5.1 Introduction, Meaning of Ethical Behavior

To maintain the probity of the report, accountants must insist on absolute independence of judgment and action. The need to maintain this independence position points to a specific code of conduct. If public confidence in the integrity of an accountant's report is shaken, its value is lost. (Arthur Andersen, 1932 Lecture on Business Ethics.)

John is an adolescent accountant at a local certified accountant office. He is working on the issue. He is trying to decide whether to cover up the mistake that a significant customer did not attach an irrevocable election to his recently filed tax return. If he does not report the mistake, he Can reduce a significant portion of the client's tax burden. John considers taxes to be unfair anyway and believes that it is his duty to look in the best interests of the client and avoid paying as much tax as possible. John also knows that retaining customers is important to the financial health of the company. Do you think most accountants hide such mistakes? Will they justify doing so?

Leo is an intimate company and he is a senior accountant responsible for auditing CHC. Leo found that CHC's income was virtually misstated. Managing, who is negotiating a consulting contract with CHC, his partner is pressured Leo to hand over the file as soon as possible. Audits take significantly longer than expected by the budget, and investigating misstatements takes a lot of time. Leo speaks to her Adele, audit manager. Adele finds no tax implications, no harm or foul, so she says she works and she doesn't mention adjustments in the paper. Should Leo follow Adele's "advice" or is he more responsible than working for the benefit of his clients?

Situations like these scenarios occur every day. They symbolize the ethical concerns faced by accountants, whether they are administrative accountants, tax accountants, auditors, valuation professionals, or other accountants doing accounting work.

Individuals and systems are very similar. Both succumb to temptation. Therefore, a full-fledged ethical treatise should focus on the pressure the system puts on individual accountants and their companies, and consider the rewards of the system to determine if they are in line with its purpose. These are the main issues addressed in this book on accounting ethics. Ethics is a comprehensive concern in all areas of life. It is involved in all human activities. Human activity is an activity that the individual is responsible for, an activity that is intentionally performed and controlled, an activity that helps or harms an individual or another person, an activity that is considered fair or unfair, right or wrong.

Define Ethics

Find out how current ethical theories can be applied to today's accounting, focusing on both the ethics of purpose and the ethics of relationships. Ethics is not just about pursuing good. It is also about loyalty to ethically acceptable relationships. An important relationship is an expert relationship with his or her clients. Accounting is a skill that requires expertise, and because accountants have clients who rely on that expertise, accounting can also be included in the profession. Being an expert means that an accountant is obliged to act in the best interests of all parties, from clients to the company to the general public. As an accountant, as an expert, he has developed various codes of ethics that require the rules that an accountant must follow in order to be accepted as an expert.

What is Ethics?

The words "ethics" and "morality" have many meanings. The Webster's Collegiate Dictionary shows four basic meanings of the word "ethics".

Ethics is, in every form, related to good and evil. It is a discipline that studies a set of principles held by an individual or group, or their ethical principles. The task of that discipline is the analysis and evaluation of human behavior and practice. For example, according to some people or groups, suicide assisted assistance is ethically acceptable. Ethical discipline considers what "suicide assisted assistance" means (analysis) and why it supports or opposes practice (evaluation).

Expert Ethics Guidelines

Her director, managing a well-known bank, explained that her job was to determine controversial issues for which no clear solution was found after a thorough investigation by his senior staff. Did. The decision was left to him as all the proposed solutions pose a significant downside risk to the bank. Ethical behavior can be categorized in the same way. There are clearly morally correct answers, and there are dilemmas that there are contradictory moral issues.

In this chapter, we strive to raise awareness of moral issues among accounting professionals. It also helps identify problems with clear solutions and encourages more search and delicate analysis of complex problems.

Expert Code of Conduct tends to provide solutions to common problems that experts have tackled many times, so it is sufficient to utilize the most experienced and knowledgeable brains to find the best solution. I had a great opportunity. Therefore, the expert code of ethics is only a starting point in the sense that it can never cover all the ethical issues facing accountants and it is inevitable that accountants will deal with other ethical dilemmas.

How does the decision look?

Another aspect of ethical behavior is that others often use hindsight or another perspective to judge the morality of their behavior. This is the aspect of "how it will be displayed on the front page of the newspaper." Therefore, recognizing what can happen is often part of ethical sensitivity. In other words, being able to predict possible outcomes and how other parties will see what you have done is a necessary part of identifying the need to address ethical issues.

What if I have a competing solution?

Therefore, ethical behavior involves making morally correct and fair decisions. Sometimes decisions are needed and cannot be resolved in relation to two or more competing aspects of morally correctness. We recognize that there are conflicts. We need to make sure that no trade-offs are made for the benefit of society and that decisions are not explicitly or subtly influenced by self-interest. They need to look fair and rational when later reviewed by an uninvolved outsider who is not an accountant. This is because the community relies on professionals who have expertise that no one else has, but at the same time you need to maintain that trust.

Preface

The main purpose is to recognize the need for accountant ethical action to complement the various accounting and auditing standards issued by the International Accounting Standards Board (IASB) and the International Auditing and Assurance Standards Board (IAASB) and a professional accounting institution.

Ethical behavior means acting according to the moral standards set by the society in which we live.

What does Ethical Behavior mean?

Ethical behavior can be identified by both personal and professional relationships. This concept can also be applied to a company as an entity. It evaluates the moral implications of the actions taking place in each of the contexts mentioned above. Ethical behavior is essential for the proper functioning of society. Individuals who behave unethically usually lose the trust of others and their unethical behavior should also be punished by law.

On the other hand, ethical behavior can also be demonstrated in business relationships. Colleagues need to maintain ethical standards with each other to ensure a healthy working environment. This behavior is evidenced by certain values   and principles that are maintained in the relationship, such as integrity, transparency, integrity and impartiality. These are ethical standards that should be respected between the parties in order to maintain an ethical environment.

Finally, businesses and businesses also need to maintain ethical behavior towards their customers and stakeholders. Transparency with shareholders, punctuality of payments, and fair treatment of employees are desirable ethical behaviours for a company.

Meaning of Ethical Behavior

Individuals in an organization have their own ethical guidelines that may vary from person to person. These can probably be seen as social norms that can change over time. For example, the relative importance of personal and social responsibility changes over time.

Individual Ethical Guidelines

Individual ethical guidelines or personal ethics are the result of various influences and pressures. As individuals, we "enjoy" a range of ethical pressures and implications:

Given the variety of inputs, it is not surprising that there are different views on what is acceptable ethical behavior. For example, as an accounting student, how do you deal with ethical issues? Do you personally tolerate cheating? Refrain from reporting cheats on exams and assignments from friends? In an essay Do you feel resentful about the selfishness of other students, such as hiding books in a very useful library? You decide to cheat on someone else's exam because you are at a disadvantage because you do not cheat. Are you resentful? Is the resentment strong enough to report to the authorities that you have an affair, even if you haven't named the people involved?

