I.

PROFESSIONALISM, ETHICAL CODES, GOVERNANCE AND REPORTING

1. Professionalism, ethical codes and the public interest

- Attributes implied for professionalism:

1. Competence
2. Honesty and integrity
3. Reliability
4. Flexibility
5. Respect for others
6. Self-control

- Fundamental ethical principles:

1. Integrity
2. Objectivity
3. Professional competence and due care
4. Confidentiality
5. Professional behavior

-Threats to professional ethics:

1. Self-interest (financial, close business relationships, close family and personal relationships, loans and guaranties, overdue
fees, contingent fees, high percentage fees, low-balling as in charging fees that are to low, recruiting staff on a behalf of a
client)
2. Self-review
3. Advocacy
4. Familiarity
5. Intimidation

-Safeguards to eliminate threats:

A. Safeguards in the work environment

B. Safeguard that increase the risk of detection
C. Specific safeguards that deal with particular cases
 2. Fraud, bribery, whistle-blowing and company ethics

-Two types of fraud:

- A Fraudulent financial reporting

- B Misappropriation of assets

-Three conditions for fraud:

I. Incentive
II. Opportunity
III. Attitude/dishonesty
Fraud Fraudulent financial reporting Misappropriation of assets
Incentive -pressure from shareholders to perform -personal financial pressure
-fear of losing job -greed
-incentives related to performance -dislike of the employer
Opportunity -poor internal control -poor internal control
-poor corporate governance (chief executive also a -high-value portable inventory (jewelry)
chairman) -cash-based business
-results dependent on many estimates and a high -poor supervision
degree of judgement
Attitude/dishonesty -poor ethics -poor ethics
-poor morale -dislike of the employer
-excessively aggressive targets -other employees behavior

-Anti-fraud strategy (fraud deterrence):

 Prevention  Legislation
 Detection  Risk management
 Response  Corporate governance
 Ethical culture
-Whistleblowing is defined as making disclosure that is in the public interest.

-To be protected by the law the whistleblower must:

 Have made the disclosure in good faith

 Reasonably believe that the information is substantially true
 Reasonably believe that you are making the disclosure to the right prescribed person

-Uk Bribery Act 2010 set out six principles that can help businesses decide if it has adequate procedures in place to prevent bribery:

1. Proportionate procedures – to risk faced an the size of the company

2. Commitment by management
3. Risk assessment –nature and extent of exposure
4. Due diligence
5. Communication-to ensure all employees/connected persons are aware of the company culture and attitude. This includes
trainings and education procedures.
6. Monitoring and review

Importance of ethics:

 Loss of goodwill and reputation

 Lower risk=lower cost (loans, attracting better partners and employees)
 Increased goodwill and increased sales

Tucker’s 5 questions approach to determine ethical outcome of a given situation:

1. Is it profitable?
2. Is it legal?
 3. Is it fair
4. Is it right
5. Is it sustainable or environmentally sound?

Corporate code of ethics –written set of guidelines, areas covered can include:

 Equal opportunity/discrimination
 Bullying
 Use of internet
 Reporting wrong-doing
 Bribery
 Money-laundering
 Responds to conflicts of interest

This code needs to be supported by top management and staff training is also needed. Addvantages:

 Emphasizes the organization values