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CHAPTER 1
BUSINESS ETHICS
1.Ethics: What is good or bad
2.Business Ethics: Set of
principles to govern the conduct of
business.
3. REQUIREMENTS:
A)Ethics Follow
(i) Laws of the land
(ii)Customs & expectations of the
community,
(iii) Principles of morality
(iv) Policies of the organization,
(v) General concerns such as the
needs of others and fairness.
B)How the actions of business affect
its stakeholders.
ETHICS & VEDANTA.
A) Viveka (understanding) should
precede Vairagya (dispassion)
B)Practice of Shatsampat (six ethical
virtues, tranquility, training,
withdrawal, forbearance, faith and
focus.
SOCIAL SIN
(i) Politics without Principles.
(ii) Wealth without work.
(iii)Commerce without Morality.
(iv)Knowledge without character.
(v) Pleasure without Conscience.
(vi)Science without humanity.
(vii) Worship without sacrifice.
MORALS V/S ETHICS
1)Root Word:- mos(customs) /
ethos(character)
2)Accepted from authority /
accepted personally
3) Expressed as general rules / it
cannot
4)Absorbed from childhood / by
taking decisions, practice
5)small Scope / wider scope.
IDENTIFYING ETHICAL
STANDARDS
There are two fundamental
problems in identifying the ethical
standards we are to follow:
1. The base of our ethical standards?
2. Application of those standards to
specific situations we face?
FIVE SOURCES OF ETHICAL
STANDARDS
1)The Utilitarian Approach

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2)The Rights Approach (The
Deontological Approach)
3)The Fairness or Justice Approach
4)The Common Good Approach
5)The Virtue Approach
ETHICAL ISSUES :- Is an
identifiable problem, situation or
opportunity that requires a person
to choose from among several
actions that may be evaluated as
right or wrong, ethical or
unethical.
ETHICAL DILEMMAS.
A situation where the decisionmaker has to choose between right
and right.
Tackling Dilemmas :1. Identify problem
2.Define problem
3.Reason / Intension
4.Intentions/objectives
5.Evaluate options / comparisons
6. Affect of time on your decision
7. Loyalty as person and member
8. Will it injure others?
9. Discuss with superiors/family
10. Exceptional conditions
11.Chances of misunderstanding
THE HIPPOCRATIC OATH
1.Profoundity of the medical
agreement
2.Patient dignity
3.Confidentiality of the transaction
4. Guard against abuse or corruption
5.Honor the rules of their profession
6.Expose those who do not follow
the high standards of conduct.
NEED/IMPORTANCE OF ETHICS IN
BUSINESS
1.Use of Resources
2.Fairness
3.Implied Contract
4.Corporate governance
ADVANTAGES / BENEFITS OF
BUSINESS ETHICS (PM SET DT
SEC.)
1. Public Image
2. Maintaining Moral Course in
times of change
3. Strengthening the Organisation
4. Employee Growth
5.Teamwork and Productivity
6. Diversity Management
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7. Total Quality Management

(TQM)
8. Social Well-being
9. Employee-friendly Policies
10.Compliance with Law
CHAPTER 2
CORPORATE GOVERNANCE &
CORPORATE SOCIAL
RESPONSIBILITY
STAKEHOLDERS
Stakeholders include
Employees, Trade Unions,
Customers, Suppliers, Shareholders
and Investors, Competitors,
Government, Industry, Society
CORPORATE GOVERNANCE
Meaning: Formal System for
corporate accountability, fairness,
transparency, structures and
processes for decision-making,
control and behaviour at the top
level of organisations.
Pervasive:"Corporate Governance"
arises in all categories of Indian
Companies
a)Public Sector Units (PSUs)
b)Multi-National Companies (MNCs)
c)Domestic Business Groups
Legal Framework:
1.Sec.292A of the Companies Act
(relating to Audit Committee)
2.Clause 49 of Listing Agreement
with SEBI (in respect of Listed
Companies).
KEY ISSUES/ MAJOR FACTORS IN
EVALUATING CORPORATE
GOVERNANCE ( E-PAAS )
(a)Appointing Non-Executive
Directors
(b)Placing constraints on
management power and ownership
concentration
(c)Ensuring proper disclosure of
financial information and executive
compensation
(d)Audit Committee
(e)Stock Options
FEATURES OF GOOD CORPORATE
GOVERNANCE ( E&E RACET)
1.Efficient and effective
2.Transparent

