1. Ethics Understanding ethics

2. What are ethics Ethics are a set of moral principles that guide behaviour Ethical values are assumptions and beliefs – that constitutes right and wrong behaviour Individuals have ethical values that relate to family, culture and environment which they develop their ideas and beliefs from Organisations have ethical values that are based on standards of behaviour and norms and help to express the business’s identity

3. Ethics Business ethics concept – Suggests business is morally responsible for their actions – Should be held accountable for the effects of their actions on people and society – Businesses should behave ethically towards Customers Employees Suppliers Communities/ society

4. Ethics continued Some ethical values are set up in the organisation’s mission statement Set out as ethical codes and guidelines which are taught to employees Others are set up as organisation culture- unwritten rules, the way we do things and customs of behaviour Code of Ethics focuses on social issues

5. Behave ethically, why? AAT Code of Professional Ethics states – ‘The decisions you make in the everyday course of your professional lives can have real ethical implications’ Reasons could be – Issues may relate to law and regulations – Reputation and standings of the professional bodies – Protect the public interest Avoid the appearance of conflict of interest Be objective and act in the public interest Keep sensitive information confidential Be straightforward and honest in professional and business relationship Maintain professional knowledge, behaviour and skills at the level required by client or employer Act within the spirit and letter of the law so as not to bring the profession into disrepute

6. Ethical principles - explanations 5 fundamental principles as stated by AAT – Integrity Should be straightforward and honest in all professional and business relationships – Objectivity Shall not allow bias, conflict of interest or undue influence on others – Professional competence and due care Continuing duty to maintain professional knowledge and skills at the level required to ensure competent professional services

7. – Confidentiality In accordance with the law a member shall respect the confidentiality of information acquired A member shall not disclose any information to a third party without proper authority (unless there is a legal or duty to disclose) Confidential information shall not be used to benefit or advantage the member or third parties – Professional behaviour Member shall comply with the laws and regulations so as not to bring the profession into disrepute

8. Ethical principles - Review Integrity – being open about the limitations of knowledge and competence – Being honest in your relationship – Carrying out work accurately, conscientiously and efficiently Objectivity – Basis of an independent and honest appraisal of information – Must be impartial free from factors (financial gain, conflict of interest between two parties)

9. Professional competence and due care – Must not carry out a task/ assignment if you do not have the competence to carry out to a satisfactory standard – You can receive support and advice to complete the task – You should not undertake or continue to undertake a task unless you can receive said support – You need to maintain and develop the professional and technical competence Regularly review working practices against standards, codes, legislations and regulations – both national & international Continually upgrading knowledge and skills

10. – Due Care is a legal concept meaning, if you agree to complete a task/ assignment you have the obligation to complete to the best of your ability Client’s /employer’s best interest Within a timescale To the professional and technical standards

11. Confidentiality Is a fundamental principle of the profession There are circumstances where the law allows or requires that confidentiality be breached. Summaries are shown on next slide ( from AAT code of section 140.7) You as a professional will not use or disclose confidential information to others unless: – Have specific and proper authorisation to do so by client or employer – Are legally or professionally entitled or obliged Note: any personal information relayed at work should be regarded confidential unless otherwise stated

12. Disclosure allowed- table CircumstancesExamples Disclosure is permitted by law and is authorised by the client or employer Providing working papers to a new firm how is taking on the client Disclosure by law Providing documentation/ evidence for legal proceeding Disclosure to HMRC Disclosure of actual/suspected money laundering Monies used to finance terrorist acts Money Laundering Reporting Officer (MLRO) Serious Organised Crime Agency (SOCA in the UK) There is a professional right or duty to disclose which is in the public interest and is not prohibited by law Complying with the quantity review of an IFAC member body or professional body Responding to an inquiry or investigation by the AAT or other regulatory or professional body Disclosure to protect the member’s professional interest in legal proceeding Disclosure made to comply with technical standards and ethics requirements

13. Professional behaviour Another fundamental principle Members must be truthful & honest when advertising their services Can bring the profession into disrepute by – Making exaggerated claims – Making disparaging references about other professionals – Or unsubstantiated comparisons Being professional also means being courteous

14. Conflict of Interest There many possible situations which conflict with the ethical principles From the AAT code are guides and problem solving procedures They form conceptual framework which are: – Identify where there may be a threat to a fundamental principle – Evaluate the threat is it significant? – If significant, apply safeguards that will eliminate or reduce the threat – If safeguards cannot be applied decline or discontinue the task/ service, and/or resign

