CAT / FIA FBT Syllabus F. Professional Ethics In Accounting And Business - Business Ethics - Notes ^{1 / 4}

Ethics

• has to do with the rightness or wrongness of the decisions and behaviours of individuals and the organisation of which they are members.

Business ethics

• is the application of ethical values to business behaviour.  

  Ethical issues in organisations are more common and complex than generally recognised.

Some ethical issues influence the decisions that employees make daily. Some ethical issues involve factors that blur the distinction between “right” or “wrong”.

As a result employees may experience ethical dilemma.

There is no simple rule for making ethical decisions but the following points may act as guidelines or considerations:

1. The consequences 

   – that is, the end justifies the means

2. The motivation 

   of the parties concerned

3. Guiding principles 

   – for example, treat others as you would like to be treated

4. Duties 

   – for example, based on religious codes

5. Key values 

   – for example, the importance of human rights

Ethical considerations are important for both the organisation and the individual.

The following points highlight some reasons why ethics is very important for organisations.

• Ethics is a driver for profitability rather than a burden

• Ethics is a part of good corporate governance

• Ethics reassures investors about the company's approach towards risk management

• Ethics create a warm environment in which employees are more motivated to work

The following points highlight the importance of ethics to the individual:

• Consumers may choose to buy ethical items, for example fairtrade products even if they are not always the cheapest

• Employees will not blindly accept orders to act in a manner that they personally perceive to be unethical

Probity risks

is the risk of unethical behaviour by one or more participants in a particual process.

Probity risk would not only be the risk that the 'wrong' supplier was chosen as a result of improper behaviour,

but it relates to other issues as well, for example failing to treat private information given by another party as confidential. 

It would also relate to the risks of lack of trust making business dealings between certain parties impossible, or time and cost having to be spent resolving disputes arising from the process. 

Probity risk is clearly linked with reputation risk.

Type of issues:

• Bribery

• Bid-rigging

• Money laundering

• Conflict minerals

• Human trafficking