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3.Accountable
4.Consensus-oriented
5.Equitable and inclusive.
6.Responsive and adaptive

KEY DEVELOPMENTS TO SHAPE

THE DIRECTION OF CSR (GI2VE
C2PT)
1.Increased Stakeholder Activism
2.Engaging Stakeholders
SOCIAL ISSUES CONNECTED WITH 3.Codes, Standards and Indicators
BUSINESS ENTERPRISES
4.Value Chain concept
1.Social problems external to the
5.Transparency and Reporting
enterprise, that were not caused by 6.CSR & Corporate Governance
any direct business action, e.g.
7.Investor Pressure and Marketpoverty, drug abuse, etc.
Based Incentives
2.External impact of regular
8.Growth of IT Sector
economic activities, e.g. pollution
9.Pressure to Quantify CSR "ROI"
caused by production, safety,
STRATEGIES IN
reliability of goods and services,
IMPLEMENTATION OF CSR
deception in marketing practices,
(CRRAAP)
social impact of plant closures etc
1. Consumer protection.
3.Issues within the Firm that are
2.Respect for human rights,
tied up with regular economic
3.Reducing the negative impacts of
activities, e.g. equal employment
business enterprises operating in
opportunity, occupational health and conflict zones
safety, the quality of work life and
4.Avoiding bribery and corruption,
industrial democracy.
and
CORPORATE SOCIAL
5.Adherence to labour standards by
RESPONSIBILITY
the Companies and their Business
The term Corporate Citizenship
Partners,
denotes the extent to which business 6. Protection of local and global
enterprises meet the (a) legal
environment,
(b) Ethical (c) Economic and
(d) Voluntary / Discretionary
Some key strategies
responsibilities
1.Mission, Vision and Values
Definition
Statements
CSR is achieving commercial success 2.Plans v/s Performance
in ways that honour ethical values
3.Management Structure
and respect people, communities,
4.Long-Term Strategic Planning
and the natural environment.
5.General Accountability
NEED FOR SOCIAL
6.Employee Recognition and
RESPONSIBILITY OF A BUSINESS
Rewards
ENTERPRISES
7.Employee Education and Training
1.Given an organisation Iron Law of 8.CSR Reporting
Responsibility
9.Leadership / Pioneering Role
2.Conversion of Resistances into
VARIOUS EXTERNAL STANDARDS
Resources
AND GUIDELINES FOR CSR
3.Avoid misuse of natural Resources REPORTING (G2RACIOUS)
and economic Power
1.The Global Reporting Initiative
4.Fulfil Long-Term Self Interest
(GRI) [1997]
5.Avoiding Government Regulation
A.Convened by CERES (Coalition for
and Control
Environmentally Responsible
6.Control Environmental Damage
Economies)
7.Help to achieve goals and establish B.GRI's Sustainability Reporting
a better Society
Guidelines is a reporting standard
8.Wealth Creation
(rather than a performance
9. Better Public Image
standard)
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2. AA-1000 [1999]:
(i)to complement the GRI Reporting
(ii) improve accountability and
performance by learning through
stakeholder engagement.
3.Social Accountability 8000:
1.The standard is maintained by
Social Accountability International
and covers standards and
monitoring programs for child
labour, forced labour, disciplinary
practices, non-discrimination, wages
and benefits, working hours, health
and safety, freedom of association
and collective bargaining, and
management systems.
4.United Nations Global Compact
[2000]
1.Companies
can
voluntarily
embrace and enact' in their
individual corporate practices, and
to support complementary public
policy initiatives.
5.OECD Guidelines for MNC's
[1976/2000]
Organisation for Economic Cooperation & Development
Guidelines are recommendations
addressed by Governments to multinational enterprises.
6.ICCR Guidelines for Measuring
Business Performance:
1. The Interfaith Centre on
Corporate Responsibility (ICCR) has
published "Principles for Global
Corporate Responsibility"
2.ICCR is comprised of more than
275 religious institutions that use
their investments to promote social
change.
7.Caux Round Table (CRT): CRT
is comprised of senior business
leaders from Europe, Japan and
North America, and is based in Caux,
Switzerland.
8.Global Sullivan Principles
[1999]:
The objectives of Global Sullivan
Principles are - (i) to support
economic, social and political justice
(ii) to support human rights and to
encourage equal opportunity (iii) to
train and advance disadvantaged

