ACCA F1 – Business & Technology | Ms. Vishah Hussain
Part F: Professional ethics in accounting
and business
Chapter 19: Ethical considerations
1 Framework of rules
1.1 How do the rules fit together?
There are three main sources of rules that regulate behaviour of individuals and businesses.
These are:
• The law
• Non-legal rules and regulations
• Ethics
1.2 Corporate governance concepts
One view of governance is that it is based on a series of underlying concepts.
Fairness
The directors' deliberations and also the systems and values that underlie the company must be
balanced by taking into account everyone who has a legitimate interest in the company, and
respecting their rights and views.
Openness/transparency
Transparency means open and clear disclosure of relevant information to shareholders and other
stakeholders, also not concealing information when it may affect decisions.
, ACCA F1 – Business & Technology | Ms. Vishah Hussain
Probity/honesty
Hopefully this should be the most self-evident of the principles. It relates not only to telling the
truth but also not misleading shareholders and other stakeholders.
Responsibility
Responsibility means management accepting the credit or blame for governance decisions.
Accountability
Corporate accountability refers to whether an organisation (and its directors) are answerable in
some way for the consequences of their actions.
Reputation
Risks to an organisation's reputation depend on how likely other risks are to crystallise. In the
same way, directors' concern for an organisation's reputation will be demonstrated by the extent
to which they fulfil the other principles of corporate governance.
Judgement
Judgement means the board making decisions that enhance the prosperity of the organisation.
This means that board members must acquire a broad enough knowledge of the business and its
environment to be able to provide meaningful direction to it.
Integrity
'Integrity means straightforward dealing and completeness.
Integrity (means that) holders of public office should not place themselves under any financial or
other obligation to outside individuals or organisations that might influence them in the
performance of their official duties.
2 Management accountability
2.1 Fiduciary responsibility
Organisations are not autonomous; that is to say, they do not exist to serve their own purposes
or those of their senior managers. They exist to serve some external purpose and their managers
have a duty to run them in a way that serves that purpose, whether it be to relieve distress (a
charity), to keep the peace and manage the economy (a government), to promote the interests
of its members (a trade union) or to make a profit (a business).
2.1 Business objectives and management discretion
(a) The stakeholder view of company objectives is that many groups of people have a stake or
legitimate interest in what the company does. A business depends on appropriate relationships
Part F: Professional ethics in accounting
and business
Chapter 19: Ethical considerations
1 Framework of rules
1.1 How do the rules fit together?
There are three main sources of rules that regulate behaviour of individuals and businesses.
These are:
• The law
• Non-legal rules and regulations
• Ethics
1.2 Corporate governance concepts
One view of governance is that it is based on a series of underlying concepts.
Fairness
The directors' deliberations and also the systems and values that underlie the company must be
balanced by taking into account everyone who has a legitimate interest in the company, and
respecting their rights and views.
Openness/transparency
Transparency means open and clear disclosure of relevant information to shareholders and other
stakeholders, also not concealing information when it may affect decisions.
, ACCA F1 – Business & Technology | Ms. Vishah Hussain
Probity/honesty
Hopefully this should be the most self-evident of the principles. It relates not only to telling the
truth but also not misleading shareholders and other stakeholders.
Responsibility
Responsibility means management accepting the credit or blame for governance decisions.
Accountability
Corporate accountability refers to whether an organisation (and its directors) are answerable in
some way for the consequences of their actions.
Reputation
Risks to an organisation's reputation depend on how likely other risks are to crystallise. In the
same way, directors' concern for an organisation's reputation will be demonstrated by the extent
to which they fulfil the other principles of corporate governance.
Judgement
Judgement means the board making decisions that enhance the prosperity of the organisation.
This means that board members must acquire a broad enough knowledge of the business and its
environment to be able to provide meaningful direction to it.
Integrity
'Integrity means straightforward dealing and completeness.
Integrity (means that) holders of public office should not place themselves under any financial or
other obligation to outside individuals or organisations that might influence them in the
performance of their official duties.
2 Management accountability
2.1 Fiduciary responsibility
Organisations are not autonomous; that is to say, they do not exist to serve their own purposes
or those of their senior managers. They exist to serve some external purpose and their managers
have a duty to run them in a way that serves that purpose, whether it be to relieve distress (a
charity), to keep the peace and manage the economy (a government), to promote the interests
of its members (a trade union) or to make a profit (a business).
2.1 Business objectives and management discretion
(a) The stakeholder view of company objectives is that many groups of people have a stake or
legitimate interest in what the company does. A business depends on appropriate relationships
