Accounting regulations and ethics

Accounting regulations and ethics

Seyi,Partick,Ashley

Potential threats to the fundamental ethical principles.​

Self-interest threats -where an interest or objective will negatively influence the accountants judgment or behaviour.​

Self-review threats- when an accountant had to re-evaluate a judgment that they have previously made.​

Familiarity threats- when an accountant becomes too sympathetic to the interests of others due to a personal relationship.​

Intimidation threats- when an accountant may be acting objectively because of real threats such as demotion or dismissal.​ Advocacy threats- when an accountant promotes a position or opinion to the point that their objectivity may be compromised in the future. 

Organizations involved in the regulatory framework​

The Financial Reporting Council- an independent statutory regulator for the accounting sector that promotes transparency and integrity in business. ​

The Department for Business, Energy and Industrial Strategy- they are responsible for a wide range of activities to support businesses productivity and their ability to compete ​

The European Union- they set out the rules of financial information to be discoloured by comps operating in the European Union. The UK’s departure from the EU does not change the regulatory framework as all all larger UK companies have applied international accounting standards since 2005.​

Fundamental principles of professional ethics​

Integrity – being straightforward and honest in all professional and business relationships.​

Objectivity – not allowing bias, conflict of interest or the undue influence of others to override professional or business judgements.​

Professional competence and due care- an accountant should maintain professional knowledge and skill at the level required to ensure that an employer or client receives a competent professional service.

​ Confidentiality - information acquired as a result of professional and business relationships should not be disclosed to the third parties except when proper and specific authority is given or there is a legal or professional right to disclose.​

Professional behaviour- accountants should ensure that their behaviour complies with relevant laws and regulations and avoids bringing the accountancy profession into disrepute.​

Regulatory Framework​

As the framework forms the 'rules' of accounting. Accountants seek to follow the same set of 'rules', which enables broad comparisons to be made between the financial result of many different companies.​ This is made up of the accounting standards, company law and the conceptual framework.​

Association Of Certified Chartered Accountants (ACCA)​

The Conceptual Framework​

The conceptual framework comprises five steps in the form of questions, which you should consider when confronted with an ethical dilemma:​

What are the relevant facts?​ What are the ethical issues involved?​ Which fundamental principles are threatened?​ Do internal procedures exist that mitigate the threats?​ What are the alternative courses of action?​

How this framework may be applied​ For example : You as the external auditor is looking at the financial statement of a well-established PLC. This company has clearly increased their expenditure to avoid paying the right amount of tax required by law, which is used to improve living standards of individuals in that country.​

 When confronted with such a dilemma you as the auditor should ask yourself questions like:​

 Is this a real problem or is it part of a larger one.​ What ethical issues are involved, you’re well aware of the fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. Review these principles and see whether they apply to this scenario.​ What are the alternative courses of action. You may do so by giving the company more ethical means of increasing profits and still paying the right amount of tax​

QUIZ

Multiple Choice

Which one of the following comprises the regulatory framework of the accounting sector?

• a) Accounting standards, the financial reporting council, the department for business, energy and industrial strategy

• b) Accounting standards, company law, conceptual framework for financial reporting

• c) Company law, conceptual framework for financial reporting, professional accounting bodies

• d) Accounting standards, the European union, the department for business, energy and industrial strategy.

Multiple Choice

Which one is not a purpose of using accounting standards?

• To standardise financial statements

• assist in promoting harmonisation of standards by reducing the number of alternative accounting treatments

• To reduce the variations of accounting treatments used in financial statements

• none of the above

Multiple Choice

What is a role of a company's remuneration committee?

• To review the salary and benefits payments for senior management of the company

• To circulate the minutes of its meetings to the company's directors

• To review the salary and benefits payments for all staff of the company, except for the executive directors

• To negotiate with the executive directors in order to agree their remuneration

Multiple Choice

What is meant by corporate governance?

• Corporate governance sets out the systems by which companies are directed and controlled.

• Corporate governance is when most large companies acknowledge obligations to their staff and to the environment in which they work.

• Corporate governance is to recommend and review aspects of payments for the senior management.

• Corporate governance is when a company's board of directors must act within the best interests of the company and in accordance with the law

Multiple Choice

How many fundamental principles of ethical behaviour are there?

• 3

• 4

• 5

• 6

Multiple Choice

What are the potential threats to fundamental ethical principles?

• Integrity, objectivity, professional competence and due care, confidentially, professional behaviour

• Self-interests threats, self- review threats, familiarity threats, intimidation threats and advocacy threats.

Multiple Choice

What is the purpose of having a conceptual framework for financial reporting?

• Because it states the financial statements have been prepared in accordance with applicable accounting standards.

• So the accountants can ensure that they are accurate for public interest.

• Because its sets out the objective of financial reporting, identifies the users of financial information and defines assets, liabilities, profit etc.

Multiple Choice

Who are the financial reporting council?

• The FRC is the independent statutory regulator for the accounting sector. It promotes transparency and integrity in business.

• The FRC puts in measures to eliminate threats or to reduce them to acceptable levels.

• The FRC make sure all financial records are up to date and making sure they tell the truth