ACCA SBR UK Syllabus A. Fundamental Ethical And Professional Principles - Ethical & Professional Issues In Advising On Corporate Reporting - Notes 1 / 4
When giving advice be aware of:
Your own Professional Competence and that company directors must keep up to date with IFRS developments
Your own Objectivity
Your own Professional Competence
The issues that may threaten this are:
Insufficient time
Incomplete, restricted or inadequate information
Insufficient experience, training or education
Inadequate resources
Your own Objectivity
The issues that may threaten this are:
Financial interests (profit-related bonuses /share options)
Inducements to encourage unethical behaviour
In fact ACCA’s Code of Ethics and Conduct identifies that accountants must not be associated with reports, returns, communications where they believe that the information:
Contains a materially misleading statement
Contains statements or information furnished recklessly
Has been prepared with bias, or
Omits or obscures information required to be included where such omission or obscurity would be misleading
Ethical Financial Reporting
When accountants prepare financial reports, they need to follow the law and the rules of accounting.
In other words, they should be ethical.
Lately, there have been some big scandals and companies collapsing because of unethical behavior by their management. We often hear about the big companies failing, but even smaller ones can have ethical problems.
Unethical behaviour that leads to wrong financial reports or poorly managed companies can create big problems.
It doesn't just affect the company itself; it also impacts the economy.
When a company goes under, it has a ripple effect. Shareholders lose money, employees lose their jobs, and it affects the whole community. The government loses tax money, other companies in the supply chain may also fail, and customers lose their source for goods.
The most common frauds relate to improper revenue recognition and overstated asset valuations. This may involve capitalisation of costs which should be expensed against profits or non-recognition of impairment losses.
Knowing about these cases of unethical behavior helps us understand what can go wrong, its effects, how to deal with it, and the consequences of those actions.