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workers for technical, supervisory
and management opportunities, and
(iv) to assist with greater tolerance
and understanding
9.Asian-Pacific Economic Cooperation (APEC) Business Code
of Conduct [1999]: 1. APEC is the
primary international organization
for promoting open trade and
economic co-operation among 21
member economies around the
Pacific Rim.
ROLE OF DIFFERENT
COMMITTEES IN REGULATING
CORPORATE GOVERNANCE
(CID is BAC Now)
1.Corporate Mgmt. Committee
2. Investor Services Committee
3. Divisional Mgmt. Committee
4. Board of Directors
5.Audit Committee
6.Compensation Committee
7. Nomination Committee
BENEFITS OF CORPORATE SOCIAL
RESPONSIBILITY (O RAPer BAI)
Improved Financial Performance
1.Operating Cost Reduction
2.Reduced Regulatory Supervision:
3.Ability to attract and retain
employees
4.Productivity and Quality:
5.Brand Image and Reputation
6.Access to Capital
7.Increased Sales & Customer
Loyalty
CHAPTER 3
WORKPLACE ETHICS
"Workplace Ethics" relates to how
one applies values to work in actual
decision making a set of right and
wrong actions that directly impact
the workplace.
Need:
1.Public concerns
2.Issues like - (i) financial scams
fraud and embezzlement
(ii) Accepting or promoting bribes,
or (iii) lying or deceptive
advertising of products and
services, unfair competitive
practices
3. Sound values and ethics
IMPORTANCE OF ETHICAL

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BEHAVIOUR AT THE WORKPLACE
To deal the problems like
(IT & HRD r problemS)
Inability to Recruit and retain
efficient people.
Tendency of employees to report
violations to outside regulatory
authorities because they lack an
adequate internal forum
Higher exposure to legal battles in
courts of Law
Risk of employees making
unethical decisions
Diminish Reputation and goodwill
in the industry and the community.
Significance legal exposure and
loss of competitive advantage in
the marketplace
FACTORS INFLUENCING ETHICAL
BEHAVIOUR IN THE WORK PLACE
(IM IN u r Out)
1.Individual Moral Standards
2.Influence of Managers and Coworkers
3.Opportunity to engage in
misconduct
ROLE OF INDIVIDUAL MORALS
AND STANDARDS IN DEFINING
WORKPLACE ETHICS (VENa)
Values
Negative Attitudes
Ethical Behaviour
REASONS OF ETHICAL DILEMMAS
IN WORKPLACE
1.Differential Roles
2. Hierarchy
EXAMPLES OF ETHICAL ISSUES
(S.E.C.R)
1.Suppliers and Business
Partners
Bribery and immoral entertainment,
Discrimination between suppliers,
Dishonesty in making and keeping
contracts
2.Customers
Unfair Pricing, Cheating
Customers, Deceitful Advertising,
Research Confidentiality
3.Employees
Discrimination hiring treatment of
employees, Harassment in
workplace
4.Resource Management
3

