CAT / FIA FBT Syllabus F. Professional Ethics In Accounting And Business - Ethical Dilemmas - Notes ^{3 / 4}

Most people, most of the time, know the difference between right and wrong.

Ethical dilemmas rarely involve choosing between these two stark alternatives.

Instead, ethical dilemmas normally arise because there is no entirely right option.

Instead, there are compelling reasons for each of the alternatives so it is up to the individual to decide which alternative to choose.

You are under timer pressure to complete this month’s management accounts.
Important sales information is provided by the sales department usually in good time for you to incorporate it into the final figures.
The sales report is delayed this month due to staff sickness and you will not receive the information until a few hours before the accounts are due for presentation to the finance director.
Answer – there is integrity issue her.
Whilst you may have time to include the information in the management accounts, it is unlikely that you will be able to check its accuracy as well.
Therefore you risk misinforming the finance director of the month’s sales.

During your lunch break, your company’s human resources manager has asked you for some help.
She has recently inherited a considerable sum of money and would like you to calculate her inheritance tax and capital gains tax liability.
She has also asked you for advice on how she should invest the money.
Answer – the issues here are professional competence and due care.
Unless you are a tax expert, it is unlikely that you would have sufficient competence to calculate the tax liabilities.
Giving financial advice can be a minefield, and you may need to be qualified under the financial services regulation before you could do so.

A financial interest in a client where the performance of professional services may affect the value of that interest.
A loan to or from an assurance client or any of its directors or officers where the performance of professional services may affect the value of that loan.
Concern about the possibility of losing a recurring client.
Potential employment with a client.

The discovery of a significant error during a re-evaluation.
Reporting on the operation of financial systems after being involved in their design or implementation.
A member of the engagement team for an assurance client being, or having recently been, a director or officer of that client.
A member of the engagement team being, or having recently been, employed by the client in a position to exert direct and significant influence over the subject matter of the engagement.
Having prepared the original data used to generate records that are the subject matter of the engagement.

Promoting shares in a public interest entity when that entity is an audit client.
Acting as an advocate on behalf of an assurance client in resolving disputes with third parties.

A member of the engagement team having a close or immediate family relationship with a director or officer of the client.
A member of the engagement team having a close or immediate family relationship with an employee of the client who is in a position to exert direct and significant influence over the subject matter of the engagement.
A former principal of the firm being a director or officer of the client or an employee in a position to exert direct and significant influence over the subject matter of the engagement.
Accepting gifts or preferential treatment, unless the value is clearly insignificant.

Being threatened with dismissal or replacement in relation to a client engagement.
Being threatened with litigation.
Being pressured to reduce inappropriately the extent of work performed in order to reduce fees.

The pluralist solution is to cater for the needs of more than one stakeholder group without seriously compromising the interests of any individual group.