Example

Shady Sunglasses LLC is a company that manufactures and sells a brand of sunglasses called Radiant. The company is currently facing a difficult financial situation as raw material costs have risen by more than 20% and gross margins have fallen sharply.

The company was supposed to pay employees at the end of the month, but their cash flow was negative, so they decided to postpone the payment to the 5th of the following month. The company has filed complaints with authorities and has been accused of acting unethically against its employees.

This unethical behavior fined her $ 15,000 and, in addition to paying interest, paid the employee additional compensation for late payments.

Importance of Ethical Behavior

Morality and integrity are important traits to demonstrate, even for citizens and for those of us who are unwilling to pursue law enforcement careers. We instinctively know that it is good to act morally and honestly, but understanding the reasons for morality and integrity motivates us to defend such behavior. Reasons for being moral and essential, regardless of profession, include:

Key takeaways:

5.2 Financial Reports – What is the link between Law, Corporate Governance, Corporate Social Responsibility and Ethics?

The law codifies the minimum standards of conduct that Congress considers essential in civilized society into binding rules. These laws reflect social values   and, implicitly, the history and religious beliefs of the community. In other words, they reflect the ethical norms of the society. As a minimum standard, they do not provide a complete list of ethical guidelines. Compliance with laws that require accountants to comply with accounting standards may not provide a comprehensive indication of a company's financial position. You may need to add additional information to provide a fairer representation.

Therefore, ethical behavior requires that the annual report be fair to all parties. A well-known economist named Baumol1 offers an interesting concept of ultra-fairness to help with this kind of ethical decision. What do you think is fair if you don't know which side of the deal you will be? Will you be the owner of the company, the auditor, or the stock buyer? If you didn't know if you would be a stock seller or a stock seller, what do you think would be a good indication of a company's performance and financial position?? As a simple example, two children have the biggest cake in their hands. Consider a mother who is tired of arguing over whether to put in. So, she gives the cake to a child, cuts it in half, and tells your brother to choose the cake first. The child cuts the cake in half as carefully as possible. The brothers choose the one that looks like the larger cake and leave the other in the cutter. This is a simple application of ultra-fairness, in which neither party is in a position to claim that they have been treated unfairly.

Another concern about legal guides is that they can change slowly and accountants are judged by modern ethical standards as well as legal requirements.

2.     Corporate Governance in relation to ethics

Corporate governance refers to a system in place to avoid or resolve potential conflicts of interest. The existence of a conflict of interest means that one or more parties may make decisions in their own Favor at the expense of the other. The possibility of unfair behavior does not necessarily mean that unethical behavior will occur. However, the purpose of the corporate governance system is to reduce or eliminate opportunities for unethical or selfish behavior in much the same way that there are internal controls that make fraud more difficult. They do not guarantee that fraud or unethical behavior will not occur, but they will protect honest people from temptation and make it more difficult for dishonest people to behave unethically in the areas covered by the system.

Therefore, corporate governance provides a mechanism to reduce opportunities for unethical behavior in the context of principals and agents. The status of a principal agent means that directors are appointed to protect the interests of shareholders and have the authority to act on behalf of shareholders in situations where they cannot observe their behavior (and therefore). Representing a shareholder). Therefore, there is a relationship of trust and the directors have a moral and legal obligation to act in the interests of shareholders. However, there is an ambiguity in that different shareholders may have different purposes, such as different timelines. Therefore, it may be difficult to prove fraud, so the existence of safeguards such as corporate governance mechanisms is encouraging.

3.     Corporate Social Responsibility in relation to ethics

Corporate Social Responsibility (CSR) refers to the process of taking financial, social, and environmental considerations into account when making decisions, rather than focusing solely on financial impact. Those who take a very narrow view of a company believe that it should focus on achieving maximum benefit to its shareholders. In the process, if they pollute the environment or cause social turmoil in the community, they ignore costs unless they are likely to be held financially liable. Ethical behavior raises interest in social responsibility and comprehensive accounting.

Key takeaways:

5.3 What does the Accounting Profession mean by the Ethical Behavior?

First, it is interesting to consider the views of legal professionals and their ethical behavior, and their implications for accounting professionals.

Kronman2 wrote a book called The Lost Lawyer, in which he noted and lamented the changing direction of legal professionals and large law firms. He said lawyers, until recently, considered themselves serving the community and earned a good income as a result. As a result, they regarded themselves as guardians of the legal system and I tried to carry out the spirit as well as the words of the law. They considered themselves to be professionals with the associated responsibility of protecting the interests of the masses, not the narrow interests of their customers.

Kron man emphasized that as law firms grew, they began to focus on seeing themselves as a business. Their purpose as a company is to maximize the income of their partners. If possible, it's equal to the income earned by the executives of the large companies they work for. They are not without ethics. It's just that their reference frame has shifted. Therefore, they look at ethical issues from a different perspective. Kron man saw middle-class law firms as supporters of new professional values

2.     Accounting Profession and Ethical Behavior

The development of specialized accounting firms reflects the development of legal practice. Duska describe accounting as follows:

This tension between professionalism and business demands is causing an identity crisis in today's industry.

Duska go on to say that the biggest challenge for accounting professionals is to prioritize the interests of clients and the general public over the interests of their interests.

This is explained by the death of Arthur Andersen, but the company wasn't the only one at the time. For example, the following extract5 reads:

In 2002, when Arthur Andersen abandoned his license as a certified accountant, suspicious accounting practices were blamed in his other five cases. Volume expansion his CMS energy and dynamism of the client. Inappropriate booking of over cost in Halliburton. Inflated revenue at Global Crossing. Arthur Andersen wasn't alone, noting that all of the "Big Five" were involved in some form of improper accounting, from conflicts of interest, misleading accounting practices to accounting counterfeiting.

In addition to the pressure to improve profits, accounting firms have been pressured by their clients to either ignore the issue or organize the transaction in a way that conceals the content of the transaction and the risks that arise. Investors have become very cautious about the reliability of their financial statements. The belief that financial reporting is fair is critical to the successful operation of capital markets, leading to the Sarbanes-Oxley Act (SOX) in the United States, which puts pressure on the standards-setters themselves.

3.     Sarbanes-Oxley Method (SOX)

Interestingly, after the collapse of both Enron and WorldCom in the United States, public opinion was so strong that the Sarbanes-Oxley Act (called SOX) was passed. Serious penalties for misleading accounts. Auditors also needed to ensure that the company had the right systems and internal controls. Following the collapse of Arthur Andersen and / or the introduction of the SOX Act, many companies had to recreate / modify their previous accounting. This raises questions about the ethics of those responsible for preparing and auditing these redisplayed accounts. However, despite resistance from companies and progress in improving accounting, there has recently been a move from industry and commerce to rewind the SOX clause, especially for smaller listed companies.

4.     Negative Pressure on Standard Setter

Standard-setters are under pressure that can lead to poor quality or expedited accounting, as reflected in the FASB and SEC rulings. This pressure comes both directly from industry and commerce, and indirectly through threats from industry benefactors, legislators. For example, there was a proposal to transfer the role of the SEC in standard settings to new regulators. The proposal, which was unsuccessful6, points to the pressure that could be placed on US standards-setting bodies.