Misuse of Company funds, Tax

evasion
CLASSIFICATION OF ETHICAL
ISSUES FACED BY AN INDIVIDUAL
IN THE WORKPLACE
A. Relationship with Business
Associates
B. Conflicts of Interest
C. Fairness and Honesty
D. Communication
EMPLOYMENT DISCREMINATION
1.Treating one person better than
another because of their age, gender,
race, religion or other protected
class status, which is not relevant to
the job that they perform
2.A form of injustice, which goes
against the formal 'principle of
equality.
Elements: (MAP)
Merit is Ignored , Adverse Effect
Prejudice.
EMPLOYMENT DISCREMINATION
PRACTICES ( Ram Se Pehle
Dashrath Crowned)
1.Recruitment Practices
2.Selection / Screening Practices
3.Promotion Practices
4.Dismissal
5.Conditions of Employment
HARRASMENT
"Sormenting by subjecting to
constant interference or
intimidation".
1.Adverse / unreasonable terms
and conditions
2.Sexual harassment - coerced into
giving into another employee's
sexual demands
Nature/Effect: Harassment1.Degrading coercion
2.Psychological harm
3.Violates right to freedom and
dignity.
4.Is an unjust misuse of the
unequal power
Employers Responsibility:
1.Expected to ensure a fair
working environment free of
harassment.
2.Sexual harassment is prohibited
GUIDELINES FOR MANAGING
ETHICS IN THE WORKPLACE

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( C CAG fined IP2O in GOa)
1. Code of Conduct & Ethics
2. Cross-Functional Teams
3. Atmosphere of Trust
4. Group Decision-making
5. Integrated Ethics Management
6. Pro-active Role
7. Policies / Procedures
8. Open Communication
9. Grievance Policy
10.Ombudsperson
CHAPTER 4
ENVIRONMENT ETHICS
SUSTAINABLE DEVELOPMENT
Sustainable Development:Sustainable Development is
"Development that meets the needs
of the present without
compromising the ability of future
generations 2 meet their own needs
Following are 2 major hurdles in
sustainable development
1.Resource Depletion
a. It refers to the consumption of
finite or scarce resources.
b. Pollution may also be seen as a
type of Resource Depletion since
contamination of air, water, or land
diminishes their beneficial qualities.
Forms of pollution
2. Water Pollution
Causes: (a) using water bodies as
dumping yards / disposal sites for
wastes (e.g. for intermediate and
low-level radioactive wastes), or
(b) accidents and disasters (e.g. oil
spills).
3. Land Pollution
A. Solid Wastes
B. E-waste
C. Hazardous or Toxic Substances
4. Air Pollution:
Causes: (a) gases and particulates
emitted by industrial processes and
vehicles, and
(b) industrial accidents and
disasters. (e.g. Bhopal Gas Leak
Tragedy of 1984)
Effect
a. Detoriating quality of the air
b. Affect vegetation & agricultural
yields
c. Corrosion, discoloration, and rot

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d. Global damage like global
warming, ozone layer destruction,
and acid rains
GLOBAL WARMING AND ITS
IMPACT
a. Role of Greenhouse Gases:
Greenhouse Gases CO2, Nitrous
Oxide, Methane, and CFC's (ChloroFluoro-Carbons) keep the earth's
temperature at the right levels so
that life can evolve and flourish
b. Global Warming: Because of
substantially higher amounts of
greenhouse gases into the
atmosphere, resulting in increasing
amounts of heat, and raising
temperatures around the globe.
Adverse Effects:
(EMI & Int. DEW)
Expansion of the world's deserts.
Melting of polar ice caps, causing sea
levels to rise.
Increase in the frequency and
magnitude of droughts
Increase in the distribution and
severity of diseases.
Disruption in farming and reduced
agricultural yield levels.
Extinction of several species of
plants and animals.
Warming of water-bodies like lakes
and oceans, thus shifting the
geographical distribution of fish and
other marine species.
OZONE DEPLETION
Ozone Layer: A layer of Ozone
protects all life on earth from
harmful ultraviolet (UV) radiation.
However, this Ozone Layer is
destroyed by CFC gases, which are
used in Aerosol Cans, Refrigerators,
Air Conditioners, Industrial Solvents,
etc.
Depletion: When released into the
air, CFC gases rise. In 7 to 10 years,
they reach the stratosphere, and
destroy ozone molecules and remain
for 75 to 130 years, continuing all
the while to break down additional
ozone molecules.
Effect: Shrinking of the Ozone Layer
and consequent increase of UV rays
will lead to - (a) new cases of skin
4

