đmemesđ29) Ethics and the Accountant â A Level Accounting CIE 9706
content and solved questions
- ethics, integrity, objectivity
- professional competence and due care
- confidentiality
- professional behaviour
- promoting ethical behaviour
- social aspects
ethics:
if the accountant has a reputation for being principled and trustworthyâŚ
Reasons people donât do the right thing
national level:
corporation level:
You donât have to read this Investopedia link. Just watch the video. You have to scroll down a little:
Integrity
Situation 1: avoiding compromising situation
While there is nothing wrong with being offered a gift of this type, the potential problem is one of âconflict of interest/being compromisedâ â is the gift large enough that someone not involved in the situation might suspect that the gift was a pay-off for carrying out work in a particular way rather than according to accounting rules and regulations (the word âbribeâ might even be used). This might lead to people doubting the overall integrity of the accountant.
The accountant should declare the gift to his/her company â many organisations have rules that require all gifts (or even offers of gifts) to be declared, particularly if they are above a certain value. Some firms of accountants make a point of informing clients, before the work starts, what the policy regarding the offering of gifts is.
Situation 2
The problem here is that an employee may feel unable to declare that they do not possess the skills and knowledge and so might pretend they do â which is dishonest. In all probability, the employee will not do the job up to the required standard and may even make mistakes that have major consequences.
Obviously, the employee should make the declaration as soon as possible as this might allow them to be trained up before the assignment starts. If this is not possible, they can be replaced by someone who can do a good job and be redeployed onto a job that they have the skills and knowledge to do.
Situation 3: communicating all information factually, whether good or bad.
Sometimes it may be tempting to leave out the bad news and only tell the client what you think he or she want to hear
An employer has the right to expect that staff are fit and able to perform to a good standard and there is every likelihood that the result of this weekend will be a very tired employee who is likely to be tired and/or ill on Monday morning. If the member of staff conceals the fact that they are going on this weekend, they are dishonestly depriving the employer of a valuable resource.
Avoiding certain activities.
For example, school teachers cannot provide private tuitions to their students as it may indicate that they do not do a good job of teaching in the classroom and students need to pay extra money to get a good education.
The ethical approach would be to inform the management of the situation and get their permission. It may be that someone else can step in and attend the meeting. The problem is that there is the possibility that the employer will say ânoâ and be on the lookout to see whether the employee disobeys them. Saying nothing gives the employee a chance of âgetting awayâ with attending this weekend.
Situation 4: avoiding conflicts of interest
Helping one of your employerâs competitors almost certainly represents a âconflict of interestâ and if the employer does this without telling the employer, this has to be regarded as dishonest. There are other hazards such as coming across information about other businesses or clients that cannot be unlearned and this may affect the way the employee does his or her job when he or she returns to his or her normal position.
The only ethical approach is for the employee to inform his or her manager of the offer. The answer will probably be ânoâ, but cooperation between companies is not unknown â carrying out the work unofficially could also have consequences if managers find out â probably dismissal!
objectivity
similar to historic cost concept:
1
This is a clear case of familiarity as one of the partners of the building firm is your brother-in-law and so it is possible that he might use the link to make requests regarding how the job is done.
The only ethical course of action you can take is to declare the family link to your manager and let someone more senior decide whether you can work on that clientâs job or not â you might be given other work.
2
This is clearly a case of intimidation as the client is threatening you â he thinks that losing a client will get you into trouble with the partners at your firm.
You should report this conversation to your partner at the earliest opportunity â hopefully, the partner will deal with the situation by talking to the client and informing him that the request and subsequent threat are inappropriate. In any event, this action will hopefully avoid you having to defend yourself against accusations later â where it is your word against the clientâs.
3
This could well be a self-review risk if you had worked on that clientâs accounts when at the previous company. While the problems and disputes might involve size and payment of fees, it might be that there are questions over whether work was done to the right standard. There is a possibility that you might not spot any errors that you made and in any case, might be tempted to conceal any that you do find to spare your embarrassment and avoid questions over your ability.
The only ethical course of action is to declare your connection with that client â the partner at your firm may decide to give you another assignment.
Note: in these cases, the risks are not your fault, but it is your responsibility to do the right thing â which in all three cases will involve reporting the issue to your manager.
professional competence and due care:
confidentiality
You donât have to read this Investopedia link. Just watch the video. You have to scroll down a little:
https://www.investopedia.com/terms/i/insidertrading.asp
On Black Thursday of the Wall Street Crash of 1929, Albert Wiggin joined with other senior Wall Street bankers in an attempt to save the collapsing stock market. On behalf of Chase National Bank, Wiggin, along with other bankers, committed substantial funds for an investment pool. They had Richard Whitney, vice president of the New York Stock Exchange, go onto the floor of the Exchange and with great fanfare purchase large blocks of shares in major U.S. corporations at prices above the current market. The action halted the slide that day and returned stability to the market. While the market slide continued on Monday, Wiggin was lauded as a hero for his actions.
However, what later came out in the Pecora Commission investigation into the Wall Street crash was that, beginning in September 1929, Wiggin had begun selling his personal shares, as soon as their value rose after the purchases by Whitney, in Chase National Bank at the same time he was committing his bankâs money to buying. He sold over 42,000 shares, earning him over $4 million. His earnings, moreover, were tax-free, since he used a Canadian shell company to buy the stocks.[6] Wiggin was not alone; other executives in powerful positions had done the same thing. The committee counsel, Ferdinand Pecora, said of Wiggins, âIn the entire investigation, it is doubtful if there was another instance of a corporate executive who so thoroughly and successfully used his official and fiduciary position for private profitâ (Pecora, p. 161). As a result of all the controversy, the âWiggin Provisionâ[7] was promptly named after him which prevented company directors from selling short on their own stocks and making a profit from their own companyâs demise.[1]
Professional behavior
promoting ethical behaviour
You donât have to read this Investopedia link. Just watch the video. You have to scroll down a little:
social aspect of decision making
corporate social responsibility:
