PART G.

17’S RESUME : THE IMPORTANCE OF ETHICS

NAMA : MENUCHA A. IFASAKSILY
NIM : 2018-30-184
MATA KULIAH ETIKA BISNIS DAN PROFESI

1 A framework of rules
Humans have developed a framework of rules to regulate behaviour. The society we live in could not exist
without rules and standards. As society developed from prehistoric tribes to the complex interrelationships
we have today, rules regulating behaviour had to evolve also. This is because humans recognised the need for
everyone to work together for the good of the group.

1.1 Developments of society

Humans have evolved from the prehistoric tribes and have built a strong society that has revolutionised
our planet. This has only been possible because individuals have worked together, guided by rules.
1.2 A need for rules
Further rules developed as society grew and eventually the first laws were laid down to control the larger
populations. Religion played a major role in developing the rules for the individual, and many of these
rules are still in place today. Business law is relatively new, and has only developed over the last couple of
hundred years with industrialisation and the needs that grew from it.
1.3 How do the rules fit together?
There are only three main source of rules that regulate behaviours and businesses in our focus of
dicipline, these are :
The Law (Civil and Criminal). Criminal Law handles serious threats against public or public
administration. Civil Law handles lost to individuals cost by the actons, or failure to comply with
legal obligations such as contract or others.
Regulation. Handles anything which requires procedures or practices to be followed.
Codes of Practice. Handles guidance for profssionals.

2 What are ethics?

Ethics are a set of moral principles that guide behaviour. Individuals have moral values and beliefs about
what constitutes 'right' and 'wrong' behaviour. These values often reflect those of the individual's family,
culture and educational environment they are brought up in. Ethics and morals are concerned with right and
wrong and how conduct should be judged to be good or bad. Morals differ from ethics in the sense that they
derive from a person’s individual beliefs and are often linked to religious views. They are not derived from
professional ethics which are the views and rules of the professional organisation that an individual is a
member of.
 2.1 Businesses and ethics

Ethics in business: 'The application of ethical values to business behaviour'. CIMA

Businesses also have ethical values, based on the norms and standards of behaviour that their leaders
believe will best help them express their identity and achieve their objectives. Business life is a fruitful
source of ethical dilemmas because its whole purpose is material gain, the making of profit.
2.1.1 An issue of trust. In recent times, trust in business has fallen and increasingly more evidence is
required to demonstrate it. The 'Show me' stage required some demonstration of trust, 'Prove to me'
required independent verification and assurance and the final stage of 'Obey me' would exist when the
law creates legislation to cure instances of unethical behaviour. We are some way off this point currently.
2.1.2 Corporate Responsibility Policies and Reports. An ethical strategy is not always visible to outsiders,
and many companies now produce Corporate Responsibility Policies (CRPs) and Corporate Responsibility
Reports (CRRs) for their stakeholders to demonstrate their commitment and to manage its relationships
in the wider community. They reflect the view that an organisation has responsibilities beyond that of its
shareholders.

3 Accountants and ethics

As an accountant, your values and attitudes flow through everything you do professionally. They
contribute to the trust the wider community puts in the profession and the perception it has of it. The
accountancy profession has developed a code of ethics that all accountants are bound by. Should an
individual’s behaviour fall short of these rules they may be brought to account at a disciplinary hearing which
is cheaper and quicker to organise than a court action.

3.1 Approaches to accountancy ethics

Professionals will have their own idea of what behaviour is ethical and what is not. Although there will
be differences, collectively there are common views and values that shine through. In the UK for example,
the Financial Reporting Council (FRC) has taken a lead role in ethical reporting and building confidence in
the accountancy profession. It also monitors the accountability of professional accountants. This work is
undertaken by two sub-bodies which is The Professional Oversight Board for Accountancy (POB) and The
Auditing Practices Board (APB).
3.2 The Seven Principles of Public Life
The UK government's Committee of Standards in Public Life set out seven principles that individuals
employed in the public sector must follow which are Selflessness , Integrity , Objectivity , Accountability ,
Openness , Honesty, Leadership.
 3.3 Codes of conduct
Professional institutions (such as CIMA) have an overriding duty to protect the public interest. To
ensure members act in a manner which achieves this, most have developed codes of conduct to guide
behaviour. There are two theoretical approaches that can be followed when developing a code of ethics
which are :
 Compliance-based approach. Under this approach, the governing body will attempt to
anticipate every possible ethical situation and lay down specific rules for members to follow. As
with law, members are expected to follow the rules and will be accountable if they breach them
– effectively members are legally bound.
 Ethics-based approach Under this approach, principles are set out which describe the
fundamental values and qualities that members should embody. There is no attempt to
prescribe detailed rules, however, general guidelines are developed to give advice on how
certain situations should be handled. This approach means members follow voluntary guidelines
which are examples of good or best-practice..
There are differences between these two approches, the differnce is that under the compliance
approach, individuals have a clear perception of the expected behaviour and can consult a rule book if
necessary, but there is a limit to the amount of rules which can be legislated for and in many cases
individuals would be forced to make their own decisions. While The ethics approach is more organic and
allows the individual to decide what behaviour is appropriate in all circumstances. This approach is more
wide ranging than the compliance-based approach as the principles can be applied in many circumstances,
more than a compliance-based rule book could cover.
3.4 Codes of conduct for business organisations
The approaches to codes of conduct described above can also be applied by businesses wishing to
develop an ethical code for their employees. There are three elements to creating an effective ethical
programme which are Active leadership, Buy-in , and Training.
3.5 Why develop an ethical code?
Organisations such as companies and accountancy firms have several reasons for introducing ethical codes,
aside from the public interest issues such as Communication, Consistency of conduct, Risk reduction,
Compliance with Corporate Governance rules.