15. Threats and safeguards Threats: Refer to the table on pg 186-7 for explanation – Self-interest – Self-review – Advocacy – Familiarity – Intimidation

16. Safeguards – AAT code Definition as ‘action or other measures that may eliminate threats or reduce them to an acceptable level’ Code identifies 2 broad categories – Safeguards created by the professional and/or legislation and regulation Education, training and experience as entry requirement CPD Corporate governance regulations Professional standards Professional or regulatory monitoring and disciplinary procedures External review of final reports, returns, communications or information produced by members

17. Safeguards in work environment – Quality controls, internal audits of quality control – Mechanism to empower and protect staff who raise ethical concerns (whistleblowers) – Involvement of, or consultation with independent third parties – Rotation of personnel to avoid familiarity and opportunities for collusion in fraud – Opportunities to discuss ethical dilemmas with ethics officer, committee, forum

18. Compliance with the law Law falls into 2 categories – Criminal Law – Civil Law Criminal is offences relating to persons and property Will result in fines or imprisonment Cases prosecuted in a criminal court – Examples – money laundering, theft, terrorist financing, bribery and fraud Civil is conflicts between individuals within the community No punishment will take place Cases heard in a civil court – Examples breach of contract, negligence and trust

19. Other laws that effect accounting professionals are: – Health & safety legislation – Employment protection – Equality laws

20. Business ethics and professional values In ‘Setting the tone: ethical business leadership’ by Phillippa Foster Back (2005) lists key business values as: Truth, transparency, fairness, responsibility and trust These business values should underpin the company’s policies and behaviour Aim of a business is to make a profit. – Modern ethical standards require the protection of the rights of groups within and outside of the organisation who have a legitimate interest or stake in the organisation’s activities. The outside group are commonly known as the stakeholders

21. Business ethics also relate to competitive behaviour Competing unethically could be: – stealing competitors designs – Using buyer power to prevent suppliers from dealing with competitors – Spreading false negative information about competitors For a business to act ethically they may have to change its culture The Institute of Business Ethics (IBE) was set up in 1986 to encourage a high standard of business behaviour based on ethical values IBE set up a simple ethical test for business decisions as: – Transparency – Do I mind others knowing what I have decided? – Effect – Who does this decision affect or hurt ? – Fairness – would my decision be considered fair by those affected?

22. Sustainability The understanding and effect of sustainability within a business

23. Sustainability Accountants are expected to act in the public interest and the business world, sustainability is increasingly important in this regard There are 3 aspects to sustainability – Economic sustainability Fair distribution and efficient allocation of global resources Developed countries consume more per capita than developing countries Economic growth must be balanced with the need of the developing world

24. – Social sustainability Involves the responsibility to work towards eradication of inequality, poverty and social injustice – Environmental sustainability Needs organisations to consider the impact their activities have on the environment Take steps to minimise the impact and conserve energy – Sustainable development Core part of an organisations corporate social responsibility Create policies to reduce waste, use less energy, recycle, encourage flexible working, cycle to work, reducing business travel through use of technology Sourcing materials from green suppliers

25. Duties and responsibilities As a finance professional you have a duty to consider the economic, social and environment aspects of their work in order to support sustainability All three aspects are linked like a triangle (diagram on pg 191) Economic aspects – – supporting their organisation/client to be profitable – supporting local businesses when deciding on suppliers – Paying them on time – Looking at ways to improve the efficiency of the organisations finance operations

26. Social aspects – Supporting policies on corporate governance – Consulting local community when making decisions (investing in or relocation operations) Environment aspects – Focuses on using less energy – Creating less pollution – Think long term

27. 6 main responsibilities Creating and promoting a sustainable culture Championing the aims of sustainability Evaluating and quantifying reputational and other ethical risks Taking social, environmental and ethical factors into account when making decisions Promoting sustainable practices Raising awareness of social resposibility

28. Impact and benefit of sustainability Environmental perspectives – Actions in respect of Environmental care Recycling Energy and resources consumption Travel efficiencies Organisational perspectives – In respect of Its shareholders The acquisition and retention of customers The acquisition and retention of suppliers Delivery of high quality goods and services Development of employees There can be costs as well as benefits in pursuing a sustainable solution