PROFESSIONAL ETHICS

LEARNING OUTCOMES Describe the purposes for which cost information is required Distinguish data from information Identify the characteristics of quality information Identify sources of information Define and illustrate a cost unit and cost centre Explain and illustrate production and non- production costs Describe the elements of non-production costs: Administration, Selling, Distribution and Finance

LEARNING OUTCOMES Describe the elements of production costs: Material, Labour and Overheads Explain and illustrate the classification of costs by Function, Nature, Elements Illustrate graphically cost behaviour Use the High-Low method to separate total cost into Fixed and Variable costs Define and illustrate responsibility centres: Cost, Profit and Investment Identify how overheads are charged to responsibility centres Calculate overhead absorption rates

ETHICAL CONFLICTS Principles-based approach Identify Evaluate Apply safeguards Rules-based approach Literally going by the rule/law

ETHICAL CONFLICTS Objectivity Independence Freedom from control or influence by others Independent in mind consider the information that is only relevant to the job at hand Independent in appearance must be seen to be independent

ETHICAL CONFLICTS Objectivity Accepting Gifts/Hospitality There is a risk that the gifts could influence the accountant’s performance Accept? YES or NO? Use professional judgement

ETHICAL CONFLICTS Objectivity Inducements Something offered to encourage or motivate a person to do something. Examples gifts, hospitality, preferential treatment, friendship

ETHICAL CONFLICTS Objectivity Safeguard Inform higher management Inform third party – AAT, professional body Inform higher management of the inducer

ETHICAL CONFLICTS Objectivity Fraud criminal deception intended to result in financial/personal gain Fraud Act 2006 – 3 acts: false representation failing to disclose abuse of position

ETHICAL CONFLICTS Objectivity Bribery “giving or receiving something of value with intention of influencing the recipient to do something favourable to the giver”

ETHICAL CONFLICTS Objectivity Bribery Act 2010 – 4 acts: Penalties bribing another receiving a bribe bribing a foreign official Failing to prevent a bribe Penalties 10 years imprisonment and/or An unlimited fine

ETHICAL CONFLICTS Objectivity/Confidentiality Conflict of Interest A professional accountant could have 2 or more clients that are in direct competition with each other An adverse disclosure on one could benefit the other Safeguards Chinese wall Reduced to acceptable level? No? Decline.

ETHICAL CONFLICTS Objectivity/Confidentiality Conflict of Loyalty “being firm and not changing in your support for a person or an organisation, or in your belief in your principles” Accountant in business owes a duty of loyalty to his/her employer but also to the profession.

ETHICAL CONFLICTS Objectivity/Confidentiality Loyalty Conflict Problems employer breaks the law ethical disagreement

ETHICAL CONFLICTS Objectivity/Confidentiality Solutions Persuade employer to change course Persuade senior management to change internal practice Consult third party Whistle blow Resign

ETHICAL CONFLICTS Objectivity/Confidentiality Whistle-blower Internal “A person who tells someone in authority about a misconduct, alleged dishonesty or illegal activity in an organisation” Internal Tell someone senior Follow internal policy guideline

ETHICAL CONFLICTS Objectivity/Confidentiality External Advice Financial Reporting Council Public Interest Disclose Act, 1998 (PIDA) gives the employee blowing the whistle some protection Advice Citizens Advice Bureau Public Concern at Work

ETHICAL CONFLICTS New Clients Consider whether: you have the competence you have the resources – staff & time you are objective there is a threat to confidentiality

ETHICAL CONFLICTS New Clients Consider whether: you have the competence you have the resources – staff & time you are objective there is a threat to confidentiality

ETHICAL CONFLICTS New Clients Customer Due Diligence (CDD) Accountants must consider whether their services could be used to launder money or aid terrorisms. Due diligence is the process of evaluating prospective business decision by investigation the other party.

ETHICAL CONFLICTS New Clients Customer Due Diligence (CDD) Accountants must consider whether their services could be used to launder money or aid terrorisms. Due diligence is the process of evaluating prospective business decision by investigation the other party.

ETHICAL CONFLICTS New Clients Customer Due Diligence (CDD) Verify the client’s identity Understand any beneficial ownership (> 25%) Purpose and nature of transaction Unable to do CDD - decline

ETHICAL CONFLICTS New Clients Money Laundering “to move illegally acquired cash through financial systems so that it appears to be legally acquired”

ETHICAL CONFLICTS New Clients Anti Money Laundering Rules Proceeds of Crime Act 2002 (POCA) Terrorism Act 2000 (TA) Money Laundering Regulations 2007 National Crime Agency (NCA) Fights serious organised crimes – drug trafficking etc.

ETHICAL CONFLICTS New Clients Money Laundering (ML) If a client is suspected of ML, they must be reported to the money laundering reporting officer (MLRO) or submit a Serious Activity Report to the NCA

ETHICAL CONFLICTS New Clients Money Laundering (ML) fines 14 years and/or Unlimited fine