ETHICS of Business

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Introduction

Ethics can be difficult to define but it is principally concerned with human character and conduct. Ethical behaviour is more than obeying laws, rules and regulations.

It is about doing ‘the right thing’.

The accountancy profession is committed to acting ethically and in the public interest.

Professional accountants may find themselves in situations where values are in conflict with one another due to responsibilities to employers, clients and the public. The International Federation of Accountants (IFAC) publishes the “Handbook of the International Code of Ethics for Professional Accountants”.

This code provides guidance in situations where ethical issues arise. International accounting institutes often publish their own code of ethics in compliance with the IFAC code but taking account of local circumstances and requirements.

ICAN has published its own code of conduct which members and student members must follow. The code provides guidance in situations where ethical issues arise. Comment Most people are honest and have integrity and will always try to behave in the right way in a given set of circumstances.

However, accountants might face situations where it is not easy to see the most ethical course of action.

One of the main roles of the ICAN code is to provide guidance in these situations. Impact on members in practice All members and student members of ICAN are required to comply with the code of ethics and it applies to both accountants in practice and in business.

 

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Threats to the fundamental principles Compliance with the fundamental principles may potentially be threatened by a broad range of circumstances.

Many threats fall into the following categories: i. self-interest; ii. self-review; iii. advocacy; iv. familiarity; and v. intimidation.

Members must identify, evaluate and respond to such threats. Unless any threat is clearly insignificant, members must implement safeguards to eliminate the threats or reduce them to an acceptable level so that compliance with the fundamental principles is not compromised.

Self- interest threats Self-interest threats may occur as a result of the financial or other interests of members or their immediate or close family members.

Such financial interests might cause members to be reluctant to take actions that would be against their own interests. Examples of circumstances that may create self-interest threats include, but are not limited to:
(i) financial interests, loans or guarantees; (ii) incentive compensation arrangements; (iii)

inappropriate personal use of corporate assets; (iv) concern over employment security; or (v) commercial pressure from outside the employing organisation

 

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Intimidation threats Intimidation threats occur when a member’s conduct is influenced by fear or threats

(for example, when he encounters an aggressive and dominating individual at a client or at his employer). Examples of circumstances that may create intimidation threats include: (i)

Threat of dismissal or replacement over a disagreement about the application of an accounting principle or the way in which financial information is to be reported.

(ii) A dominant personality attempting to influence decisions of the chartered accountant.

Accountants in business Accountants in business are often responsible for the preparation of accounting information. Accountants in business need to ensure that they do not prepare financial information in a way that is misleading or that does not show a true and fair view of the entity’s operations.