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ACCA Paper P1
Professional Accountant
For exams in 2010
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ExPedite Notes
Chapter 4
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2010 This material is the copyright of the ExP Group. Individuals may reproduce this material if it is for their own private use. It is illegal for any individuals to reproduce this for commercial use or for companies to reproduce this material partially and/or in full by any means, be it printed, photocopied, on electronic devices or any other means of reproduction. All examples presented in these course materials are for information and educational purposes only and should not be applied to a specific real life situation without prior advice. Given the nature of information presented in these materials, and given that legislation may change at any time, The ExP Group will not be held liable for any information presented in these materials as to its application to any specific cases.
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ExPedite Notes
Advantages: Set of rules that can be followed and knowing actions are right. The absolute rules make application of corporate governance more achievable.
Disadvantages/ limitations: Takes no account of evolving norms within society and development of advances in morality. Still subject to human interpretation = different views on the same issue. There will never be universal agreement. Two absolutist positions may be incompatible and therefore irreconcilable = can tell lie to save an innocent life?
Relativism (pragmatic ethics) is the view that a wide variety of acceptable ethical beliefs and practices exist. It recognises the differences that exist between the rules of behaviour prevailing in different cultures. Significant in the context of international business as ethical opinions may change over time.
Teleology makes moral judgements about the action by reference to their outcomes or consequences. The act itself is not relevant in assessing whether it is ethical or not, it is the consequences or potential consequences of an action that matters. Hence teleological
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2010 This material is the copyright of the ExP Group. Individuals may reproduce this material if it is for their own private use. It is illegal for any individuals to reproduce this for commercial use or for companies to reproduce this material partially and/or in full by any means, be it printed, photocopied, on electronic devices or any other means of reproduction. All examples presented in these course materials are for information and educational purposes only and should not be applied to a specific real life situation without prior advice. Given the nature of information presented in these materials, and given that legislation may change at any time, The ExP Group will not be held liable for any information presented in these materials as to its application to any specific cases.
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ExPedite Notes
thinkers may support the idea that victimless crimes may exist, if nobody is hurt by an action. It may be sub-divided into two parts: Utilitarian ethics an action is morally right if it benefits the greatest number of people, even if it does harm to a minority. Egotistical the rightness or wrongness of an action is assessed only by references to the person making the ethical judgement, not society as a whole. Under teleological thinking, right or wrong becomes a question of benefit or harm.
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2010 This material is the copyright of the ExP Group. Individuals may reproduce this material if it is for their own private use. It is illegal for any individuals to reproduce this for commercial use or for companies to reproduce this material partially and/or in full by any means, be it printed, photocopied, on electronic devices or any other means of reproduction. All examples presented in these course materials are for information and educational purposes only and should not be applied to a specific real life situation without prior advice. Given the nature of information presented in these materials, and given that legislation may change at any time, The ExP Group will not be held liable for any information presented in these materials as to its application to any specific cases.
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ExPedite Notes
6. Universal ethical principles (Principled conscience. Laws and the reasoning of others are not viewed as necessarily to be obeyed. Indeed, if a government passes a law that violates a natural justice, such as imprisonment without trial, individuals have a duty to disobey the law and overthrow the government).
American Accounting Association American accounting association model ethical decisions as a series of answers to questions. Establish the facts of the case Identify the ethical issues at stake, eg stakeholder claim conflict Identify the norms, values and principles related (this could be particularly relevant if assessing the behaviour of a person in a different culture/ country) Come up with alternative course of action possible (brainstorm all possibilities) Identify the best courses of action in alignment with the norms, values and principles, ie produce a short list of viable choices Assess the consequences of each course of action Reach your decision.
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2010 This material is the copyright of the ExP Group. Individuals may reproduce this material if it is for their own private use. It is illegal for any individuals to reproduce this for commercial use or for companies to reproduce this material partially and/or in full by any means, be it printed, photocopied, on electronic devices or any other means of reproduction. All examples presented in these course materials are for information and educational purposes only and should not be applied to a specific real life situation without prior advice. Given the nature of information presented in these materials, and given that legislation may change at any time, The ExP Group will not be held liable for any information presented in these materials as to its application to any specific cases.
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ExPedite Notes
Ethics and the accounting profession specifically There is a substantial overlap in the syllabus for paper P1 and the syllabus for F8 and P7 in this regard. IFAC (International Federation of Accountants) fundamental ethical principles Objectivity Members should not allow bias, conflicts of interest or undue influence of others to override professional or business judgements. Professional behaviour Members should comply with relevant laws and regulations and should avoid any action that discredits the profession. Professional competence and due care Members have a continuing duty to maintain professional knowledge and skill at a required level. Members must be seen as acting diligently and in accordance with applicable technical and professional standards Technical standards Members should ensure all undertaken work is performed to the highest standard. Integrity Members should be honest and straightforward in all business and professional relationships Confidentiality Members should respect the confidentiality of information acquired as a result of professional and business relationships and should not disclose it to third parties without authority to do so. Such information should not be used for the personal advantage or members or third parties
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2010 This material is the copyright of the ExP Group. Individuals may reproduce this material if it is for their own private use. It is illegal for any individuals to reproduce this for commercial use or for companies to reproduce this material partially and/or in full by any means, be it printed, photocopied, on electronic devices or any other means of reproduction. All examples presented in these course materials are for information and educational purposes only and should not be applied to a specific real life situation without prior advice. Given the nature of information presented in these materials, and given that legislation may change at any time, The ExP Group will not be held liable for any information presented in these materials as to its application to any specific cases.