4 A code of ethics for accountants

The International Federation of Accountants (IFAC) is an international body representing all the major
accountancy bodies across the world. Its mission is to develop the high standards of professional accountants
and enhance the quality of services they provide. To enable the development of high standards, IFAC's ethics
committee established a code of ethics which has aligned standards globally. The code (which CIMA has
adopted) has the aim of identifying the responsibilities that a person employed as an accountant takes on, in
return for a traditionally well paid career with high status. The code identifies potential situations where
pitfalls may exist and offers advice on how to deal with them.

5 CIMA's ethical guidelines

CIMA's ethical guidelines give the fundamental principles that members should follow in their
professional lives. Fundamental means the principles form the bedrock of professional judgements, decisions,
reasoning and practice. CIMA members must not only know them, but also apply them in their everyday work.

5.1 Fundamental principles

The fundamental principles, which must be observed by all members are Integrity, Objectivity,
Professional competence and due care, Confidentiality, and Professional behaviour.
5.2 Rules
As a CIMA member you are expected to go beyond following the rules and to achieve this it is important
for you to understand some theory. First, Rules are a cut-off point , either an individual is inside a rule (ie
complying) or is not (disobeying). This creates a strong divide between acceptable and unacceptable
behaviour. Second, Rules have a meaning, to maintain the boundary between acceptable and unacceptable
behaviour it is important to agree on the exact meaning of a rule. And the third, Rules need enforcement ,
to administer rules, an objective third party must be available to interpret the rule and (where it deems a
rule has been broken) ensure the guilty party finds their actions are met with appropriate consequences.

6 Qualities of an accountant
In meeting the fundamental principles, certain qualities are expected of accountants, these can be classed as
Personal qualities and Professional qualities.

6.1 Personal qualities expected of an accountant

The personal qualities that an accountant should demonstrate are:
• Reliability. When taking on work, they must ensure it is consistently delivered on time and is what was
asked for.
• Responsibility. They should not expect others to do their work for them and must be willing to
personally respond to queries regarding their decisions.
• Timeliness . Accountants should be on time for work and appointments - failure to do so wastes both
their time and that of others.
• Courtesy. Accountants should conduct themselves with courtesy, consideration and general good
manners towards their clients, colleagues, and others that they come into contact with during the
performance of their work.
 • Respect. Accountants should respect others by developing constructive relationships and recognising
their values and rights.

6.2 Professional qualities expected of an accountant

The professional qualities an accountant should demonstrate are:
• Independence. It means putting all considerations not relevant to the task
in hand to one side - enabling the completion of work free from bias or prejudice. It allows the professional
to act with integrity, objectivity and professional scepticism.
• Scepticism. The principle of integrity means that accountants should develop a healthy sense of
scepticism. Therefore, accountants should question information given to them.
• Accountability. Accountants should recognise that they are accountable for their own judgements and
decisions. Where these are called into question they should not pass undue responsibility onto others.
• Social responsibility. Accountants have a public (social) duty as well as a duty to their employer or clients.
This public duty can also be referred to as social responsibility – the provision of specific benefits to society
as a whole.

7 Personal development and lifelong learning

Personal development is the development of personal qualities such as communication skills,
assertiveness, time management and relationship building. Lifelong learning is the concept that an individual
never stops learning and should be open to new ideas, decisions, skills or behaviours.
7.1 Why is professional development necessary?
The fundamental ethical principles of professional competence and due care require accountants to
develop and maintain their knowledge and technical skills and this requirement is driven by public
expectations.
7.2 CIMA's professional development cycle
One approach to personal development and lifelong learning is CIMA's professional development cycle
that it introduced from January 2006. Stages in CIMA's professional development cycles are Define, Assess,
Design, Act, Reflect, Evaluate
7.2.1 What counts as development?
The following activities count as CPD under the scheme:
• Reading professional publications and study for professional or academic qualifications
• Computer based training and training colleagues and students
• Research and project work
• Attending CIMA events
7.3 Other approaches to professional development
Other accountancy bodies such as the ICAEW and ACCA have their own development requirements.
Rather than following a cycle, they require members to complete a certain number of hours of CPD each
year that should be relevant to their role. CPD is classified as verified or unverified. Verified CPD covers
development that can be supported by evidence such as course notes or work produced. Unverified CPD
covers development such as reading journals that cannot be supported with evidence.