The SEC has the statutory authority to establish financial accounting and reporting standards for public companies under the Securities and Exchange Act of 1934. But historically, the SEC has endorsed the FASB's independence, and he has relied on the FASB and its predecessor, the private sector, for setting accounting standards.

Original fix, it's new introduced by Congressman Ed Perlmutter of D-Colo and proposed oversight of SEC accounting standards.

A regulator that is obliged to play an active role in accounting standards that it considers to pose systemic risk.

The passed amendment acknowledged that the systemic risk regulator proposal to be drafted under the bill, like other stakeholders, has the ability to comment on FASB standard-setting issues.

Key takeaways:

5.4 Implications of Ethical Values for the Principles Versus Rule Based Approaches to Accounting Standards

In the literature, it is common to cite Milton Friedman as showing that the role of business is focused on maximizing profits, and Adam Smith as a justification for not interfering with the business. Often, these arguments misunderstand the author.

Milton Friedman recognized that what businessmen should do is maximize profits within the norms of society. He knew that a highly efficient economy would not be possible without legislation that would increase certainty and build trust in business activities. Thus, he embraced the laws and social norms that promote commerce. This also helped create a collaborative environment. In this way, social norms set the minimum standards of ethical and social activity that businesses need to be involved in and are accepted by the people with whom they interact.

Adam Smith (The Wealth of Nations) did not say that it would interfere with business, but assumed that the conditions necessary to promote fair and impartial exchange existed. He also suggests that the government should interfere to prevent monopoly, but not as a result of business group lobbying, as the normal behavior of a business group is designed to create monopoly. He also thought that people who did not meet ethical standards might benefit at first, but would be discovered and avoided. His other major book (moral sentiment) is about morals. There is no doubt that he thought that ethics was a normal and integral part of society and business, as it was a thing.

Creating accounting standards is just the starting point for the application of accounting standards. It turns out that an accountant can apply the standard to the wording of the law, but cannot achieve a report that conveys the nature or substance of the business's performance or financial position. This is because companies can configure transactions to circumvent the application of standards.

The simplest example of this is a lease. In various jurisdictions, the accounting of leases began with the proposal that leases could be divided into two categories. That is, one with a long-term commitment, one that is essentially short-term, or one that can be cancelled at any time without substantial penalties. Long-term leases are traditionally capitalized and appear on the statement of financial position (balance sheet). Short-term lease payments, on the other hand, are recognized as expenses when incurred and commitments appear as notes in your account. If a company does not want to capitalize a lease, it can approach the lender to change the terms of the lease so that it does not fall into the long-term category.

It is this kind of game Manship that plagues accounting standard setters. The question is whether such games are appropriate, and if not, why aren't they prevented by the ethical standards of accountants?

2.     How do Accounting Professionals try to ensure that Financial Reporting reflects the nature of the transaction?

Standards have been set in many national jurisdictions to make financial statements fair and comparable, and he is now set internationally by the IASB. The number of standards varies from country to country and is described as rule-based or principle-based, depending on the number of standardized accounting treatments.

Rule Base

When there are many detailed standards, such as in the United States, the system is described as a rule based on trying to specify a unified treatment for many types of transactions. This is both an advantage and a disadvantage in that using an accurate standard as the only standard leads to the type of game that circumvents the above-mentioned standards for lease accounting. If a company does so, as in the Enron case, regulators are affected to adopt broader override criteria to uphold (or replace) the rules.

Based on the Principle

When there are few standards, as in the UK, the system is called principle-based. In a principle-based system, (a) report anomalous situations and (b) accounts created according to existing standards are created by different users to provide additional information as needed.

These are the positive application of override clauses. However, override criteria can also be misused. For example, many companies during the dot-com bubble around 2000 announced normalization of profits. The argument was that they were in the setup stage and many of the costs they were incurring were one-off. To better understand the business, readers were told that they needed to know what the continuous outcome could be. So, they removed the setup It has generated costs and normalized or sustainable revenues that suggest that the company is inherently profitable. Unfortunately, many of these companies have failed. Because these one-off costs weren't one-off, they had to be maintained to maintain a customer base.

However, the current argument that IFRS is principle-based while USA GAAP is rule-based does not justify non-compliance with the standards in either case. Incorrect. It's true that the United States has more standards developed for specific applications, but it's not a difference in approach, but a reflection that more efforts have been addressed in more different situations. Having more choices that sometimes occur in IFRS is a principle-based approach, unless the choices are based on reasoning, which must be justified on the basis of first principles, rather than on personal preference. Not. In addition, it can be argued that generic accounts (rule-based or principle-based) are by no means suitable for many everyday purposes.

He has reached an IASB agreement with the United States that this decision should adopt a principle-based approach. This has not yet answered the question of whether this approach can give a true and fair view to all stakeholders. Shareholders are recognized in all jurisdictions, but the rights of other parties may vary by legal system. For example, when are lenders' rights a top priority? The legal system in some jurisdictions is large enough to allow businesses to retain employment as much as possible, not just to support their owners. Should the accounting be tailored to the employee if he admits he is responsible?

The above discussion is designed to provide a sense of the type of problem associated with the discussion of rules and principles.

Key takeaways:

5.5 The Principal-based Approach and Ethics

In the discussion so far, we have seen the principles of truth and fairness or equivalent from the accountant's point of view, but what that means is ultimately decided by the court. They may take a different perspective, which is one of the problems of having criteria that are subjective and more accurately defined after the event.

If accounting is primarily or partially based on principles, those principles should be clearly explained in such a way that those who apply them and those who consider applying them can clearly understand their implications is needed. In addition, those who make decisions in disputes over whether the criteria have been properly applied usually only occur if they lose or gain a significant amount of money, but at least they have basically the same perspective. Must be. This does not imply that the court must obey the accountant. The application is likely to require the adoption of a court position, regardless of whether the accountant correctly understands the subtleties of accounting. This means that the principles must be expressed in everyday language. Truth and justice may probably apply, but it will require routine interpretation.

To avoid ambiguity, it is necessary to clarify "who is fair to whom and for what purpose". This is in the process of reassessing the role of business in response to social demands in order for society to achieve high employment rates, overcome environmental problems and achieve fair treatment in all countries. Because there is. In essence, this means that even with a partial shift from shareholder orientation to a balance of competing claims in society, ethical standards may have to be considered given the changing direction. Daniel Friedman 8 said: In other words, it must be driven in principle.

