7.4 Ethical Considerations in Modern Accounting

• Steps in the ethical decision-making process for accountants

  1️⃣ Identify the ethical issue or dilemma

  2️⃣ Gather relevant information and facts

  3️⃣ Evaluate the issue using ethical principles

  4️⃣ Consider alternative actions and their consequences

  5️⃣ Make a decision based on ethical principles

  6️⃣ Implement the decision

  7️⃣ Review the outcome
• What is fraudulent reporting in financial accounting?

  Falsifying financial records intentionally
• Ethical issues in financial reporting contravene the codes of ethics enforced by bodies like the ACCA and CIMA.
• A conflict of interest in accounting occurs when a professional's judgment is compromised by personal or financial interests
• What is a self-interest threat in accounting?

  Financial benefit influencing decisions
• A conflict of interest in accounting occurs when a professional's judgment is influenced by personal interests or obligations to multiple parties
• Self-interest threats arise when financial or personal benefits influence decisions.
• Self-review threats occur when an accountant evaluates their own work or work done within the firm
• What is an advocacy threat in accounting?

  Promoting a client's interests
• Familiarity threats arise from close relationships influencing judgment.
• Intimidation threats occur when an accountant is pressured to act unethically
• Conflicts of interest in accounting can erode trust in financial reporting.
• What is the primary goal of ethical responsibilities in accounting?

  Ensuring financial accuracy
• Disclosing all material financial information to investors promotes market confidence.
• Ethics in accounting refers to the moral principles and standards of conduct
• Order the key ethical principles in accounting:

  1️⃣ Integrity

  2️⃣ Objectivity

  3️⃣ Confidentiality

  4️⃣ Professional Competence and Due Care

  5️⃣ Professional Behavior
• What does the ethical principle of confidentiality require in accounting?

  Protecting sensitive information
• Compliance in accounting focuses on adherence to legal and regulatory requirements
• Ethics in accounting emphasizes what is right, while compliance focuses on what is legal.
• Ethics in accounting refers to the moral principles and standards of conduct
• What does the ethical principle of integrity in accounting emphasize?

  Honesty and straightforwardness
• Objectivity in accounting means avoiding bias and maintaining independence when making financial decisions.
• Confidentiality in accounting requires protecting sensitive information and not disclosing it without proper authorization
• Why is ethical behavior crucial in accounting?

  Builds trust and stability
• Strong ethics in accounting reduces the risk of financial fraud and errors
• Trustworthy accounting attracts more investment.
• Ethics in accounting emphasizes moral principles guiding behavior
• Compliance in accounting focuses on ensuring adherence to legal and regulatory requirements.
• Which professional bodies outline ethical principles in their codes of conduct?

  ACCA and CIMA
• Steps in the ethical decision-making process in accounting.

  1️⃣ Identify the ethical issue

  2️⃣ Gather relevant information

  3️⃣ Evaluate using ethical principles
• The ethical decision-making process helps resolve ethical dilemmas
• What is the primary purpose of the ethical decision-making process in accounting?

  Resolve ethical dilemmas
• When evaluating an ethical issue, accountants must use ethical principles
• Steps in the ethical decision-making process

  1️⃣ Identify the ethical issue or dilemma

  2️⃣ Gather relevant information and facts

  3️⃣ Evaluate the issue using ethical principles

  4️⃣ Consider alternative actions and their consequences

  5️⃣ Make a decision based on ethical principles

  6️⃣ Implement the decision

  7️⃣ Review the outcome
• An example of the ethical decision-making process is when an accountant discovers a discrepancy and decides to report it transparently
• Ethics in accounting ensures that financial information is accurate, fair, and transparent
• Match the ethical principle with its definition:

  Integrity ↔️ Acting honestly in all relationships

  Objectivity ↔️ Avoiding bias in decisions

  Confidentiality ↔️ Protecting sensitive information

  Professional Competence ↔️ Maintaining professional skills
• Compliance emphasizes moral principles, while ethics focuses on legal requirements

  False
• Ethical behavior in accounting fosters trust among investors, creditors, and stakeholders
• What is the primary benefit of strong ethics in preventing fraud?

  Reduces financial errors