BA4 Slides 2017 - Classes PDF

Fundamentals of Ethics, Corporate Governance
and Business Law

CIMA BA4
www.ultimateaccess.net
Session 0 Introduction to
BA4
Fundamentals of Ethics, Corporate Governance and
Business Law
Syllabus:
• Business ethics and ethical conflict

• Corporate governance, controls and corporate
social responsibility
• General principles of the legal system, contract
and employment Law
• Company administration
Format of examination paper
A Computer Based Assessment (CBA)
▪ 85 Objective Test Questions
▪Time allowed – 2 hours
Session 1 Business ethics
Overview
Introduction to business ethics
Ethics are moral principles that govern a person’s behaviour in the conducting of
an activity.
Schools of ethics:
• virtue ethics
• deontological
• utilitarianism
Business ethics
Business ethics is the application of ethical principles to the problems typically
encountered in a business setting.
Relevant factors:
• the consequences
• the motivation
• guiding principles
• key values
The role of the accountant
A management accountant’s role is to provide crucial information that

forms the basis of decision-making in an organisation.
Unethical behaviour impacts on:
• jobs
• financial viability
• tax-payers’ money wasted or misused
Ethical influences
Costs and benefits of business ethics
Increases costs and reduces profits:
➢ sourcing materials
➢ turn away unethical customers
➢ taking up management time
Commercial benefits
➢ attracts customers
➢ more effective workforce
➢ cost savings
➢ reduce risk
The role of law in ethics
The law provides a deterrent. However, it sets the threshold value for
unacceptable accounting practices at a fairly high level.
Law by nature can be inflexible, therefore causing difficulty when applying

it to cases of ethical misconduct.
The role of professional bodies
Codes of ethics
The CIMA Code of Ethics aims to:
➢ identify the nature of personal responsibility that the management
accountant takes on as part of the price for getting a reasonable salary and
status
➢ provide guidance on how to identify the practical situations where particular
care might need to because of the ethical pitfalls involved
➢ provide general guidance on how to address those difficult questions
Fundamental principles
Threats and safeguards
Safeguards
Rules-based and framework approaches to ethics
Contrasting compliance driven and
principle based codes
Personal development and life-long learning
Independence
Accountability and social responsibility
• The concept of accountability is that of the professional accountant

being responsible to someone and for something for an action.
• Corporate social responsibility is the outward manifestation of an ethical

policy.
Confidentiality
CGMA Report on Managing
Responsible Business
• Responsible business
• Business ethics
• Ethical performance
• Ethical management information
• Integrated reporting
Embedding ethical values: A guide for CIMA partners
• How does a company start to ensure that business behaviour reflects

ethical values?
• Why produce a code?
• Is having a code enough?
Embedding Ethical Values
How does a company start to ensure that business behaviour
reflects ethical
values?
➢ Identify core values to which it is committed.
➢ Articulate a set of business values.
Why produce a code?
➢ Prevent misconduct.
➢ Provide guidance for all employees.
➢ Promote and support an ethical culture.
Is having a code enough?
➢ Ethical values must be strongly embedded into an organisation’s
culture.
➢ Supported by a programme of communication and training.
➢ Ethical commitments need to be reflected through core business
activities.
➢ Establish a monitoring programme.
Responsible business
➢ is about an organisation’s commitment to operating in a
way that is economically, socially and environmentally
sustainable
➢ means ensuring this commitment prevails while still

upholding the interests of various stakeholder groups.
Business Ethics
➢ is the application of values such as integrity, fairness,
respect and openness to organisational behaviour
➢ apply to all strategic and operational aspects of business

conduct, including sales and marketing techniques,
accounting practices and the treatment of
suppliers, employees and customers
➢ may also be termed “business principles”, and are usually

set out in a code of
ethics or similar policy document.
Ethical Performance
Ethical Performance
➢ is the extent to which an organisation’s behaviour aligns with its stated

ethical values and commitments
Ethical Management Information
allows an assessment of the organisation’s ethical performance, such as the

efficacy of relevant policies and procedures, occurrence of breaches of relevant
policies or codes, stakeholder opinion and other metrics
➢ may include specific ethics information, such as the number of employees
attending ethics training or calls to an ethics helpline, as well as routine
management and risk information
➢ will often originate from multiple sources within the business, and can be
either quantitative or qualitative
Integrated reporting
Describes an approach to corporate reporting. It is

based on both financial and non-financial
information that demonstrates the linkages between
an organisation’s strategy, governance and financial
performance as well as the social, environmental
and economic context within which it operates.
Session 2
Ethical conflict
Overview
The relationship between ethics and law
Consequences of unethical behaviour
• For the individual?
• For the professional body?
• For the corporation?
Ethical dilemmas and conflicts of interest
CIMA’s ethical checklist
1. Check all your facts – and document where possible.
2. Is it ethical- have you considered the ethical issues involved?
3. Is it legal?
4. Identify which fundamental principles are affected.
5. Identify the affected parties.
6. Possible course of action – internal and external escalation.
7. Seek professional or legal advice
8. Refuse to remain associated with the conflict.
Business ethics for SME’s: A guide for CIMA partners
Session 3 Corporate governance
Overview
Organisations
Organisations
Organisations
• Not for profit organisations
• Public sector organisations
• Private sector organisations
• Non-governmental organisations
• Co-operatives
What is corporate governance?
The purpose of corporate governance is to facilitate effective
entrepreneurial management that can deliver the long-term success of the
company.
The aim of corporate governance initiatives is to ensure that companies