The next issue is the link between principles and accounting standards. The current conceptual framework assumes that you need to create general-purpose financial accounting using comparability, relevance, credibility, and comparability as guidelines. However, the individual standards do not show how those principles lead to the standards in which they were created. Only when that link is demonstrated can the standard setter generally show the accountant how to move from general principles to detailed application. This is important if you intend to start with the basic principles that must be the underlying starting point. When principles dominate in the absence of applicable standards, as in the case of proprietary industries or new applications, practitioners look to derive existing standards and find appropriate treatments for them. You can learn how. A situation that was not previously addressed. Also, when applying existing accounting standards, the intent should be clear from its derivation. In that case, the accountant is obliged to apply the intent rather than justifying the avoidance by technical manipulation. However, if the intent is intended to be guided by the principles, it is possible to justify non-compliance with the standards if the assumptions made in developing the standards do not apply in certain cases. Should be.

2.     What does the above discussion mean?

Ethics has two main areas in which he can influence a principle-based approach. These are that (a) ethics informs the principles and (b) cultural differences can lead to the application of different principles.

(a) Ethics may provide all or part of the criteria used to derive and evaluate potential principles, or may be part of the principles themselves. Also, unless the accountant who prepares and reviews the accounting has high moral standards, the usage of the principle will not lead to good results. Accountants preparing accounts can always clash between what their employer or boss wants and what is best from an ethical or community perspective.

(b) If norms, laws, and ethics are an integral part of developing accounting principles, there may be grounds for different accounting to apply to different countries. If the accounting objectives are not the same in all countries, for example, in some countries the impact on employees and communities is more important, then the principles need to be different. It also raises the question of how cultural norms and religions affect ethics in the press and how they interpret individual guidelines. This casts doubt on the assumption that shareholders in all countries have the same information.

The same Ethical Standards must be applied when assessing the operation of a company.

An interesting study comparing US and UK students' attitudes toward cheating found that US students were more likely to cheat9. Tolerance to ambiguity leads to different attitudes towards ethics. This means that unless the corporate culture is much stronger than the culture of the country, unified ethical guidelines will not lead to unified application in multinational corporations. This affects multinationals that want to equalize the quality of accounts created in different countries. This is important for audit companies that want sister companies in other countries to apply the same criteria to their audit decisions. It is important for investment firms investing around the world to understand that accounting and ethical standards mean the same thing in all major securities markets.

If there are differences in legal and cultural settings, and if a principle-based approach is adopted, the correct accounting treatment may also be different. Currently, Western concepts dominate accounting, but if the world's power base consists of several centers of global influence or shifts to either a new dominant world power, Accounting Principles may need to reflect that.

Key takeaways:

5.6 The Accounting Standard setting Process and Ethics

Criteria setters seem to think of processes as physics-like in the sense that they try to set criteria to achieve an objective measure of reality. However, some scholars suggest that such an approach is inappropriate because the concept of profit and value is not a physical attribute, but a "human-made" dimension. For example, we measure business progress for profit, but the concept of progress is a very subjective attribute and has traditionally omitted public costs such as environmental and social costs. The standard of fairness is believed to be met by preparing a profit statement based on principles such as going concern assumptions and accrual accounting when measuring profits, and neutrality when displaying profit statements.

What if the definition of impartiality is different?

For example, the idea of   accounting based on fairness standards for all stakeholders (financiers, workers, suppliers, customers, and communities) is the FASB's idea. Invented by Leonard Space k before its founding 10. However, this view was not appreciated by experts at the time. Currently, there are current developments in that direction from the perspective of environmental and social accounting, yet CSR is not included in the financial statements prepared under IFRS and the accounting measures themselves. Consists of supplementary information that is not included in.

Accounting experts believe that ethical behavior in standard setting ensures that accounting is neutral. Their opponents believe that neutrality is impossible and accounting has a wide range of social implications, so in order to be ethical, the implications for all affected parties must be taken into account.

Other than pursuing neutrality, accounting professionals focus on what they do after standards and legislation are in place, rather than tackling macro-level ethics. This profession seeks to provide ethical standards that increase the likelihood that those standards will be applied in an ethical manner at the micro level where accountants apply their individual skills.

The International Federation of Accountants (IFAC) has developed a code of ethics for accounting professionals through its organization11. This provision addresses the basic principles and specific issues that accountants often encounter in public affairs. Business accountants are facing the intent is that professional bodies and accounting firms "do not apply stricter standards than those listed in this code" (p. 4).

Key takeaways:

5.7 The IFAC Code of Ethics for Professional Accountants

The basic Principles of IFAC are as follows:

i) "A distinguishing feature of the accounting profession is that it accepts the responsibility to act for the public good ..." (100.1)

Ii) "Professional Accountants must adhere to the following basic Principles:

a)     Honesty – Be open and honest in all professional and business relationships.

b)    Objectivity – Do not invalidate professional or business judgments due to prejudice, conflicts of interest, or the excessive influence of others.

c)     Professional Competence and Appropriate Care – The customer or employer receive competent professional services based on the current developments in practice, law and technology and acts diligently according to appropriate technical and professionalism. Criteria for maintaining the level of expertise and skills required to ensure that.

d)    Confidentiality – Third parties without appropriate and specific authority, unless there is a legal or professional right or obligation to respect and disclose the confidentiality of information obtained as a result of professional and business relationships. Do not disclose such information to. Also, do not use the information for the personal benefit of a professional accountant or a third party.

e)     Professional Behavior – Comply with relevant laws and regulations and avoid acts that damage your professional credibility (100.5).

The first basic statement that accountants should act for the public good is probably harder to achieve than you might think. To do this, accounting professionals need to be resolute in accounting standards that are not in the public interest, even if politicians and executives are pressing for their acceptance. When conducting an audit, the auditor mainly deals with the management, so it is easy to lose track of who the client is. For example, the expression "audit client" is commonly used in technical treatises and academic books when referring to the management of an audited company. It immediately suggests a management-biased relationship if the client is legally a group shareholder or a particular stakeholder. This is a small but subtle difference, but it can be misguided to view management as a client.

2.     Basic Principles

The five basic principles are probably an undisputed guide to professional behavior. The biggest challenge is applying these guides in specific situations. The IFAC Paper provides guidance on accountants covering appointments, conflicts of interest, second opinions, compensation, marketing, receipt of rewards, custody of customer assets, objectivity, and independence. When it comes to business accountants, they provide guidance in the areas of potential disputes, information preparation and reporting, well-informed behavior, financial gain, and incentives. This is not intended to provide all the guidance provided by the IFAC Code of Ethics. Students should refer to the original document if they want to know the details. This chapter provides an overview of public affairs accountants and the press related to them in business.

3.     Problems that actually occur to Accountants

Before accepting an appointment, the accountant should consider whether it is desirable to accept the client, especially if there are doubts about its legality, considering the relevant business activities. They also advised on the professional reasons that the current accountants of potential clients are not involved, and (b) whether they have the necessary competence in light of the industry and their own expertise. Also need to be considered. You should also not be involved if you have already provided other services that are contrary to your position as an auditor, or if the size of the fees threatens the independence of the auditor. (Although not mentioned in the code, it does mean that it is better to avoid situations that can lead to difficult ethical issues.)

b.    Second Opinion

If an accountant asks for a second opinion on accounting, that opinion can be used to undermine an accountant trying to do the right thing. Therefore, before issuing a second opinion, it is important to make sure that all relevant information is provided and refuse to work if in doubt.

c.     Reward

The reward must be sufficient to do the job in a professional way.

