This section introduces the CIMA Code of Ethics as well as past questions from the BA4 paper that highlights ethics. The Code provides guidance for you throughout your studies and your working life. The Code is global in approach and based on IFAC's Handbook of the Code of Ethics for Professional Accountants issued by the International Ethics Standards Board of Accountants (IESBA).
Being familiar with the Code and how you apply it is an integral part of both studying and working as a management accountant. Throughout the syllabus questions will arise on how you apply your understanding of the Code. Remember, sometimes ethical considerations may require behaviour above that required by the law.
See Part 1 'Why ethics and accountants?' to refresh your knowledge on why Accountants have a Code.
THE BA4 EXAM
The BA4 exam covers the fundamentals of ethics, corporate governance and business law. 25% of the paper focuses on ethics and ethical conflict, but governance and law also have strong ethical considerations, particularly in relation to how you uphold the Code. If you have had exemptions from BA4 exam due to previous qualifications it is worth reviewing this section to familiarise yourself with the Code and ethical questions. BA4 additionally covers areas of corporate governance and the law which will also come up in higher level examinations, which you will separately need to consider.
INTRODUCING THE CODE OF ETHICS
The CIMA Code has five key principles and is based on a conceptual framework approach. Being principles based, as opposed to rules based, the Code assists the accountant to truly reflect and make a judgment on what is the appropriate way to handle a situation.
See the 2020 Code of Ethics at a glance and find out how it applies to members and students.
The Code points out that we may encounter ‘specific threats to compliance with the fundamental principles’. Further, the Code helps by categorising threats as self-interest threats, self-review threats, advocacy threats, familiarity threats, and intimidation threats.
||thinking about your bonus
||not using objectivity and independence
||not using objectivity and just promoting an employer’s position
| familiarity threats
|| a close relationship with an employer, supplier or client
||an employer or client pressuring and using undue influence
The Code also offers some defence mechanisms in the form of safeguards, including:
- educational, training and experience requirements for entry into the profession
- continuing professional development requirements
- corporate governance regulations
- professional standards
- professional or regulatory monitoring and disciplinary procedures
- external review by a legally empowered third party of the reports, returns, communications or information produced by a professional accountant
ETHICAL CONFLICT RESOLUTION
The Code recognises that there may be circumstances when the responsibility of a professional accountant to her/his employing organisation and her/his obligations to the Code’s fundamental principles are in conflict.
This could also be described as an ethical dilemma. Some examples of ethical dilemmas or potential conflicts with the fundamental principles include:
Being expected to
- act contrary to law, regulation, or technical or professional standards
- facilitate unethical or illegal earnings management strategies
- lie to, or otherwise intentionally mislead (including misleading by remaining silent) others, in particular the auditors of the employing organisation or regulators
- issue, or otherwise be associated with, a financial or non-financial report that materially misrepresents the facts, including statements in connection with, for example the financial statements, tax compliance, legal compliance, or reports required by securities regulators
WHAT TO DO WHEN FACING AN ETHICAL CONFLICT?
The professional accountant faced with any of the ethical dilemmas listed on the previous page is in a most uncomfortable position. What should he/she do?
The Code requires the accountant to respond to an issue and gives guidance on how they should consider a response. Inaction or silence may well be a further breach of the Code. It advises us that, when faced with an ethical conflict the professional accountant should consider the following areas in making a plan of action to respond to the issue:
- relevant facts
- ethical issues involved fundamental principles related to the matter in question (an ethical conflict often involves more than one fundamental principle)
- established internal procedures
- alternative courses of action
Learn more about ethical dilemmas
Test: BA4 sample questionnaire