is resource allocation: in society through their roles and functions, help capital and profits flow to those who control and own production (they are agents of capitalism).

• Accountancy regulations are too passive:

too lenient and flexible, allowing too much discretion and choice.

not impose enough responsibilities on auditors, such as detecting and reporting fraud, or challenging management.

not address auditor independence, competence and liability.

• Accountancy regulations emphasise the wrong principles:

prioritise clients over the public

value client confidentiality more than disclosure

favour materiality over prudence

ignoring or downplaying risks or uncertainties.

• The IESBA (2018) Code of Ethics is a principle-based approach:

• (a) The code acknowledges the profession's duty to act in the public interest

• (b) The code states the fundamental principles of ethics before the guidance

• (c) The code gives a conceptual framework that requires accountants to deal with threats to compliance and apply safeguards

• Benefits:

• It makes the professional accountant think about relevant issues in a situation, not just avoid unacceptable actions

• It stops professionals from using legalistic requirements to dodge ethical responsibilities

• It allows for variations, as situations differ

• It can adjust to a changing environment, like the one accountants work in

• Drawbacks:

• Ethical codes cannot include all situations and dilemmas, so accountants need to know the principles well

• International codes cannot reflect regional cultural differences in beliefs and practice

• Principles-based codes can be hard to enforce legally, unless the code is clearly violated. Most are voluntary and maybe less effective

• Safeguards against breach of compliance include:

• Safeguards by the profession, legislation or regulation (e.g. corporate governance)

• Safeguards by the client/the accountancy firm’s own systems and procedures

• Educational training and experience requirements and continuing professional development

• Professional competence and due care: Members update their professional knowledge and skills and act diligently and according to standards and laws

• Integrity: Members are honest and straightforward in their business and professional relationships;

• Professional behaviour: Members follow laws and regulations and avoid discrediting the profession

• Confidentiality: Members respect the confidentiality of information (acquired as a result of professional and business relationships)

• Objectivity: Members do not compromise their judgments because of bias, conflict of interest or undue influence

• These principles can be remembered using PIPCO

arises when: the audit firm acts as the client's advocate in a dispute or situation, Representing a client in two different capacities

Acting in a way that benefits yourself and not your clients
can arise in many areas, such as:

• Family or close personal relationships

• Contingent fees based on the outcome of a transaction

• Client lends money to an audit firm or member of audit team

• Valuable gift and/or hospitality -> not trivial and inconsequential

• Client represents a large proportion of a firm's/partner's fees

• A partner or employee on the board of an audit client

• Lowballing, offering a low fee for an audit engagement

• Safeguards:

• Using different departments in the firm to do the work

• Making full disclosure to the client's audit committee

• Withdrawal from an engagement if the risk is too high

• Safeguards:

• Discussing the issues with the audit committee

• Reducing the dependency on the client

• Consulting an independent third party such as ACCA

• Maintaining records to show appropriate staff and time spent on the engagement

• Compliance with all applicable standards, guidelines and procedures

Being forced into a course of action against your will; arises when a professional accountant is deterred from acting objectively by threats, actual or perceived, such as:

• Threats of dismissal

• Threats of litigation

• Pressure to reduce fees or the extent of work performed

• Safeguards:

• Disclosure of threats to the audit committee

• Review of work for any evidence of bias

• Removal of affected individuals from the area under threat

Having a personal connection with a client


arises when independence is jeopardised by the audit firm and its staff becoming over-familiar with the client and its staff, and becoming too sympathetic to their views and interests

• Safeguards:

• Rotation of affected individuals away from the position creating the threat

• Quality control review of anyone's work if there is a familiarity threat present

arises when an audit firm provides services other than audit services to an audit client (providing multiple services), such as:

• Having an individual on the audit team who was recently employed by or involved with the client

• Having custody of an audit client's assets, supervising client employees or preparing source documents for the client