Commissions received from other parties must not be difficult to be objective in advising the client and must, in any case, be disclosed to the client at least. Although not discussed in the document, the involvement of accountants in personal financial planning raises ethical issues.

The investment vehicle rewards the accountant with a commission. Some accountants deal with this by passing a fee to the client and charging a flat rate to the consulting.

d.    Marketing

Marketing should be professional and should not exaggerate or make negative comments about the work of other professionals.

e.     Independence

Accountants and their close relatives must not receive any non-substantial gifts from clients. IFAC Para. 280.2 stipulates that:

Question: I run a playback center in his large KPMG office. We subcontract a significant amount of work to local businesses. The owner is very friendly and recently offered to make two free passes for the movie. Can I accept the pass?

Answer: Maybe. Here, the movie pass is considered a gift because the vendor does not participate in the movie with you. In situations where it is not created

If deemed inappropriate, reasonable from a third party such as our vendor, provided that the value of the gift does not exceed $ 100 and he does not receive a gift from the same vendor more than once in the same year. You can receive gifts.

4.     Problems with Accountants in Business

In relation to business accountants, the main issues identified by the code are significant financial gains in the form of stocks, options, pension plans, and reliance on employment income to support oneself and its dependents. Seems to be the financial pressure that arises from. If these rely on reporting good performance, it is difficult to withstand the pressure.

All companies, of course, want to present results in the most favourable way possible, and investors expect this, and doing so is part of the accountant's expertise. However, ethical standards require compliance with laws and accounting standards and are subject to the highest priority requirements for financial statements to provide a fair view. Misinformation and omission of additional material that may change the company's financial position assessment are unacceptable.

Accountants must use all means within the company to report pressure to behave unethically and are willing to resign if no results are obtained.

5.     Threats to Adherence to Basic Principles

The IFAC document identifies five types of threats to adherence to the basic principles and outlines them below. Purpose to outline these possibilities

A threat is to sensitize you to the type of situation in which your ethical judgment becomes ambiguous and you need to take additional steps to act ethically. The statements are deliberately extensively written to help handle situations not specifically covered by the guidelines. IFAC Para. 100.12 stipulates the following:

Threats fall into following distinctions:

(A) Self-Interest Threat – A threat that monetary or other interests improperly affect an accountant's judgment or behavior.

(B) Self-Assessment Threat – The threat that an expert does not adequately assess the outcome of a professional accountant, or another individual within a professional accountant's company or employment organization, or the results of previous judgments or services undertaken by the accountant. It depends on making decisions as part of the current service offering.

(C) Advocacy Threat – A threat that an expert promotes the position of a client or employer and impairs the objectivity of an expert accountant.

(d) Threat of Familiarity – The threat of professional accountants being too sympathetic to their interests or accepting their work too much because of long-term or close relationships with their clients or employers. And

(e) Threat of Intimidation – Intimidation that a professional accountant is prevented from acting objectively due to actual or perceived pressure, including attempts to exert excessive influence on the professional accountant.

Key takeaways:

5.8 Ethics in the Accounting Work Environment – A Research Report

The Institute of Chartered Accountants of Scotland has published a discussion Report 12 entitled "Taking Ethics to Heart" based on a study on the application of ethics in practice. This section describes some of the findings of that report.

From a student's point of view, one of the interesting discoveries is that many accountants don't remember the ethical work they did when they were students, so they rarely referred to them when problems occurred. There was an agreement that students need to gain more experience in working with case studies in order to improve their ethical decision-making skills. This should be strengthened throughout their careers by continuing professional development. Training needs to be sensitive so that accountants can easily recognize ethical situations and develop skills to solve dilemmas.

Exposure to ethical issues is usually low in younger positions, but there can still be clear and gray issues. For example, making up for bills and exaggerating overtime are obvious issues, but it's not very clear how to handle the information heard in personal conversations between clients and her staff. What if one of the factory staff hears a conversation that a product known to be defective was shipped at the end of the year? If you were in the conversation, your reaction would be Is it different? Is your response different if you are suggested to be at risk of injury due to a defect?   Is it ethical to notify the manager or is it unethical not to notify?

Exposure to ethical issues usually increases significantly at the manager level and continues in senior management. However, as both corporate size and accounting practices grow, ethical decision-making becomes more important. The impact of the decision can be broader and more serious. In addition, there are an increasing number of proceedings that may expose accountants to external review.

A small number of accounting and auditing standards can narrow the focus and make it harder for individual accountants to envision a wide range of ethical aspects and consider more than detailed rules.

Given the potential for internal or external reviews, it seems a wise criterion for many participants in the study to focus on the question, "What does this decision look like to others?" In light of that emphasis by the participants, it is interesting to consider the "Conflict Resolution" section of the BT PLC document called The Way We Work 13.

How do you explain your decisions to colleagues in different countries? How do you explain your decisions to your family and in public?

Is it inconsistent with your own or BT's commitment to integrity?

Emphasizing how ethical decisions can withstand public scrutiny, including scrutiny in different countries, is of particular relevance to accountants operating across national borders.

The ICAS report paid considerable attention to the role of the organizational environment in improving or deteriorating ethical decision making. An important starting point is to have a set of ethical policies that are pragmatic and reinforced by the actions of senior management. Another support is the existence of a well-defined process for upward reference to difficult ethical decisions within an organization.

For small organizations, people in difficult situations need the opportunity to seek advice on ethical choices and how to handle the consequences of establishing an ethical position. Most professional organizations have senior mentors or referrals to organizations that specialize in ethical issues.

In reality, some who have taken an ethical position have lost their jobs, while others who have not established their position have lost their reputation and freedom.

Key takeaways:

5.9 Implications of Unethical Behavior for Financial Reports

One of the key aspects of providing complete and reliable information that the financial industry takes seriously is to have a set of strict internal controls. Ultimately, however, these controls typically rely on checking and balancing within the system, and the integrity of the one with the highest authority within the system. In other words, checks and balances, such as requiring two approvals to issue or transfer a check, be aware that at least one authorized person may act diligently and the other may be fraudulent or misguided. Is assumed to be paid. In addition, we will take decisive steps to prevent seemingly suspicious behavior, if necessary or desirable. The internal control system relies on integrity and diligence, the ethical behavior of most of the staff in the organization.

The presence of unethical behavior within an organization raises questions about the authenticity of the account. If investors suspect unethical behavior, the cost of capital for individual businesses will probably rise. When all companies are fully unethical, the health of the entire market is questioned and the liquidity of the entire market is reduced. That would affect the overall cost of capital and increase stock price volatility.

2.     Hidden Debt

Another aspect associated with the existence of unethical behavior is associated with hidden responsibilities. For example, if a company cuts corners in terms of quality control, it incurs future costs in terms of guarantee satisfaction and possibly reduced credit value.