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ExPedite Notes
Categories of threat to accountants independence: Self-interest (eg financial involvement) Self-review (eg auditing financial statements that include figures based on the auditor having advised on implementation of an accounting standard) Advocacy (eg having a reason to believe a certain figure is right, when its actually wrong such as attempting to neutrally assess a tax provision after fighting the clients case for a reduction in taxes payable). Familiarity (excessive personal knowledge of the client, resulting in progressively hardened views of the clients ethics and competence, thus destroying scepticism) Intimidation (eg threat of humiliation, blackmail).
Accountants should seek to promote or preserve the public interest. If the idea of a profession is to have any significance, then it must make a bargain with society in which they promise conscientiously to serve the public interest. In return, society allocates certain privileges. These might include one or more of the following: the right to engage in self-regulation the exclusive right to perform particular functions, such as conduct audits or speak in court on behalf of somebody special status.
There is more to being an accountant than is captured by the definition of the professional. It can be argued that accountants should have the presentation of truth, in a fair and accurate manner, as a goal. This is because members of society at large are generally impacted by the actions of a profession, even if they have no direct involvement in that profession themselves.
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2010 This material is the copyright of the ExP Group. Individuals may reproduce this material if it is for their own private use. It is illegal for any individuals to reproduce this for commercial use or for companies to reproduce this material partially and/or in full by any means, be it printed, photocopied, on electronic devices or any other means of reproduction. All examples presented in these course materials are for information and educational purposes only and should not be applied to a specific real life situation without prior advice. Given the nature of information presented in these materials, and given that legislation may change at any time, The ExP Group will not be held liable for any information presented in these materials as to its application to any specific cases.
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ExPedite Notes
Members of any profession therefore have an ongoing wider duty to society at large rather than solely to their own professional body.
KEY KNOWLEDGE Gray, Owen & Adams Viewpoints on Corporate Social Responsibility
Gray, Owen & Adams identified seven possible viewpoints that stakeholders might take, ranging from the most limited view of social corporate responsibility (pristine capitalists) to the most extreme (deep ecologists). In the exam, you may be required to define each of these, or suggest which of these viewpoints a particular stakeholder appears to fit into and why. The ones that we feel are the most important for the exam are in red.
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2010 This material is the copyright of the ExP Group. Individuals may reproduce this material if it is for their own private use. It is illegal for any individuals to reproduce this for commercial use or for companies to reproduce this material partially and/or in full by any means, be it printed, photocopied, on electronic devices or any other means of reproduction. All examples presented in these course materials are for information and educational purposes only and should not be applied to a specific real life situation without prior advice. Given the nature of information presented in these materials, and given that legislation may change at any time, The ExP Group will not be held liable for any information presented in these materials as to its application to any specific cases.
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ExPedite Notes
Pristine capitalists: Business has no moral responsibilities beyond their obligations to shareholders and creditors.
Proponents of the social contract (social contractarians): There is effectively a contract or agreement between the organisation and those who are affected by their decisions.
Social ecologists: Believe that business activities result in resource exhaustion; waste and pollution must be modified. Organisations must be socially responsible.
Radical feminists: Aim to promote feminine values such as co-operation. Note that this is not associated with the womens rights movement.
Deep ecologists: Suggest that man has no greater rights to resources or life than other species.
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2010 This material is the copyright of the ExP Group. Individuals may reproduce this material if it is for their own private use. It is illegal for any individuals to reproduce this for commercial use or for companies to reproduce this material partially and/or in full by any means, be it printed, photocopied, on electronic devices or any other means of reproduction. All examples presented in these course materials are for information and educational purposes only and should not be applied to a specific real life situation without prior advice. Given the nature of information presented in these materials, and given that legislation may change at any time, The ExP Group will not be held liable for any information presented in these materials as to its application to any specific cases.
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ExPedite Notes
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2010 This material is the copyright of the ExP Group. Individuals may reproduce this material if it is for their own private use. It is illegal for any individuals to reproduce this for commercial use or for companies to reproduce this material partially and/or in full by any means, be it printed, photocopied, on electronic devices or any other means of reproduction. All examples presented in these course materials are for information and educational purposes only and should not be applied to a specific real life situation without prior advice. Given the nature of information presented in these materials, and given that legislation may change at any time, The ExP Group will not be held liable for any information presented in these materials as to its application to any specific cases.
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