• Preparing accounting records and financial statements, and then auditing them

• Providing valuation services where audited financial statements include figures generated by the valuation

• Providing internal audit services to an external audit client (permitted in most jurisdictions, but not in the US under Sarbanes-Oxley)

  • Providing internal audit services that will be relied upon for external audit opinion

• Assuming management responsibility for an audit client

• Safeguards:

• Using different personnel for the non-audit work and the audit work

• Second partner review

• Confirming that the client understands and accepts responsibility for the non-audit work

• Ensuring that the client's management team make all decisions relating to the management of the organisation

• Safeguards:
measures to prevent conflicts of interest and ensure fairness and objectivity in student assessments

• Using different departments in the firm to do the work:

prioritised when there is a risk of advocacy or self-review threat

as it can help to maintain objectivity and avoid conflicts of interest

• Making full disclosure to the client's audit committee

prioritised when there is a risk of self-interest or intimidation threat

as it can help to increase transparency and accountability, and reduce pressure or influence from the client

• Withdrawal from an engagement if the risk is too high:

prioritised when there is a risk of any threat that cannot be eliminated or reduced to an acceptable level by other safeguards

as it can help to protect the reputation and integrity of the profession and the firm.

• Reducing the dependency on the client

prioritised when there is a risk of self-interest or intimidation threat

as it can help to reduce the incentive or coercion to compromise professional judgment and behavior

• Consulting an independent third party such as ACCA:

prioritised when there is a risk of any threat that requires professional guidance or advice

as it can help to ensure compliance with ethical standards and regulations and resolve any ethical dilemmas

• Maintain records to show appropriate staff and time spent on the engagement:

prioritised when there is a risk of self-interest or lowballing threat

as it can help to demonstrate that the quality and scope of the work are not compromised by fee considerations or other factors

• Compliance with all applicable standards, guidelines and procedures:

prioritised when there is a risk of any threat that affects the quality and reliability of the work

as it can help to ensure that the work is performed in accordance with professional competence and due care.

• Reviewing work for any evidence of bias:

prioritised when there is a risk of familiarity or intimidation threat

as it can help to detect and correct any errors or omissions caused by personal relationships or threats.

• Removal of affected individuals from the area under threat:

prioritised when there is a risk of familiarity or intimidation threat

as it can help to avoid or reduce the influence of personal relationships or threats on professional judgment or behaviour.

• Rotation of affected individuals away from the position creating the threat:

prioritised when there is a risk of familiarity threat

as it can help to prevent or break the development of personal relationships that might impair objectivity or independence.

• Quality control review of anyone's work

prioritised when there is a risk of familiarity or self-review threat

as it can help to ensure that the work is checked and verified by an independent and qualified person.

If an audit firm is also providing tax services to an audit client, it should use separate staff for tax work and audit work, and no communication or information sharing.

If an audit firm receives a significant gift or hospitality from an audit client that can create a self-interest threat, disclosing nature & value of gift, and seeking approval for gift or hospitality from client

If an audit firm relies on a single audit client for a large proportion of its fees, it should diversifying client portfolio, seeking new clients or expanding services

If an audit form quote a low fee for an audit service, it should maintain records showing sufficient staff and time allocated for audit work, no quality or scope compromise due to fee or other factors

if an audit firm has a personal relationship with a key employee of an audit client, review the work performed by that employee for any evidence of bias or error, such as overstating or understating revenues or expenses, omitting or misstating disclosures, etc., and correct any such bias or error before issuing the audit opinion.

removing individuals threatened by client with litigation or dismissal if not issue a favourable audit opinion, replacing them with others

if an audit firm has been auditing a client for a long period of time, rotate the engagement partner and other key members of the audit team every few years, preventing over-familiarity with client and staff

if an audit firm provides accounting services to an audit client, such as preparing their accounting records or financial statements, reviewing accounting work by another person not involved in accounting or audit work, checking and verifying accuracy and completeness

complying with ACCA, IESBA, IAASB, etc., documenting compliance in working papers and reports

if an audit firm faces an ethical dilemma that is not covered by the existing ethical codes or regulations, consulting ACCA for ethical guidance or advice on dilemmas

declining or withdrawing from the engagement and acting as client's advocate in legal dispute, explaining reasons