cancer, and (b) destruction of75% of

the world's major crops that are
sensitive to UV light.
ACID RAIN
Acid Rain : Gases in the
atmosphere. + water vapour in
clouds = Acids, thus raising the
acidity of the water sources.
Effects: Acid Rain.
(a) Soaks into soils and indirectly
destroys the wildlife and species
that depend on forests for food and
breeding.
(b) Increases the acidity of the
water sources.
(c)Releases toxic metals from the
soil and carries these into
waterways
(d) Corrodes and damages
buildings, statues, and other
objects of iron limestone & marble
ECOLOGICAL ETHICS
Business is a part of the Ecological
System. Elaborate. (E-RISE)
System: An Ecological System is
an inter-related and interdependent set of organisms and
environments
Inter-related: Various parts of an
ecological system are inter-related,
the activities of one of its parts (i.e.
sub-systems) will affect all the
other parts (sub-systems).
Role of Business: Need to
recognize, maintain and preserve
the ecological systems within
which we live.
Ecology Awareness: Business
Enterprises should - (a) recognize
the inter-relationships and interdependencies of the ecological
systems within which they
operate, and (b) ensure that their
activities will not seriously injure
the ecological system.
Ecological Ethics: It is based on
the idea that the environment
should be protected not only for
the sake of human beings but also
for its own sake. This resolve by
business enterprises is required in
order to counter the problems of
pollution and resource depletion.

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IMPORTANCE OF CONSERVATION
OF NATURAL RESOURCES
a. Conservation refers to the
saving or rationing of natural
resources for later use.
b. Conservation, looks primarily
to the future, i.e. the need to limit
consumption now to have
resources available for tomorrow.
c. It also includes pollution control
as Pollution "consumes" pure air
and water, and Pollution Control
Steps for conservation
a. Change of approach from "using"
the economic resources in the best
possible manner to "conserve" the
ecological resources.
b. awareness of social
responsibility
c. need to adopt ethical values
d. more statutory requirements
towards pollution control,
environment-friendly practices, etc
are required
ENVIRONMENTAL ETHICS
Environmental Ethics:- the value
system which focuses on the need to
minimize pollution, and adoption of
environment-friendly business
practices. (GDP fc )
Global Impact: Problems like
Global Warming, Ozone Depletion
and disposal of hazardous wastes,
affect the entire world. Pervasive:
The issue of Environmental Ethics
concerns ethical behaviour of all
types of organizations
Facets: Environmental Ethics has
two facets - (a) the effect, i.e.
problems relating to protection of
environment or nature in terms of
pollution, resource utilization or
waste disposal, and (b) the basic
cause, i.e. issues of exploitive
human nature and attitude that
should be addressed in a rational
way.
Developments in India: The
Chipko movement in India (1973)
is a proof of people's concern about
balance in eco-system. Also, many
statutes have been enacted to
prevent / reduce air pollution, like

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Air (Control and Prevention of
Pollution) Act 1981, The Factories
Act, 1948, The Motor Vehicles Act
and Rules
framed there under, The Industries
(Development & Regulation) Act,
1951, and Mines & Minerals
(Regulation and Development) Act,
1957.
ENVIRONMENTAL FRIENDLY
BUSINESS PRACTICES (B QUE
VOW)
Eco-friendly business practices
should involve - (a) eco-friendly
production processes, strategies &
technologies, and (b) effective
management of wastes.
1.Overall Strategy
2.Value Analysis
3.Eco-friendly Attitude
Environment Impact Assessment
(EIA) and Environmental Audits
4.Quality Standards
5.Waste Management
6.Use of Natural Resources
7. Basic Aspects
Green Accounting Systems
CHAPTER 5
ETHICS IN MARKETING AND
CONSUMER PROTECTION
Marketing :-To influence the
behaviour of customers
Ethical Dilemma: Marketing
Executives face the challenge of
balancing their own best interests
in the form of recognition, pay, and
promotion, with the best interests
of consumers, their organization,
and society into a workable guide
for their daily activities.
Guidelines: Codes of Ethics
These guidelines will 1.Reduce violation of Company
standards
2.Strengthen a Company's
position
3.Assist young or inexperienced
executives
Limitation of Guidelines:
1.Every decision cannot be taken
out of the hands of the Manager
2.Also, determining what is right
and what is wrong can be
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extremely difficult.
3.It is not possible for any
enterprise to construct a twocolumn (ethical v/s unethical) list
of all possible practices.
REASONS FOR BEHAVING
ETHICALLY IN MARKETING ( P
MICR) / (IMP RC)
Image Boost to the Organisation
Matching Power & Responsibility
Positive Role of Marketing
Reduced Government Regulation
Consumer Well-being
COMPETITION - Competition is a
situation in a market in which
Sellers independently strive for the
Buyers patronage, in order to
achieve a certain business
objective(s), e.g. profit, sales,
market share etc.
Need: A pre-requisite for a good
competition is trade, i.e. the
unrestricted liberty of every man
to buy, sell and barter, when,
where and how, of whom and to
whom he pleases.
Effect: In conditions of effective
competition, competitors will be
having equal opportunities to
compete for their own economic
interest. Hence, the quality of their
outputs and resource deployment
will be given top priority in order
to sustain and succeed in the
market by meeting consumers'
demand at the lowest possible
cost.
COMPETITON POLICY AND LAW
The Competition Policy is regarded
as genus, of which, the
Competition Law is the specie.
RELATIONSHIP BETWEEN
COMPETITION AND CONSUMER
WELFARE
Competition: Competition refers
to rivalry in the marketplace.
Benefits
(a) Economic efficiency,
(b) Consumer welfare, and
(c) Avoiding concentration of
economic power.
Effect on Consumers: Consumers
are the greatest beneficiaries of

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competition.
Pervasive Effect:
a. Macro Level Effect
b. Micro Level Effect
Competition Act 2002
Objectives: The Preamble to the
Competition Act, 2002 lists the
following objectives (P3E)
(a) Establishment of a Commission
[called Competition Commission of
India (CCI)]
(b) To promote and sustain
competition in markets,
(c) To protect the interests of
consumers,
(d) To ensure freedom of trade
carried on by other participants in
markets, in India,
(e) To provide for matters
connected therewith and incidental
thereto.
Key areas
1. Prohibition of AntiCompetitive Agreements [Sec. 3]
Agreements like Tie In
Arrangements, Exclusive Dealings,
Refusal to Deal and Resale Price
Maintenance, Cartels for Bid
Rigging, Collusive Bidding etc. shall
be considered anti-competitive
and hence void, if they cause or are
likely to cause an appreciable
adverse effect on the competition
within India.
2.Prohibition of abuse of
dominant position [Sec. 4]
Imposing unfair or discriminatory
conditions or limiting and
restricting production of goods or
services or indulging in practices
resulting in denial of market access
or through any other mode is
prohibited.
3.Regulation of Combinations
[Sec. 5 & 6] Combinations which
cause or are likely to cause an
appreciable adverse affect on
competition within the relevant
market in India are void, unless it
is approved by CCI.
DEFINITION OF CONSUMER
As per Competition Act
Buyer/Approved User of goods or

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Hirer/Approved beneficiary of
services whether for personal or
commercial purpose whether
consideration is paid or payable
Competition Act v/s Consumer
Protection Act The definition of
Consumer in Competition Act is
substantially the same However,
the following wordings are
different.
Commercial v/s Personal Use:
Under the Competition Act 2002,
"Consumer" includes a person who
purchases goods for resale or for
any commercial purpose or for
personal use. But the Consumer
Protection Act, 1986 does not
consider "consumer for
commercial purpose" under the
meaning of the term "Consumer".
Distinguish between Consumer
Interest and Public Interest.
1. Meaning
2. Interested Class
3. Scope
4. Factors
5. Focus
SCOPE OF CONFLICT BETWEEN
CONSUMER INTERSET AND
PUBLIC INTEREST
Conflict: All Governmental policies
for "Public Interest" may not be in
the ultimate interest of the
Consumers.
Example: For example, a farmer
wants the price of goods he
consumes to be as cheap as
possible, but wants the highest
price for his produce. If the
Government wants self-sufficiency
in food as a national security
measure (public interest) it faces a
conflict i.e. should it support high
prices to encourage production or
low prices to protect the
consumer?
Conclusion: Consumers (Buyers)
want competition but Producers
(Sellers) desire monopoly.
INITIATIVES TAKEN BY UNITED
NATIONS TOWARDS
CONSUMERS WELFARE
(SEE PRESS).
6

Physical Safety, Redress, Economic

Interests, Education & Information,
Standards, Essential Goods &
Services. Sustainable Consumption.
Rights (BaSICs & CaR 4 HR)
(a) Right to Basic Needs
(b) Right to Information
(c) Right to Safety
(d) Right to Consumer Education
(e) Right to Choice
(f) Right to Representation
(g) Right to Redress
(h) Right to Healthy Environment.
CONSUMER PROTECTION
COUNCILS IN INDIA
1.The Central Consumer
Protection Council
2.The State Consumer Protection
Council
3.The District Consumer
Protection Council
Chapter 6
ETHICS IN ACCOUNTING AND
FINANCE
IMPORTANCE OF ETHICS FOR A
FINANCE AND ACCOUNTING
PROFESSIONALS
Need:
1. They accept responsibility to act
in Public Interest.
2. Their responsibility is not
restricted to satisfy the needs of any
particular individual or organization.
3. They should adhere to ethical
principles in order to achieve their
objective of "service in public
interest".
4. Failures such as Accounting
Scandals, use of false and
misappropriated accounting
information, direct involvement in
fraudulent activities, refusing to
identify frauds and embezzlements
reported by sub-ordinates /
employees in the Firm, etc. have
contributed to the failure of many
high-profile enterprises.
PRINCIPLES TO BE ADHERED BY
FINANCE AND ACCOUNTING
PROFESSIONALS (COPI & Paste)
1. Integrity & Independence
2. Objectivity

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3. Confidentiality
4. Professional Competence & Due
Care
5.Professional Behaviour
ASPECTS TO BE CONSIDERED IN
CREATING AN ETHICAL
ACCOUNTING ENVIRONMENT IN A
BUSINESS ENTERPRISES (FEAR)
The following aspects should be
considered for creating a sound and
ethical accounting environment in a
Business Enterprise Employee Awareness
Reporting of Frauds
Fair Treatment to Whistle
Blowers
GENERAL REASONS FOR
UNETHICAL BEHAVIOUR IN
CONTEXT OF ACCOUNTS AND
FINANCE (SAMIE) / (IM SEA) / ME
IAS)
Money-Mindedness
Accounting Complexities
Short-Term Profitability
Ignoring small unethical issues:
Economic Cycles
THREATS FACED BY A FINANCE
AND ACCOUNTING
PROFESSIONALS (S2AFI)/(SAIFS)
Self-Interest Threats
Self-Review Threats
Advocacy Threats
Familiarity Threats
Intimidation Threats
SELF INTEREST THREATS
Working as Consultants or
Auditors (F2Ind PDC2)
1. Financial Interest/Joint financial
interest
2. Dependence on total fees from a
client
3. Close business relationship
4. Fear of possibility of losing a client
5. Potential employment with a
client
6. Contingent fees
Working as Employees:- (IPCC
FIrst)
1. Incentive compensation
arrangements
2. Personal use of corporate assets
3. Concern over employments
security

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4. Commercial pressure
5. Financial interests, loans and
guarantees
SELF REVIEW THREATS
Working as Employees
Employee reviews decision or data
prepared by employee
Working as Consultant/Auditor
(R2E2D) REDER
1. Discovery of a significant error
during a re-evaluation of own
work
2. Reporting on the operation of
financial systems, designed or
implemented by him
3. Examining data prepared by him
4. Recently been, a Director or
Officer of that client
5. Employed by the Client
ADVOCACY THREATS
Working Auditor or Consultant,
1. Promoting Shares + doing AUDIT
2. Acting as an advocate + doing
AUDIT
Working as employee
1.Making false and misleading
statements on Company's position
FAMILARITY THREAT
Working as Consultants or
Auditors
1. Close or immediate family
relationship with a Director or
Officer
2. Close or immediate family
relationship with an employee of
the client
3. A former Partner of the Firm being
a Director or Officer
4. Accepting gifts or preferential
treatment
5. Long association
Working as Employees:1. Immediate or close family
member
2. Long association
3. Acceptance of a gift or preferential
treatment
INTIMIDATION THREATS
Working as Consultants or
Auditors
1. Threat to dismiss or replace
2. Threatened with litigation
3. Threat to reduce work & fees
7

