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Ethical, Social and Environmental Responsibilities Unit 3 June 20131Dr Vidya Kumar.

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Presentation on theme: "Ethical, Social and Environmental Responsibilities Unit 3 June 20131Dr Vidya Kumar."— Presentation transcript:

1 Ethical, Social and Environmental Responsibilities Unit 3 June 20131Dr Vidya Kumar

2 The meaning of ethical behavior social norms which can vary for example the relative importance of individual and societal responsibility varies over time. June 20132Dr Vidya Kumar

3 Individual ethical guidelines or personal ethics are the result of a varied set of influences or pressures. June 20133Dr Vidya Kumar

4 Professional Ethical guidelines Increasing your awareness where here are clearly morally correct answers And where there are conflicting moral issues. Professional codes of conduct provide solutions to common issues June 20134Dr Vidya Kumar

5 How does this relate to accounting standards? The production of accounting standards is only the starting point in the application of accounting standards. June 20135Dr Vidya Kumar

6 The IFAC Code of Ethics for Professional Accountants The accounting profession sees ethical behaviour in standard setting as ensuring that accounting is neutral The profession seeks to provide ethical standards which will increase the probability of those standards being applied in an ethical fashion at the micro level where accountants apply their individual skills. June 20136Dr Vidya Kumar

7 Code of Ethics for Professional Accountants Developed by International Federation of Accountants (IFAC) code looks at fundamental principles as well as specific issues which are frequently encountered by accountants in public practice followed by those commonly faced by accountants in business. June 20137Dr Vidya Kumar

8 The IFAC Fundamental Principles Integrity Objectivity Professional Competence and Due Care Confidentiality Professional Behaviour June 20138Dr Vidya Kumar

9 Problems arising for accountants in practice Appointments Second opinion Marketing Independence June 20139Dr Vidya Kumar

10 Ethical values Rules v/s Principles Rules based there are many detailed standards as in the US It attempts to specify the uniform treatment for many types of transactions. June Dr Vidya Kumar

11 Principles based fewer standards as in the UK greater reliance on the application of the True and fair override to (a) report unusual situations (b) address the issue of whether the accounts prepared in accordance with existing standards provide a fair picture for the decisions made by the various users June Dr Vidya Kumar

12 The problem of defining ethics where there are cultural differences Different cultural characteristic such as uncertainty avoidance or the tolerance for ambiguity lead to different attitudes to ethics. June Dr Vidya Kumar

13 Implications for multinationals This means uniform ethical guidelines will not lead to uniform applications in multinational companies unless the corporate culture is much stronger than the country culture. June Dr Vidya Kumar

14 Implications of unethical behavior for stakeholders Increased cost of capital Hidden Liabilities June Dr Vidya Kumar

15 Auditor reaction to unethical behavior Unethical behavior should make auditors scrutinize accounts more closely. June Dr Vidya Kumar

16 Ethical issues for accountants in business Requests by employers to manipulate tax returns Requests to produce figures to mislead shareholders Requests to conceal information Requests to manipulate overhead absorption rates Requests to authorize and conceal bribes to buyers and agents Requests to produce misleading projected figures to obtain additional finance Requests to conceal improper expense claims put in by senior managers Requests to over- or undervalue assets Requests to misreport figures in respect of government grants Requests for information which could lead to charges of insider dealing Requests to redefine bad debts as 'good' or vice versa' June Dr Vidya Kumar

17 Action by professional accounting bodies to assist members The ICAEW established Industrial Members Advisory Committee on Ethics (IMACE) in the late 1970s to advise members with ethical problems June Dr Vidya Kumar

18 Action taken by governments The Sarbanes-oxley Act (SOX) has had a major impact on company management and auditors. It placed personal responsibility on the CEO and CFO for the accounts. June Dr Vidya Kumar

19 Action by companies Most companies now adopt codes of ethics includes the following Commitment to integrity Health, safety, security of environment Employees Business partners Government and communities Company assets and financial integrity June Dr Vidya Kumar

20 Whistle Blowing First party to report favourable treatment to the first party to report occurrence Anonymous whistle blowing a contact number where people can anonymously report Details of breaches of the law or breaches of ethics June Dr Vidya Kumar

21 Money laundering In 2006, Auditing Practices Board (APB) in the UK issued a revised Practise Note 12 Money laundering The Financial Action Task Force (FATF) is an independent inter governmental body that develops and promotes policies to protect the global financial system against money laundering and terrorist financing. June Dr Vidya Kumar

22 Why should students learn ethics Survival of the accounting profession Future role of accountants Implications for training June Dr Vidya Kumar

23 Q & A June Dr Vidya Kumar


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