If a supplier is treated unethically and unfairly, it can refuse supply or make it more expensive in the long run. Alternatively, the merger can consolidate activities and increase bargaining power. Again, the value of the buyer's intangible assets can be compromised.

James Hardy of Australia Like his group, responsibilities, especially environmental issues, may not materialize for years. The James Hardie Group was the producer of his sheets of asbestos, whose fibers can cause long-term lung damage and death. Many senior executives in the company themselves have died from this. The company took some time to withdraw from the market after the potentially dangerous nature of the product was demonstrated, but for many years it has only manufactured and sold safe alternative fiberboard. The challenge the company faced was the long pregnancy period between exposure to asbestos dust and the onset of illness. It can take up to 40 years for a victim to be sentenced to death. The company was reorganized and had another entity responsible for the debt, which was supposed to have sufficient funds to cover future debt. The funds secured were significantly inadequate and appropriate. Widespread anger in the community arose when it became clear that the valuation was based on older data rather than using recent data showing the rate of increase in billing. As a result, the James Hardy Group Feeling the need to negotiate with state governments and unions, regardless of legal position, to secure some of the cash flow from the business each year to help victims. Thus, the unfair arrangements implemented have returned to create the equivalent of debt and have caused considerable damage to the company's public image. This has made some people hesitant to engage with the company as customers or employees. A current assessment of liability (as of 2009) can be found in the KPMG Actuary Report 14.

3.     Auditor's response to the risk of Unethical Behavior

In addition to the above types of items, unethical behavior requires auditors and investors to scrutinize their accounts more closely. Following experience with companies such as Enron, auditing standards have become more focused on auditors being sceptical. This means that if they identify examples of unethical behavior, they should ask more search questions. Depending on the response you receive, you may need to do further testing to satisfy your account's authenticity.

4.     Risk of Fraud

There is an increasing need to be wary of unethical behavior of business owners that leads to fraud.

Jennings 15 points out that while most of the major headline scams tend to come from a small number of individuals, there must be many other participants who have made it possible. What's happening to all CEOs who are bleeding into the company, whether the company pays large personal expenses, operates large accounts, or goes back to the past dates of options. There must be quite a few people who know if they are,

Those who choose not to draw the attention of the appropriate authorities. Appropriate authority may be the board of directors, auditors or regulators. She attributed this to the culture of the organization, suggesting that the organization has seven signs of ethical collapse: pressure to maintain numbers, dissenting opinions and bad news are unwelcome. It includes an iconic CEO surrounded by young executives whose careers depend on them, a fragile board of directors, numerous conflicts of interest, a wealth of innovation, and good points in several areas. Is believed to atone for the evil of. Others suggest that companies with high levels of takeover activity and high leverage are good candidates for fraud because of the pressure to reach the numbers. Also, if the company's sole purpose is to target money, then

Adhering to the wording of the law is also a warning sign.

ICSA Report 16 Keeping Ethics in Mind, the current business and commercial environment seems to put a lot of pressure on accountants no matter where they work, a decision that jeopardizes ethical standards. It states that it may lead to judgment. It was also noted that increasing commercial pressure on accountants could be seen by many as a sign of an uncertain new era.

Accountants working within a company have different problems due to their dual position as employees and professional accountants. Issues that can conflict business interests with expert standards can conflict.

5.     Actions by Specialized Accounting Institutions to Support Members

Different specialized agencies work on things in different ways. For example, ICAEW established the Industrial Member Ethics Committee (IMACE) in the late 1970s to provide specific advice to members with business ethical issues. It is supported by a strong local support network and a national helpline for accountant guidance. IMACE currently handles 200 to 300 issues annually, which reflects the number of certified accountants in the business rather than having no ethical issues.

The type of problem raised is a good sign of an ethical problem raised by a business accountant. They include:

The message for industry accountants is that if your employer has a culture that does not encourage high ethical values, a good career move is to look for employment.

Other places the message to the auditor is that the presence of the symptoms suggested above is the basis for adopting a higher level of skepticism in the audit.

Key takeaways:

5.10 Code of Corporate Ethics

Most companies now have a code of ethics. They may have alternative titles such as our values, code of conduct, code of ethics, etc. For example, BP has a range of codes of conduct listed below, which are expected of companies involved in the industry and their activities covering a large number of countries. Its Code of Conduct includes the following major categories:

Please note that at the time of writing (June 2010), BP's Code of Conduct is under close scrutiny due to an oil drilling disaster in the Gulf of Mexico.

However, the challenge is to make the code an integral part of the day-to-day behavior of the company and make it so perceived by outsiders. Obviously top management must act in such a way as to enhance the value of the code and eliminate existing activities that are incompatible with the new value.

BP has been criticized for actions that contradict its values, but such actions may be related to actions taken prior to the adoption of the code17.

Therefore, it is important to ensure that corporate behavior is consistent with the Code of Conduct, employees are rewarded for ethical behavior and penalties are imposed for non-compliance. Violations, whether past or not, are difficult to erase from social memory.

Stohl et al. Suggest that he can divide the content of the Code of Conduct into three levels.

b.     Level 2 – Focus on ensuring fair and impartial relationships with all parties with which the company is directly involved. This category would include the well-known notoriety Nike received when subcontractors were allegedly exploiting child labor in countries where such treatment was legal. Disadvantages. Advertising and boycotts mean that many companies have reviewed their businesses and expanded their norms to cover such situations, thus moving to a second level of ethical awareness.

c.      Level 3 – A place where businesses have a global perspective and recognize their responsibility to contribute to the potential for peace and favourable global environmental conditions. For most companies, Level 1 concerns are more predominant than Level 3 and Level 2. European companies are likely to have a Level 3 direction than the United States.

On the one hand, we see that while companies are developing ethical codes of conduct, some of these same companies are developing management by objectives.

This creates unattainable goals for staff and creates pressure that leads to unethical behavior. If this happens, there is a risk that an unhealthy corporate culture will develop, leading to manipulation of accounting figures and unethical behavior.

There is a view 19 that we need to transcend the ethical compliance approach and instead create an ethical climate that focuses on fostering socially harmonious relationships. Interesting article 20 is an inadequate corporate culture, as well as the failure of managers' individual morals, where recent accounting scandals focus on setting unrealistic goals and fostering competition among staff. We are advancing the claim that it may reflect.

2.     Multinationals Face Special Problems

Today's multinationals have special ethical issues. First, transactions are often so large that there is a lot of pressure to bend the rules to win a business. Second, the ethical values reflected in some countries may differ significantly from those of the Group's headquarters. One company was doing business in a developing country where the wages paid to civil servants were very low and the country's very modest standard of living was not enough to support a family. Many civil servants had another job to deal with it. Others considered it appropriate to request a kickback to handle government approval: they have a strong ethical obligation to ensure that their families are properly cared for. In their opinion, it exceeds the obligation to the community.