Working as Employees
1. Threat to dismiss or replace
2. Dominating personality trying to
influence decision making process
SAFEGUARDS TO OVERCOME
THREATS
NEED :(a) Ensure an ethical environment,
(b) Increase the likelihood of
identifying or deterring unethical
behaviour, and
(c) Eliminate or reduce the threats to
an acceptable level.
Types:- Safeguards may be created
by the (FouR LAP)
(A) Finance & Accounting
Profession , Legislation &
Regulation, or
(B) Business enterprise employing
the professional. Some examples are
given below
A. Safeguards by the Profession,
Legislation or Regulation [PCC
Exam Exempt]
1. Educational, training and
experience
2. Continuing Professional
Development
3. Corporate Governance
Regulations,
4. Professional Standards,
monitoring and disciplinary
procedures
5. External Review by legally
empowered third party
B. Safeguards in the Work
Environment:
1. Systems of corporate overview /
supervision / reporting
2. Ethics and conduct programs
3. High caliber competent staff
4. Adequate system of Internal
Controls
5. Disciplinary processes and
procedures
6. Leadership that stresses the
importance of ethical behaviour
7. Monitor the quality of employee
performance
8. Timely communication
9. Encourage employees to
communicate ethical issues that
concern them

Accounting Academy
2520030
ETHICAL DILEMMA IN CONTEXT
OF A FINANCE AND ACCOUTING
PROFESSIONALS
Ethical Dilemma:
(a)Value-conflicts among differing
interests
(b) Multiple alternatives which can
all be justified, and
(c) Significant consequences to all
stakeholders
Example: In preparing a Profit
Forecast (a) projecting unrealistic
high revenue and mislead the
Lending Institution, in order to avail
the loan, or
(b) Projecting realistic but
insufficient revenue
ETHICAL CONFLICTS FOR A
FINANCE AND ACCOUNTING
PROFESSIONAL (ECC)
Conflict of Interest: A Finance
and Accounting Professional faces an
"Ethical Conflict" when the
circumstances are such that he is not
in a position to comply with the
principles (integrity, objectivity,
confidentiality, etc.) that govern
ethical behaviour.
Consultants or Auditors: A
threat to objectivity is created, when
a Professional Accountant in public
practice, competes directly with a
client or has a Joint Venture or
similar arrangement with a major
competitor of a client.
Employees: Pressure to act or
behave in ways that could directly or
indirectly threaten compliance the
fundamental principles. Such
pressure may be - (i) explicit or
implicit,
(ii) From a Manager, Director or
another individual within the
company. Such pressure may be to(a) Act contrary to Law or
Regulations.
(b) Act contrary to technical or
professional standards.
(c) Facilitate unethical or illegal
earnings-management strategies.
(d) Lie to, or otherwise intentionally
mislead (including misleading by

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9322011915
remaining silent) others, particularly
to the Auditors of the Company, or
Regulatory Authorities.
(e) Issue, or otherwise be associated
with, a financial or non-financial
report that materially misrepresents
the facts, including statements in
connection with,
ETHICAL CONFLICT
RESOLUTION IN THE CONTEXT
OF FINANCE AND ACCOUNTING
Conflict: Ethical Conflict is a
situation, where the professional is
required to decide between
compliance with principles, and
actions which are beneficial to the
business enterprise.
Factors to be considered: To
resolve the conflict, the Finance and
Accounting Professional should
consider the following aspects
(FEERA)
(a) Relevant facts,
(b) Ethical issues involved,
(c) Fundamental Principles related
to the matter in question,
(d) Established internal procedures,
and
(e) Alternative courses of action.
Conflict Resolution Process:
(a) Weigh the consequences / effects
of options
(b) Consult
(c) Course of action consistent with
the fundamental principles
Documentation
Legal Advice
Withdrawal:- where possible,
refuse to remain associated with
the matter creating the conflict.