are run in the interests of their shareholders and the wider community.
Governance, ethics and company law
Agency theory
Key concepts
• Accountability
• Stewardship
• Resource-dependency theory
The OECD Principles of Corporate Governance
IFAC’s main driver of sustainable corporate success
• Customer and stakeholder focus
• Effective leadership and strategy
• Integrated governance, risk and control
• Innovation and adaptability
• Financial management
• People and talent management
• Operational excellence
• Effective and transparent communication
CIMA’s practical proposals for better corporate governance
1. Tone from the top
2. How the board works as a team
3. The key actions of the board and its committees
4. Board effectiveness
5. Communication and engagement with shareholders
Board structures
The development of corporate governance codes
Best Practice – policies and procedures
King III (South Africa)
The Code is divided into nine sections which address:
Rules and principles based approaches to corporate
governance
Advantages and disadvantages of a
governance code
Board committees
Session 4 Controls
Overview
Assurance
An assurance engagement is one in which a practitioner expresses a
conclusion designed to enhance the degree of confidence the intended
users other than the responsible party have about the outcome of the
evaluation or measurement of a subject matter against criteria.
The 3 party relationship
1. Practitioner: usually auditor.
2. Intended user: depends on assignment.
3. Responsible party: usually directors.
External audit engagement
External audit
External audit
External audit
Testing
Audit risk
Agency and stewardship
The engagement letter
Reporting to those charged with governance
Written representation letter
A written representation letter is a written statement by management

provided to the auditor to confirm certain matters or to support other audit
evidence.
Audit report
Audit Firm Governance Code
Internal audit
Internal audit
Types of audit
Distinction between external and internal audit
Errors
• Errors of omission
• Errors of commission
• Errors of principle
Errors
Fraud
Fraud is an intentional act involving the use of

deception to obtain an unjust or illegal advantage
– essentially ‘theft by deception’.
Fraud can be carried out by management,

employees or third parties.
Fraud
Fraud detection
A common misbelief is that external auditors find fraud. This is actually

rarely the case.
Most frauds are discovered accidentally, or as a result of information

received (whistleblowing).
Perform regular checks and look for warning signals
Fraud response plan
Session 5 Corporate social responsibility
Overview
Corporate social responsibility (CSR)
CSR refers to organisations considering and managing their impact on a variety

of stakeholders:
➢ local community
➢ environment
➢ employees
➢ shareholders
➢ suppliers
➢ customers.
Carroll 4 part model
Social responsiveness
Social responsiveness refers to the capacity of a corporation to respond to

social pressure, and the manner in which it does so.
• Reaction
• Defence
• Accommodation
• Pro-action
Developing a CSR strategy
For and against CSR
Sustainability
The use of resources in such a way that they do not compromise the needs
of future generations.
As an example, some logging companies plant a tree for every one they fell.
Other companies try to make their products easy to recycle, helping to

ensure that materials are reused rather than wasted.
The Global Reporting Initiative
GRI is an international independent organisation that helps businesses,
governments and other organisations understand and communicate the
impact business on critical sustainability issues such as climate change,
human rights, corruption and many others.
Their vision is “to create a future where sustainability is integral to every

organisation’s decision making process”.
Stakeholders
A stakeholder is a group or individual, who has an interest in what the organisation

does, or an expectation of the organisation.
There are three categories:
• internal e.g. employees and managers
• external e.g. local community and government
• connected e.g. shareholders, customers and suppliers
Stakeholder needs analysis
• An organisation will undertake research; and
• Organisations can ask their stakeholders directly as to what their needs

and wants are.
CSR Initiatives
• The Universal Declaration of Human Rights
• The ILO Conventions
• The ILO Declaration of Fundamental Principles and Rights at Work
• The 1992 Rio Declaration
• The Johannesburg Declaration on Sustainable Development
• The 2005 World Summit Outcome
• 2003 UN Convention Against Corruption
CSR Initiatives
OECD guidelines
Session 6 The law of contract
Overview
Definition of law
The system of rules which a particular country or community recognises as

regulating the actions of its members and which it may enforce by the
imposition of penalties.
Definition of a contract
A contract is a legally binding agreement between two or more parties.
It can be in any form. It may be written, oral or inferred from the conduct
of the parties.
The essential elements of a valid
contract
• Offer
• Acceptance
• Consideration
• Intention to be legally bound
Offer
Offer
Acceptance
Consideration
Consideration
Intention that the agreement should be legally binding
Misrepresentation
A false statement of fact or law made by one party to the other before the
contract, and made with a view to inducing the other party to enter into it.
Silence cannot amount to misrepresentation.
The contract can be “voidable”.
The contents of the contract
Express terms:
• Can be written, oral or a combination
• Specifically inserted into the contract
• Must be clear to be enforceable
Condition:
➢ A vital term of the contract
➢ Innocent party has the choice of cancelling the contract and claiming
damages or continuing with the contract and claiming damages
Warranty:
➢ A less important term which is incidental to the main purpose of the

