ETHICAL DILEMMAS:

What would you do?

At some point in your career you may be faced with an ethical dilemma. Given that you are required to comply with the CIMA Code of Ethics in order to uphold your professional standing what would you do? Ethical dilemmas do not always have a prescriptive and clear cut response (unless there is evidence of breaking the law or accepted regulations). You may have discovered something you believe to be illegal or fraudulent, or someone may be pressuring you to mislead, or to report in a way that is against or marginal to accepted accounting standards or outside the law. Conicts of interest and condentiality are also ethical issues. By using the Code as guidance members and students can review their options and decide on a course of action in order to resolve the issue. As a trained professional you have a responsibility and a professional duty to exercise good judgement and be accountable for your actions to the profession and the public. Understanding the wider strategic implications and the impact on the business, or society, is part of your role. These case studies are linked to the fundamental principles which a CIMA professional accountant is required to uphold: a) Integrity b) Objectivity c) Professional competence and due care d) Condentiality e) Professional behaviour The case studies demonstrate how the Code of Ethics works in practice and guides you to areas in the Code which would apply. It is not exhaustive. There is also a checklist (see full checklist) you can work through when faced with an ethical dilemma to help you determine a course of action.

CHECKLIST (summary)
Key questions to also consider when facing an ethical dilemma rest on a personal feelings you generally know if something feels right, if you are unsure ask yourself: Would I feel comfortable about my professional peers, family and friends knowing about the situation? How would I feel if I saw this in a newspaper?

Check all your facts and where possible document

Possible course of action and internal/ external escalation

Seek professional or legal advice

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

Identify the affected parties

Refuse to remain associated with the conflict

Is it legal?

Identify which fundamental principles are affected

If you have concerns you most probably have a dilemma! The longer you leave resolving it, the more chance there is for there to be repercussions for the organisation, yourself and the standing of the profession. Please see CIMAs full ethical checklist.

Ethical dilemmas: what would you do?

CASE STUDIES
1. Case study one: takeover information. You are nancial director of a large multinational organisation and have been privy to information about a takeover bid to acquire a rival rm. A family friend is considering selling shares in this rival organisation and has asked you, as an expert in the industry, for advice on this matter. What would you do? Integrity This situation has a clear impact on you integrity fair dealing and truthfulness. Your obligations in this instance are to condentiality. See section 110. Your objectivity would be at risk if you allow a personal relationship to inuence the ethical and legal responsibilities you have to your employer. See section 120. You have a duty to maintain professional knowledge, to act diligently in accordance with professional standards and to uphold legal requirements. See section 130. You have an obligation to refrain from disclosure of information outside the rm or employing organisation. See sections140.2, 100.5d. You cannot compromise your professional judgement as a result of a personal relationship. See sections 150.1, 100.12.

Objectivity

Professional competence and due care Condentiality Professional behaviour

2. Case study two: withholding information You are a CIMA member who is a non-executive director of a large services company. The board of directors meets on a monthly basis to discuss the quarterly forecast and other business issues. It is the responsibility of the nance director to distribute papers at least two weeks prior to the date of the meeting. These papers should rst be signed off by the CEO. Recently documents have only been received a day before the meeting. You have raised this with the nance director who has stated the delay is due to the sign-off by the CEO. You do not feel that you are given sufcient time to review the papers, and also believe the information that is available is not complete and therefore difcult to fully appraise. The CEO is a very dominant character and many members of the board are nervous about broaching the matter. What would you do? Integrity Objectivity You need to uphold your integrity by addressing the matter there is a need to be straightforward and honest. See section110. Your objectivity is being compromised not only on the basis of lack of full and timely information, but also the perceived threats of the CEOs behavior. See sections 300.12 -300.15. You need to have full and correct information in a timely manner in order to carry out your role. See secton 330.2. You would be expected to resolve the issues internally where possible without disclosing condential information. See section 140.1. Your professional behavior is compromised without addressing the issue and you would not be discharging your duties (and nor would your colleagues). See section 320.2.

Professional competence and due care Condentiality Professional behaviour

Ethical dilemmas: what would you do?

3. Case study three: possible insolvency As nancial controller at a manufacturing company you have been advised by a colleague that the sales director is unlawfully declaring fuel benets as the tax value is high. This has been creating higher prot margins and if declared those margins will go down. There is potential that this could push the company into insolvency, which would result in job losses for 300 employees. You have made the other directors aware of the situation but they have expressed a wish not to disclose the misleading tax bill. You are aware that by declaring this information to the tax authorities, as required by law, that the organisation may have to declare insolvency and those 300 employees could lose their jobs. What would you do? Integrity Objectivity By not declaring the unlawful tax benets your integrity is clearly compromised. See section 110.2 Your objectivity is threatened by the perceived threat of job losses. The shortterm and unlawful actions to increase margins will not help the business model in the longer term. See sections 300.12-300.15. By not declaring you are undermining both your professional competence as well as not acting with due care and diligence as a professional accountant. See sections 130.1-130.2 and 100.16. In this case there is a legal and professional right and a duty to disclose. The issue will not go away and you will be seen as complicit. See section 140.7. There is a need to comply with the relevant law and regulations on this matter. By failing to declare your actions both discredit the profession and put you in disrepute. See sections 300.2, 300.6. 310.2 and 200.10.

Professional competence and due care Condentiality Professional behaviour

4. Case study four: family issues You are a CIMA student employed as a company secretary for a small family owned limited company. The board is made up of family members, with only one family member holding an executive position as MD. There are some disagreements within the family regarding the will of the recently deceased chair of the board, the mother of the family. The board have twice voted to pay pension contributions to one of the members of the family on the board as non-executive director, a brother of the MD, and this has been approved by majority in meeting. However, you have since been advised by the MD not to make the payment. What would you do? Integrity Objectivity Professional competence and due care Condentiality Professional behaviour You need to remain straightforward and honest with both the MD and the Board. See section 110.1. You cannot allow the undue inuence of family issues to override your professional judgment. See sections 120.1-120.2 and 100.12. There is a need to act diligently in accordance with professional standards the decision has been approved by the board. See sections 150.1 and 100.16100.22. You will not compromise condentiality by further raising issue with the board. See section 140. Failure to care out the boards actions may mean failure to comply with relevant company regulation, against your professional duty. See section 150.1; 300.12-300.15 and 310.1.

Ethical dilemmas: what would you do?

5. Case study ve: employee issues You are a CIMA member who has recently joined a limited company that processes food. The company is effectively run by one director. The other directors are non-executive and all have close personal relationships. As a key member of the nance team you have discovered that some employees are being paid cash in hand and not via the formal payroll. You also have suspicions that some of these people are being employed illegally and you have no records of their formal employment documents or contracts. What would you do? Integrity The situation demands that you are honest and straightforward with your concerns with the management. See section 110.2. Your objectivity could be compromised if you are unable to obtain the full facts. See sections 120, 310. You will be required to act competently and diligently in relation to relevant legislation and professional standards. Sections 130 and 320.3-320.6.

Objectivity

Professional competence and due care Condentiality

If you are unable to resolve the issue internally you may need to consult externally, particularly if legal requirements are being breached. See sections 140.7-140.8. You will need to bring to the attention of the management the risks and also the need to act within the law and fairly with employees. See sections 150.1 and 310.2 to 310.3.

Professional behaviour

Ethical dilemmas: what would you do?