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

There are no universally accepted principles and rules for resolving all the ethical issues in complex decision-making situations.

In addition, individuals and groups differ over what influences both ethical and unethical behaviours and decisions.

Organisations, though, can draft sets of criteria to be used in making difficult decisions:

1. Is it legal?

2. Is it contrary to our company's adopted code of ethics?

3. Is it contrary to any other published official code of ethics like for example, the ACCA code of ethics and conduct?

4. Would you mind other people knowing what you have decided, for example, if it was published in tomorrow's newspaper?

5. Who is affected by this decision? Would they regard the decision as fair?

The highest form of ethical decision making involves a careful determination of who will receive benefits or incur costs at the consequence of a decision.

For major decisions, this assessment may include a variety of stakeholders for example, shareholders, customers, banks, suppliers etc.

The more specific an individual or group can be about who may benefit and who may incur costs from a particular decision, the more likely it is that ethical implication will be fully considered.

There is a section in the ACCA’s Code of Ethics and Conduct dedicated to the subject of conflicts of interest.

ACCA members need to be aware that a conflict between members’ and clients’ interests might arise if members compete directly with a client, or have a joint venture with a company that is in competition with the client.

The rules state that members and firms should not accept or continue engagements in which there are or are likely to be significant conflicts of interest between members, firms or clients.

Members should evaluate the threats arising from a conflict of interest and unless they are insignificant, they should apply safeguards.

The test of whether a treat is significant is whether a reasonable and informed third party having knowledge of all relevant information, would consider the conflict of interest as likely to affect the judgment of members and firms.