contract
➢ Only remedy for breach is a claim for damages
If it is unclear whether the term should be a condition or a warranty then the

courts will classify the term according to the consequences of a breach.
Session 7 The law of employment
Overview
The contract of employment
The contract of employment
Implied duties
Implied duties
Notice and dismissal
Constructive dismissal
The employer’s conduct must be sufficiently serious for the employee to

leave at once. If he continues for any length of time without leaving, he
maybe regarded as having affirmed the contract.
Even if the employer can prove the reason for the dismissal was fair he must
also prove that he acted reasonably in dismissing the employee for that
reason.
Workplace policies
Workplace policies
Workplace policies
Workplace policies
Whistleblowing is disclosing information that a worker believes is evidence

of illegality, gross waste, gross management, abuse of power or
substantial and specific danger to the public health and safety.
Workplace policies
Workplace policies
Workplace policies
Data protection laws exist to strike a balance between the rights of giving
individuals privacy and the ability of an organisation to use data for the
purposes of their business.
Some countries will have laws which give individuals the right to know what
information is held about them. The law can provide a framework to ensure
that personal information is handled properly.
Workplace policies
An organisation should ensure that it has a social media policy in place.

Employers should include what is and what is not acceptable for general
behaviour in the use at work of the internet, emails, smart phones and
social media, such as networking websites, blogs and tweets.
Workplace policies
Workplace policies
Session 8 Company administration
Overview
Types of business organisation
Companies
Companies
Lifting the veil of incorporation means that in certain circumstances the

court can look through the company to the identity of the shareholders.
The members or directors can become personally liable for the company’s
debts.
Companies limited by shares
• The company’s capital is divided into shares.
• Each shareholder holds one or more share.
• The shares are issued by the company in return for payment by the
member.
Companies limited by shares
Company formation
Articles of association
The articles of association:
➢ set out the manner in which the company is to be governed; and
➢ regulates the relationship between the company, its shareholders and its
directors.
Articles of association
Legal effect is they form a contract:
➢ between the company and its members
➢ between the members themselves.
Advantages and disadvantages of companies
limited by shares
Advantages and disadvantages of companies
limited by shares
Good luck
www. Ultimateaccess.net

BA4 Slides 2017 - Classes PDF

Hochgeladen von

Dokumentinformationen

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

BA4 Slides 2017 - Classes PDF

Hochgeladen von

Copyright:

Verfügbare Formate

Fundamentals of Ethics, Corporate Governance

and Business Law

• Business ethics and ethical conflict

A management accountant’s role is to provide crucial information that

Unethical behaviour impacts on:

• tax-payers’ money wasted or misused

Increases costs and reduces profits:

➢ turn away unethical customers

➢ taking up management time

➢ more effective workforce

Law by nature can be inflexible, therefore causing difficulty when applying

• The concept of accountability is that of the professional accountant

• Corporate social responsibility is the outward manifestation of an ethical

• Ethical management information

• How does a company start to ensure that business behaviour reflects

• Why produce a code?

• Is having a code enough?

➢ means ensuring this commitment prevails while still

➢ apply to all strategic and operational aspects of business

➢ may also be termed “business principles”, and are usually

➢ is the extent to which an organisation’s behaviour aligns with its stated

Ethical Management Information

allows an assessment of the organisation’s ethical performance, such as the

Describes an approach to corporate reporting. It is

• For the individual?

• For the professional body?

• For the corporation?

2. Is it ethical- have you considered the ethical issues involved?

4. Identify which fundamental principles are affected.

5. Identify the affected parties.

6. Possible course of action – internal and external escalation.

7. Seek professional or legal advice

8. Refuse to remain associated with the conflict.

• Not for profit organisations

• Public sector organisations

• Private sector organisations

The aim of corporate governance initiatives is to ensure that companies

• Customer and stakeholder focus

• Effective leadership and strategy

• Integrated governance, risk and control

• Innovation and adaptability

• People and talent management

• Effective and transparent communication

1. Tone from the top

2. How the board works as a team

3. The key actions of the board and its committees

5. Communication and engagement with shareholders

The Code is divided into nine sections which address:

1. Practitioner: usually auditor.

2. Intended user: depends on assignment.

3. Responsible party: usually directors.

A written representation letter is a written statement by management

Fraud is an intentional act involving the use of

Fraud can be carried out by management,

A common misbelief is that external auditors find fraud. This is actually

Most frauds are discovered accidentally, or as a result of information

Perform regular checks and look for warning signals

CSR refers to organisations considering and managing their impact on a variety

Social responsiveness refers to the capacity of a corporation to respond to

Other companies try to make their products easy to recycle, helping to

Their vision is “to create a future where sustainability is integral to every

A stakeholder is a group or individual, who has an interest in what the organisation

There are three categories: