Question

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 finance 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?

answer the above question and back up your answer with logical reasoning. Include a comment to EACH of the 5 critical pieces of ethics (INTEGRITY, OBJECTIVITY, PROFESSIONAL COMPETENCE, CONFIDENTIALITY and PROFESSIONAL BEHAVIO);how they would be disregarded, and what would make it right? Minimum of 250 words is required.

Answer 1

The given Case Study is related to the ethical dilemmas faced by a professional while disposing his duties in normal course of business.

The Ethical Issues include Five Critical Pieces of Ethics as follows:

Integrity: According to CIMA Institute Code of Ethics, “The principle of Integrity imposes an obligation on all professional accountants to be straightforward and honest in all professional and business relationships.” The current situation demands the honesty and straightforwardness from a professional while confronting the management with the concerns as found and raised by him.

Objectivity: The CIMA Handbook on Code of Ethics states that “The principle of objectivity imposes an obligation on all professional accountants not to compromise their professional or business judgement because of bias, conflict of interest or the undue influence of others.” In the current scenario, the unavailability of full facts might render the objectivity of a professional accountant compromised.

Professional Competence: As per CIMA Code of Ethics, the Competence piece imposes the obligations “to maintain professional knowledge and skill at the level required to ensure that clients or employers receive competent professional service; and to act diligently in accordance with applicable technical and professional standards when providing professional services.” Thus, in the current situation, the accountant is expected to act competently and diligently with respect to all relevant and applicable laws and regulations along with professional standards.

Confidentiality: The Code of Ethics issued by CIMA Institute lay down that “to refrain from disclosing outside the firm or employing organization confidential information acquired as a result of professional and business relationships without proper and specific authority or unless there is a legal or professional right or duty to disclose; and using confidential information acquired as a result of professional and business relationships to their personal advantage or the advantage of third parties.” The principle allows the professional to consult externally, provided that he is unable to resolve these issues internally.

Professional Behavior: This principle of Code of Ethics issued by CIMA imposes an obligation “to comply with relevant laws and regulations and avoid any action that the professional accountant knows or should know may discredit the profession.” Accordingly, the accountant should draw the attention of the management to the risks of breaching the law and also the need to act fairly with employees.