Is it ethical for other countries to blame such behavior in extreme cases? Do we need to apply different standards? If that is the standard in the country, what is the business doing? Some refuse to do business in those countries, while others hire intermediaries. In the latter case, the company sells the item to the intermediary company, which resells the item in the country in question. Brokers obviously have to pay commissions and bribes for sale, but multinationals don't care about that. They deliberately don't ask the intermediary what they are doing. However, if the protest group identifies suspicious behavior of the agent and decides to hold the multinational accountable, it can be a concern. The third option is to pay only fees and bribes. The problem with the second and her third position is that they can be held accountable by one of her in the country in which they operate. Another problem is that when a company pays a bribe, its actions strengthen the corruption forces of the target country, and as a result, it becomes difficult for the government of that country to eradicate corruption.

The Serious Fraud Office 21 in the United Kingdom and the US Department of Justice are actively investigating corruption. For example, in 2010 BAE Systems had to pay a large fine for being involved in a bribe. In the United States, $ 400 million had to be paid to resolve a bribery claim related to the arms trade with Saudi Arabia. The Serious Fraud Office in the United Kingdom has made him pay £ 30m in connection with the expensive military radar sold to Tanzania, taking into account the implementation of significant ethical and compliance reforms by BAE Systems. Some of the fines have been passed on to the Tanzanian people to compensate for the damages.

3.     Support by Professional Associations in developing Ethical Codes

A full support system is in place. For example, his website for the Association of Chartered Certified Accountants (www.accaglobal.com) offers a toolkit for accountants.

Anyone who may be involved in the design of the Code of Ethics. This site also provides an overview of why ethics is important, including links to other related sites. At the Center for Ethics and Business 22 at Loyola Marymount University in Los Angeles, quizzes to establish an ethical style of justice or ethics of care and a toolkit to assist in designing a code of ethics 23.

Key takeaways:

5.11 Increasing role of Whistle Blower

It is generally recognized that when a company violates a law or code of ethics, a variety of people inside and outside the company have sufficient information to be aware of or raise suspicions about the illegal activity. Many regulators have set up mechanisms for whistle-blowing to reduce the likelihood of illegal activity and to identify the occurrence of such activity. In addition, many companies set up their own departments, often through consulting firms, to report other activities that may cause employees to commit illegal activities, violate the company's code of ethics, or damage the company's reputation.

Immunity to the First Party to Report

For example, in many countries, price-fixing regulators have the authority to give exemptions or incentives to the first party to report the occurrence of price-fixing. Without revealing the client's identity, the client's attorney may be able to see if the item has already been reported. Such arrangements have been made because it is difficult to collect information about such activities with sufficient quality and detail to be successful in prosecution. British Airways, for example, was fined approximately £ 270m after admitting that it had colluded in price-fixing fuel surcharges. The US Department of Justice has fined $ 300 million (£ 148 million) for collusion of additional passenger and freight charges to cover fuel costs. Rival Virgin Atlantic. The virgin was exempt from fine because she was not fined after reporting the collusion.

Anonymous Whistle Blower

In the case of a large company, it is difficult for top management to fully understand whether the subordinates of the entire organization are acting responsibly. One solution is to provide the accounting firm with a contact phone number so that they can anonymously report details of legal or ethical violations or other activities that affect the company's reputation. You need to be anonymous for several reasons. First, people often report on activities that they are "forced" to, as well as the activities of their bosses and colleagues. It is important to be able to report anonymously, given that those colleagues do not like the report and can make the life of the informant very difficult. Also, whistle- blowers often consider themselves disappointing, even for those who are not directly affected. If the whistle blower is identified, he may be banished. Companies that have anonymous hotlines may assist individuals on request, but whistle-blowers may eventually have to look for another job from the beginning. You need to be aware. This does not suggest that they should not whistle. Rather, it reflects the history of whistle-blowers. However, this should be contrasted with the alternative. If the actions you have to take can expose you to criminal activity, loss of reputation, perhaps loss of freedom, severe financial punishment, and

The stress of the proceedings pulled out. If you're not involved, but the company is just trying to keep you out of the more negative territory, it could be benefiting a lot of people. You can prevent your company from falling into an irreversible situation. You can avoid others suffering from the same stress as you. Take Enron as an example. The bankruptcy of the company has left many people out of work and a significant portion of their retirement pensions. Others were sentenced to prison. This included executives and outside parties who benefited from or endorsed illegal or unethical behavior. The events surrounding the failure also contributed to a series of events that destroyed auditor Arthur Andersen. If someone had blown the whistle earlier, perhaps many of these serious consequences would never have happened. In fact, the staff who raised the questionable accounting issue to CEO Kenneth Lay made it difficult for him to deny responsibility shortly before the collapse- Strength when he was tried for fraud.

Proportional Reaction

Despite the comments above, it is important to note that the measures taken reflect the seriousness of the case and that whistle-blowers should be the final strategy, not the first. In other words, if your boss is inaccessible for some reason, it's normal practice to use internal forums, such as discussing at staff meetings or raising issues with your immediate boss or boss. Also, disagreements about business issues are not a reason for reporting. Motivation is to report a breach that expresses concern about law, morality, or the public interest, and is not purely related to disagreement, disagreement, or jealousy regarding business issues.

Government Support

Although there is legal protection against damage, active efforts such as helping the government find other jobs and some form of monetary compensation to compensate for public mental behavior that actually leads to professional or financial difficulties. It is more useful if you provide personal assistance. For whistle-blowers.

Financial markets rely heavily on the integrity of the system and the presence of trust in all major players in its operation. It is worth noting that during periods of low levels of trust participation, prices have fallen and price volatility has increased. To maintain confidence in the system, financial regulators monitor improper behavior and take action against violators. He in the United States briefly comments on FINRA and the Actuarial Sciences Commission in the United Kingdom.

FINRA (Financial Industry Regulatory Authority)

On March 5, 2009, FINRA announced the creation of the "Whistle-blower Bureau", stating:

Some of FINRA's most important enforcement actions result from investor complaints and anonymous insider information. This includes his FINRA proceedings against Citigroup Global Markets in his 2007 proceedings, with a $ 3 million fine and his 12.2 million to resolve Bell South's misleading employee charges. It ordered the company to pay a dollar compensation to the customer.

Early retirement seminars in North Carolina and South Carolina. FINRA 2006 Fines Customer Call $ 5 million against Merrill Lynch to resolve a complaint related to a breach of supervision at her center. His FINRA ground breaking proceedings against a Kansas company in 2005 Waddell & Reed, Inc. Ordered a $ 5 million fine and payment her $ 11 million indemnity to the customer to settle the costs associated with the variable annuity switch. And his FINRA lawsuit against Credit Suisse First Boston in 2002 settled the crime of sucking up tens of millions of dollars in customer interests in exchange for his "hot" IPO shares, and by FINRA his 50 million. He was fined $ 50 million and he was fined $ 50 million. According to the Securities and Exchange Commission.

Accounting and Actuarial Disciplinary Commission

The UK has an Accounting and Actuarial Discipline Commission that investigates and listens to complaints. Web page 25 has details of the pending case and a report of the completed case. Complaints are referred to the relevant accounting authorities (ICAEW, ACCA, CIMA, CIFPA) seeking to resolve the issue and, if necessary, to the court.

Whistle-blower-Protection in the UK

In the UK, the Public Interest Disclosure Act came into force in 1999 to protect whistle-blowers who have expressed genuine concern about misconduct from dismissal and damage in order to promote the public interest. The range of medical malpractice is wide-ranging, and the range is as follows.

For example, concealment of suspicious crimes, civil crimes such as negligence, miscarriage of justice, and health and safety or environmental risks.

Whistle-blower – Policy

Companies need to have policies in place that give employees clear guidance on the appropriate internal procedures to follow in the event of suspected fraud. Employees, including accountants and internal auditors, are expected to follow these procedures and act professionally in accordance with their own professional norms.

The following is an excerpt from the Vodafone 2009 Annual Report.

Ethics

Vodafone's success is underpinned by its commitment to ethical behavior in the way it does business and in its interactions with key stakeholders.

Management Philosophy

Our business principles define how we do business and our relationships with key stakeholders. Employees are required to act honestly, honestly and fairly.

The principles cover ethical issues such as:

The Business Principles set out a policy of not tolerating any bribery or corruption. Our anti-corruption compliance guidelines help our employees ensure compliance with all applicable anti-corruption laws and regulations. We have also introduced online training to prevent bribery.

Violation Report

An employee can first report to her manager on the line or a local HR manager if there is a potential violation of business principles. Alternatively, you can raise concerns anonymously to the Group Audit Director or Group Human Resources Director through an online whistle-blower system.

Our mandated return policy applies not only to employees, but also to suppliers and contractors. Concerns can be reported directly to Vodafone's Group Fraud Risk and Security Department or through a third-party confidential telephone hotline service. The line is available 24 hours a day. All calls are received by an independent organization with staff trained to handle this type of call.

However, whistle-blowing policies may have been followed and accountants may have been protected by the provisions of the Public Interest Disclosure Act, which could disrupt credibility and disapprove of their position. This means that whistle-blowers are encouraged to keep a different position in mind.

Violation of Confidentiality

The auditor is protected from the risk of liability infringement of trust

2.     Reporting Legal Requirements – National and International Regulations

Formal regulation may increase as the quest for greater transparency and ethical business behavior continues. A brief comment on national and international regulations related to money laundering and bribery.

Money Laundering-Overview

There are various estimates of the size of money laundering, which amount to more than 2% of his gross domestic product in the world. Certain businesses are said to be more prone to money laundering. Import / export companies such as antiques, art dealers, auction houses, casinos, garages, and cash transactions. However, the methods are becoming more sophisticated and vary from country to country. While the use of small non-bank institutions is increasing in the UK, Spain includes cross-border cash transportation, currency exchange at currency exchange offices and real estate investment.

Money Laundering-Impact on Accountants

In 2006, the UK Audit Practice Board (APB) took into account the possibility of money laundering when conducting audits and required that any doubts be reported to the appropriate authorities. Practice Note 12 Money Laundering Issued Laundry.

In 1999, there was also guidance from a specialized accounting institution.

Money Laundering: A guide for certified accountants published by the Association of Certified Accountants that covers statutory, regulatory, and professional requirements related to money laundering avoidance, recognition, and reporting.

Money Laundering-Financial Action Task Force (FATF)

The Financial Action Task Force (FATF) is an independent intergovernmental organization that develops and promotes policies to protect the global financial system from money laundering and terrorist financing. The recommendations issued by the FATF define criminal justice and regulatory measures to be implemented to address this issue. These recommendations also include international cooperation and precautionary measures.

It is adopted by financial institutions such as casinos, real estate dealers, lawyers, accountants and others. The recommendations are recognized as global anti-money laundering (AML) and anti-terrorism (CFT) standards.

FATF published Report 26 in 2009 entitled "Money Laundering by the Football Sector". This report identified sector vulnerabilities resulting from football club ownership, transfer market and player ownership, betting and image rights, and transactions related to sponsorship and advertising arrangements. This report is great introduction to the complex web that attracts money launderers.

Key takeaways:

5.12 Why do Students have to Learn Ethics?

There is debate as to whether the attempt to teach ethics is worth it. However, this chapter is designed to raise awareness of how ethics are important to the survival of accounting professionals. Accounting is part of a system that creates confidence in the financial information provided. Without a considerable level of trust in the system, financial markets will not function efficiently and effectively. Such trust is a delicate matter, and if the accounting professional is no longer trusted, the accounting professional has no role to play in the system. In that case, the accounting expert disappears. You may think that you don't need to ponder, as the chances of losing trust are very low. But who would have imagined that Arthur Andersen, which we knew, would disappear from the scene so quickly? As soon as the public correctly or falsely decided that Arthur Andersen was no longer credible, the business collapsed.

2.     The future role of accountants in ethical assurance

Accountants in the enterprise may also be seeing a growing role in ethical oversight, as internal auditors are responsible for assessing manager performance in compliance with the organization's code of ethics. This has already happened partially, as conflicts of interest are often highlighted by comments on internal audit and business practices. This is, after all, the traditional role of an accountant, ensuring that it follows the various practices of the organization. The level of compliance with the Code of Ethics is just one more assessment that an accountant should do.

3.     Impact on Training

Additional training is required if the accountant is likely to act as an "ethical guardian" in the future. In the United States, an accountant who wants to become a Certified Public Accountant (CPA) must pass a formal examination of ethical practices and procedures before being granted the privilege of working in practice. Failure to fail these exams will prevent future accountants from practicing in a business environment.

For example, in the UK, ethics is central to ACCA certification, values, ethics, and governance are themes that organizations are currently incorporating into their business plans, and expertise in these areas is very high in today's job market. We sought. ACCA takes a holistic approach to student ethical development by using "real-life" case studies and embedding ethical questions within the exam syllabus. For example, ACCA's dissertation P1, Professional Accountants, applies in the context of accountant obligations and serves as a guide to appropriate professional behavior and behavior in personal and professional ethics, ethical frameworks, and professionals. Covers value.

4.     Various situations

In addition, as part of ethical development, the student must complete her 2-hour online training module developed by her ACCA. This gives students access to a variety of real-world ethical case studies and requires them to think about their own ethical behaviours and values. Students are expected to complete the Ethics Module before starting professional-level research. Similar efforts are being made at other specialized accounting institutions.

Key takeaways:

ACM's Code of Ethics and Professional Practice (“Code”) is intended to inform practice and education. It not only serves as a professional conscience, but also as an individual decision maker.

As specified in the preamble of the code, computing professionals should approach the dilemma by reading the principles holistically and assessing the situation with careful consideration. In either case, computing professionals need to respect the public interest as a top priority. The analysis of the following cases focuses on the intended interpretation of members of the 2018 Code Task Force and should help guide computing professionals on how to apply code in a variety of situations.

Case 1

Case 2