Chapter 5 - Code of Ethics

Why are ethics important?

Ethics relate to fairness, honesty, and responsibility. They are a set of moral principles to guide behavior. Ethics are important because they ensure that accountants perform their work properly, maintain the financial viability of businesses, and prevent the wastage of public sector funds.

CIMA's code at a glance

CIMA's code of ethics provides high ethical standards for CIMA members and CGMA candidates. It helps identify and deal with situations where professional integrity may be at risk. The code is based on five fundamental principles: objectivity, professional competence and due care, professional behavior, integrity, and confidentiality.

Principles

1. Objectivity

2. Professional Competence and Due Care

3. Professional Behavior

4. Integrity

5. Confidentiality

Objectivity

Avoiding bias, conflict of interest, or undue influence on professional judgment.

Professional competence and due care

Maintaining professional knowledge and skill to provide competent service.

Professional behavior

Complying with laws and regulations and avoiding actions that could harm the profession's reputation.

Integrity

Being honest and truthful in all professional and business relationships.

Confidentiality

Respecting the confidentiality of information acquired through professional relationships.

Threats

1. Self-interest threats

2. Self-review threats

3. Familiarity threats

4. Intimidation threats

5. Advocacy threats

Self-interest threats

Self-interest threats occur due to personal or close family interests, such as financial concerns, job security, or incentive remuneration arrangements. These threats can lead to conflicts of interest.

Self-review threats

Self-review threats arise when an individual is required to re-evaluate their own previous judgment, such as reviewing a business decision they made or reporting on financial systems they designed.

Familiarity threats

Familiarity threats occur when close relationships with others compromise professional judgment. This can result from long associations with business contacts, colleagues, or accepting gifts or preferential treatment.

Intimidation threats

Intimidation threats happen when an individual is deterred from acting objectively due to actual or perceived threats, such as the threat of dismissal or influence from a dominant personality.

Advocacy threats

Advocacy threats occur when an individual promotes a position or opinion to the extent that their objectivity is compromised. This can include acting as an advocate for a client in disputes with third parties.

Safeguards

Safeguards are actions that reduce or prevent ethical issues from arising. They can be found within employing organizations (e.g., whistle-blowing procedures) or embedded within the profession (e.g., standards or legislation). Safeguards help resolve ethical conflicts or dilemmas.

Resolving an ethical dilemma

To resolve an ethical dilemma, gather all relevant information, raise concerns internally (e.g., with a manager or trusted colleague), consider escalating the issue if necessary, and, if unresolved, report it externally (e.g., to auditors or regulatory authorities). If all else fails, consider removing yourself from the situation. Document all steps taken to resolve the issue.

Examples of ethical issues

Examples of ethical issues:

• Dealing with demands for bribes

• Unfair competition

• Social responsibility

• Safety and compliance with legislative standards

• Honesty in advertising

• Management of closures and redundancies

• Non-exploitation of countries and people

• Effects on customers

• Dealing with oppressive governments

• Fairness in settling pay and work conditions.