Acting as tax advisers and external auditors for the same client

Having a friendship between the partner and the FD

• In this case ( audit firm helps client tax avoidance or evasion ),
the public interest is
👥 those who feel the company should pay its fair share of taxes and
👥 those who feel the accountancy firm should not assist the company to avoid or evade taxes, as it owes a duty to society as well as to its clients

a bonus for the firm for securing such savings from tax avoidance or evasion for the company

Responsibility as an employee and as a professional to act in the public interest:

consult an independent partner within the firm or a third party such as ACCA

consider whistleblowing, which is disclosing illegal or unethical activity to an appropriate authority

Whistleblowing satisfies your duty to act in the public interest but may lead to retaliation from your employer or damage your reputation
(such as legal action, disciplinary procedures, redundancy and poor employment references)

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implies fair dealing and truthfulness

a steadfast adherence to strict ethical standards despite any other pressures to act otherwise.

an underlying and underpinning principle of corporate governance and professionalism.

Importance for professional relationships:

• Trust and reliability:

• Efficiency and effectiveness:

• Culture and reputation:

assures colleagues of good intentions and truthfulness.

A person of integrity can be trusted to act ethically and professionally.

shows character traits that inspire confidence and respect.

For example, Potto Sinter should show integrity to his staff and client, John Wang, by being professional and ethical.

It reduces time and energy spent in monitoring when integrity and openness can be assumed.

person of integrity does not need to be monitored or verified.

It allows for better communication and cooperation.

For example, Miller Dundas would save costs if they trust Potto Sinter and do not need to check his work or performance.

It cultivates good working relationships in professional situations.

A person of integrity can create a culture of mutual support and collaboration that can improve organisational effectiveness.

It also enhances the reputation and credibility of the profession and the organisation.

For example, John Wang's professional relationship with Potto Sinter is very important to Miller Dundas, as it affects their audit quality and client satisfaction. Therefore, Potto should have personal integrity.

• Benefits of a professional code of ethics:

• Contents of a professional code of ethics:

• Background and scope: An introduction that provides the background, scope, enforcement and disciplinary procedure of the code.

• Principles and values: A definition of the fundamental principles and values of the NFA, such as professional competence, integrity and objectivity for the referees.

• Conceptual framework: A conceptual framework that explains how the principles should be applied in the spirit of the code.

• Practical application: A practical and detailed application of the code that shows examples of how the principles are applied in specific situations, such as potential match fixing.

• Foundation and consistency: It provides a foundation for referees to base their decisions on. It helps referees to understand the expectations and ethical guidelines of the NFA. It ensures consistent and clear behaviour in any given situation.

• Transparency and reputation: It provides transparency and enhances reputation and brand for the NFA. It communicates the professional values of referees to the outside world and key stakeholders.

• Deterrence and resolution: It deters unethical practices by placing limits and prescriptions on behaviour. It provides a framework for conflict resolution in applying the fundamental principles.

• Safeguards against breach of compliance include:
---> deter unacceptable behaviour and prevent any conflicts of interest include:

• Job descriptions:
Define the roles of the CEO and the chairman, avoid conflict of interest, promote corporate governance, query irregularities

• Board continuous professional development:
Develop knowledge and skills, increase awareness of fiduciary duties, use reasonable skill and care

• Corporate code of conduct:
Control behaviour, prohibit and sanction inappropriate actions, deter manipulation of financial statements

• By clearly defining the roles of the CEO and the chairman of TR Co, it will avoid any risks arising from conflict of interest

• By focusing on representing the interests of the shareholders, the chairman is promoting the highest standards of corporate governance in the company

• The chairman may also be responsible for signing off the financial statements, and so would query any irregularities brought to his attention by the auditors

• All directors should continuously develop their knowledge and skills base, concentrating specifically on the duties and obligations necessary to be effective members of the board

• This would include a greater awareness of their fiduciary relationship to act in good faith and in the best interests of the company

• Duty of care is a specific fiduciary duty, requiring every director to use reasonable skill and care in carrying out their tasks

• If TR Co developed and issued a corporate code of conduct, it would act as formal control over individuals’ behaviour

• By prohibiting certain behaviours and actions, and then stipulating sanctions for any serious breach, the code should deter anyone in the company from behaving or acting inappropriately

• Therefore, if the CEO was aware that his attempts to manipulate the financial statements could result in disciplinary proceedings against him, he would be less inclined to act as he did

Code of ethics

Corporate governance provision

audit committee consists of independent non-executive directors who oversee the financial reporting process and the external audit function.

acts as an intermediary to ensure that external auditors are independent of both the company and its management (e.g. CFO), and that they are not influenced or pressured by them.

reinforces the auditors' independence by providing a channel of communication where they can raise any concerns or issues found during an audit, which should improve the quality of financial reporting and protect the interests of shareholders and other stakeholders.

a professional regulation that governs the accountancy profession and sets out the ethical principles and standards that accountants must follow in their work.

contains a conceptual framework which allows individual accountants to evaluate and address any threats to compliance with the ethical principles, such as self-interest, self-review, advocacy, familiarity or intimidation, which they identify in the course of their work.

( audit team ) apply professional judgement and scepticism in dealing with ethical dilemmas and conflicts of interest, and to adopt appropriate safeguards to either eliminate or reduce the threats to an acceptable level.

Corporate code of conduct to outline values and principles, explain ethical problems and standards, clarify responsibility for managers/ staff, whistleblowing channel to raise concerns

Safeguards of audit firm in areas such as personal relationships, revenue reliance, quality control, influence and consultation

identifying and handling personal relationships between audit team members and clients

managing the reliance on revenue from individual clients

quality control policies and procedures to ensure audits are conducted properly

prohibiting any individual from influencing the outcome of an engagement

consulting with the firm's technical team on contentious accounting issues.

Re-evaluation of previous judgement by the same professional accountant.

Promotion of a position or opinion that may compromise objectivity

Close relationship that may cause sympathy or bias.

accounting firm's long-term relationship with the client and its senior management

the accounting firm's role as a lobbyist for the client on environmental issues.

Threats, actual or perceived, that may deter from acting objectively.

the pressure from the client's CEO to not question his beliefs or policies.

when a professional accountant's financial or other interests compromise their objectivity and integrity

when a professional accountant promotes a position or opinion that may impair their subsequent objectivity

when a professional accountant becomes too sympathetic to the interests of others because of a close relationship

occur when the promise of personal gain obscures the professional accountant's duty to act with integrity and in the public interest

occur when the giver of the gift or hospitality tries to influence the professional accountant's behaviour by threatening to expose their unethical conduct

professional accountant may have to defend the interests of the giver of the gift or hospitality against their own employer or other stakeholders

The conflict between Anne's two roles:

Employee: part of organisation, answerable to seniors, accountable to principals

Professional accountant: part of profession, answerable to code of ethics and GAAP, accountable to professional body and public interest

The tension between Anne's duties:

Managing Zachary: poor judgment, compromised independence, self-interest, familiarity, advocacy threats

Ensuring true and fair accounts: materiality test, poor client explanation, intimidation threat, advocacy threat.

• Not allowing fair competition for the contract
• Accepting a bribe to award the contract
• not apply safeguards to avoid or reduce the threats
• Believing that she deserved a higher personal return

-> a failure of her duty to the public interest, to her employers and to her professional body.

-> not ensure the best value for money for the organisation and its principals.

-> undermines the contract bidding system and offers poor value to the organisation's principals

-> seeking more than the career opportunities that come with being a qualified accountant.

-> not follow a generalisable ethic that respects the rights and duties of others

-> let her personal financial problems influence her professional judgement

the duty

that accounting and other professionals are bound to recognise and comply with

that Ann Koo owes as an accountant and a director

to maximise the public good over personal interests by

considering the collective wellbeing of the people and institutions of the community that the accountancy profession serves

adapting to the changing needs and challenges of society.

being impartial and unbiased in audit

ensuring true and fair accounting reports

avoiding anything that undermines stability.

ensuring external audit independence

recommending change in auditor if needed

judging non-audit services impact

preventing management capture;

being non-executive directors with no financial interest,

being impartial and identifying ethical threats;

representing shareholders' interests and bringing scrutiny;

following ACCA Code of Conduct and Ethics

• Instruction or CPD on professionalism and ethics for Mr Hu

• Requirement to declare conflicts of interest at each meeting and recruitment -> make the conflicts more visible and accountable.

• Rotation of partner who chairs assessment committee
-> Other partners without the conflict of interest would be more likely to chair the meeting and ensure fairness and objectivity.

• Involvement of additional partner in review of assessments
-> Another partner would have more organisational authority and influence to challenge Mr Hu's decision.

• Validation of outcomes by external party: final decision would not be made known until approved by the external party.
-> add an extra layer of scrutiny and oversight to ensure integrity and quality.

• Internal HR file recording list of students by assessment category
-> make the decision to retain Polly more visible to relevant business managers.
-> apply more consistency and transparency to the assessment process.

⦁ Absolutism:
a form of deontological perspective that holds that there are universal and eternal moral rules that apply to all situations

• Relativism:
a form of teleological perspective that holds that moral values are relative to some further instance, such as culture, situation, or personal judgment.

belief in situational ethics, pragmatic approach, personal judgment, varying ethical beliefs and practices, situational outcomes, no objective right or wrong, depends on situation and person, subjective moral opinions based on what one feels is best


-> weigh ethical importance of yielding or holding out, recommend sign off or seek further evidence

belief in eternal rules, one right course of action, dogmatic approach, unchanging ethical principles, universalist terms
-> pursue right course of action regardless of cost, recommend extension to audit

Definition: the view that ethics is based on the intrinsic rightness or wrongness of actions, regardless of their consequences.

Definition: the view that ethics is based on the outcomes or consequences of actions, and that the right action is the one that produces the most good or the least harm.

Examples of absolutist and relativist ethical dilemmas:

• Bribery: pay bribes to local officials or agents to secure business or follow anti-corruption laws and codes of conduct

• Environment: invest in environmental protection and sustainability or follow economic development and welfare

• Labour: treat workers with dignity and well-being or follow competitiveness and efficiency

• Privacy: respect the personal data and information of customers and employees or use it for marketing and research purposes

• Taxation: pay taxes according to the laws and regulations of the home country or use tax havens and loopholes to minimise tax liability

• Quality: ensure the quality and safety of products and services or cut corners and costs to maximise profits

• Diversity: promote diversity and inclusion in the workplace or follow the dominant culture and norms of the society

• Innovation: pursue innovation and creativity in products and services or follow the established practices and standards of the industry

• Social responsibility: contribute to social and community causes or focus on the core business and shareholder interests

the acceptance of gifts unless trivial and inconsequential

pragmatic approach

Stefan Krank's actions: self-interested and profit-driven, broke company policy and professional ethics, fraudulent and risky, wrong and unethical
-> can't be justified by relativist arguments.

to use relativist arguments

action is the best outcome based on these values

considering the consequences and the context

lying is sometimes right, because it reflects the cultural norms or personal beliefs of the agent or the situation

To use absolutist arguments

action conforms to or violates these principles, regardless of the consequences or the context.

lying is always wrong because it violates the principle of honesty or the categorical imperative.

right to be concerned, raise issue, whistleblow; wrong to accept payment, be complicit in fraud and bribery

influenced by mother's illness, weighed mother's suffering against honesty and accuracy, acted with reasonable motives, but inappropriate and wrong decision

some actions are right or wrong regardless of situation and person, follows a set of rules, objective moral standards based on whether action conforms to rules

Individual or personal differences not significant in guiding ethical behaviour, do not affect what is right or wrong in a given situation, same moral principles for everyone

Individual or personal differences very significant in guiding ethical behaviour, determine what one feels is best, different moral opinions for different people

the view that nothing is objectively right or wrong, but depends on the circumstances of the situation and the individuality of the person facing the situation or dilemma.

an ethical position held by one person may be right for them, but unacceptable to another person in the same situation.

Why Mr Shreeves is a professional:

high level of technical knowledge in accounting and auditing

uses it in the public interest

upholds the interests of society and clients

complies with legal and ethical requirements

overall welfare of society and shareholders, greater good rather than sectional interest

-> ensure the stability of business organisations – and hence the security of jobs and the supply of important products

Public accountability:

duty and obligation to ensure satisfactory performance and completion of publicly financed contract, accountability for financial and social outcomes, demonstration of proper use of public money

Value for money: criteria of economy, efficiency and effectiveness to confirm and report to government authority

• Lack of integrity and unprofessional behaviour: betrayed trust of shareholders, made biased and partial disclosures

• Lack of objectivity: accepted inducements, clouded judgement by personal gains, ignored public interest and shareholder interests

• Lack of integrity and professional behaviour: misled shareholders, violated transparency and fairness, breached laws and regulations

• Frank Bub breached professional behaviour by ignoring purchasing procedures.

• Frank Bub breached professional competence and due care by buying an inadequate system without proper specifications.

• Frank Bub breached objectivity by relying on a friend's advice without further consultation.

• Frank Bub failed to act in the public interest, which is a duty for all professionals.

• Amy Tsang calculated costs and profits for illegal material change without questioning Mr Mara.

• Frank Bub failed to consider various factors and stakeholders before making a wrong decision.

• Be trustworthy and reliable in their work, as they are respected professionals by many people.

Accountants in society should be trustworthy and reliable in their work, as they are respected professionals by many people.

• Kathy Wong's assessment was criticised for being biased and unbalanced, as she only considered the company's interests and not others'.

Calculated costs and profits for illegal material change without questioning Mr Mara

• Amy Tsang approved investment for illegal manufacturing process change without considering consequences.

Signed false compliance reports to regulator without verifying facts

• Failing to include the social costs as well as the economic and reputational benefits of the development.


• Breaking the law of insider trading, which discredited the profession and himself.

• Being dishonest and unfair in his professional and business relationships, using a false name to buy shares illegally and lying to his colleagues.

• Not acting with due care in the interests of Parkstone, but damaging its reputation and standing by his illegal behaviour.

• Using confidential information for his own personal advantage, without proper authority or duty to disclose or use it.

• Allowing his bias, self-interest and greed to compromise his professional and business judgement, abusing his trust as the finance director and failing to act in the best interests of its shareholders.

• Deontology focuses on actions and rules in advance, regardless of outcome. It is based on neutral facts and independent criteria. It is similar to absolutism and concerned with decision-making process.

• Teleology or consequentialism focuses on end result and judges actions based on consequences. It is based on greatest good for greatest number. It does not have hard and fast rules, but views actions as ethical depending on circumstances and effects. It is similar to relativism and concerned with outcome of decision.

• Sarah Shue has adopted a teleological or consequentialist approach, as she considers the payment as a necessity that would benefit MRA and its stakeholders. She is pragmatic and flexible in different situations and focuses on consequences.

• Jake Neilson has adopted a deontological approach, as he rejects the payment as a violation of his professional ethics. He is governed by strict rules and does not accept any situation that justifies paying a bribe. He ignores consequences and focuses on decision-making process.