Test of Professional Competence in Management Accounting: What's the Difference between an Ethical Issue and a Business Issue? This Question Seems Straightforward Enough, Yet Recent T4 Exam Results Have Shown That Many Students Find It a Tough One to Answer by the T4 Case Study Writer

Financial Management (UK), July-August 2013 | Go to article overview

Test of Professional Competence in Management Accounting: What's the Difference between an Ethical Issue and a Business Issue? This Question Seems Straightforward Enough, Yet Recent T4 Exam Results Have Shown That Many Students Find It a Tough One to Answer by the T4 Case Study Writer


The T4 assessment matrix indicates that 10 marks are available in the exam under the "ethics" criterion for identifying, discussing and advising on ethical issues raised in the unseen material. But candidates in every sitting have been confused about what constitutes an ethical issue and what distinguishes it from a business issue.

Before I clarify the difference and explain what the exam requires with regard to your discussion of, and advice on, ethical issues, it's useful to consider CIMA's code of ethics. This sets out the following five fundamental principles for professional accountants:

* Integrity. Be straightforward and honest in all your professional relationships.

* Objectivity. Do not allow bias, conflicts of interest or the undue influence of others to override your judgement.

* Professional competence and due care. Maintain your knowledge and skill at the level required, to ensure that a client or employer receives competent services based on current developments in practice and legislation, and act diligently in accordance with the available technical and professional standards.

* Confidentiality. Respect the confidentiality of information acquired as the result of professional and business relationships, so neither disclose any such information to third parties without proper and specific authority (unless there is a legal or professional right to do so) nor use the information for your personal gain or that of third parties.

* Professional behaviour. Comply with relevant laws and regulations, avoiding any action that discredits the profession.

The T4 exam requires you to specify what the ethical issue is in a given scenario; explain why you consider it to have an ethical dimension; and provide detailed guidance on what action could be taken to address that issue, both immediately and in the longer term, along with your justification for that advice.

Between one and three marks are available for identifying an issue and justifying why you think it has an ethical dimension. Because of this mark allocation, you would be well advised to find a second ethical issue and repeat the process. A further five marks are available (up to three per issue) for giving detailed and justified recommendations. Demonstrating a good understanding of what an ethical issue is and why, together with providing sound advice, should therefore earn you up to 10 marks under the ethics criterion.

So what is the difference between an ethical issue and a business issue? There is a fine line, especially when some of the ethical issues included in the unseen material get "mixed in" with the business issues. In general, a business issue is one that affects an organisation's performance, profitability or cash flow and which needs to be addressed in order to improve the company's efficiency. By contrast, an ethical issue is one where the performance of the business (and often its profitability) is being prioritised above the wellbeing of its employees or what is considered to be good practice.

Let's consider an example of a problem with both business and ethical aspects from the May 2012 exam, which concerns a toy firm called Jot (bit.ly/T4May2012). The company is having trouble with its IT systems, which means that incorrect invoices are being sent to customers.

Here is an edited extract from the unseen material: "The finance and IT director is concerned that Jot's different IT systems are not integrated, which has caused data duplication and conflicts. Some customers have queried and not settled their invoices, as the volume of products invoiced for does not agree with the volume of products received. This is causing some conflict between the finance department, which is chasing overdue trade debtors, and the sales department, which is trying to keep customers satisfied. One of the problems is that Jot appears to have invoiced customers for a number of products that have been supplied as replacements for faulty or damaged goods. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Test of Professional Competence in Management Accounting: What's the Difference between an Ethical Issue and a Business Issue? This Question Seems Straightforward Enough, Yet Recent T4 Exam Results Have Shown That Many Students Find It a Tough One to Answer by the T4 Case Study Writer
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.