Fundamentals of Ethics,

Corporate Governance and Business Law

2nd Edition (April-2020)

Fundamentals of Ethics,
Corporate Governance and Business Laws
Module -03 1. The importance of ethics.
2. Values and attitudes for professional accountants.
Ethics and
3. Legal frameworks, regulations and standards for business.
business
4. The role of national ‘Professional Oversight Boards for Accountancy’
(15%)
and ‘Auditing Practices Boards’.
(Contin…) 5. Financial Reporting Council (FRC) Bangladesh.
6. The role of international accounting bodies e.g. IFAC.
7. The nature of ethics and its relevance to business and the
accountancy profession.
8. Rules based and framework approaches to ethics.
9. The ‘Seven Principles of Public Life’ – selflessness, integrity,
objectivity, accountability, openness, honesty and
leadership.

The role of international accounting bodies e.g. IFAC. [www.ifac.org]

The International Federation of Accountants

(IFAC) strives to serve the public interest by
establishing and promoting adherence to
international standards, facilitating cooperation
with member bodies, and serving as a
spokesperson for the international profession on
relevant public policy issues.

The worldwide organization for the accountancy profession.

IFAC's boards set international standards in a number of areas including auditing, quality
control, education, public sector accounting and ethics for professional
accountants. While IFAC was founded on October 7, 1977, in Munich, its headquarters
have been located in New York City since its inceptions.

The International Federation of

Accountants (IFAC) reviews the
profession worldwide and published
Code of Ethics.
This Code of Ethics establishes
ethical requirements for
professional accountants.
The framework of laws, regulations
and standards are applied to the
accountancy profession by the
bodies mentioned above, and
through matters brought to their
attention by professional firms.

They test the efficacy of the framework through consultation with interested parties
(professional firms and others) and review the professional accountancy bodies’ practices.

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Md.Monowar Hossain FCA, CPA, FCS, CGA, CIPFA(UK), FCMA
CFO & Head of ICC, Agrani Bank Limited
eMail: md.monowar@gmail.com
Fundamentals of Ethics,
Corporate Governance and Business Law
2nd Edition (April-2020)

A further source of guidelines and standards with which the professional accountant must be
aware is the code pertaining to their place of employment.
A majority of large corporate entities and number of smaller companies now have codes of
ethics giving guidance to company personnel as to expected levels of behaviour of their
staff.

The nature of ethics and its relevance to business and the accountancy profession

In business, ethics is defined as the

application of ethical values to
business behaviour. Ethical values
are words such as integrity,
honesty, responsibility,
transparency and fairness amongst
others. It is how the business or
entity brings these values ‘alive’ or
applies them within their organisation
as it transacts its business that is key.
How it conducts its relation-ships with
its employees, its shareholders, its
customers, its suppliers and with those
in the community in which and
wherever it operates. It is therefore
about how the entity does its business
not what it does, so it is not about the
product or service the company
provides.

Ethical values play out through behaviours. They are highly relevant to business and those
operating in it, especially professional people. There is the expectation in the public mind that
professionals within organisations will play a leadership role in ensuring that those entities
will act ethically in transacting their business.
That expectation is rooted in ‘trust’ that businesses know what they are doing and are doing
it in society’s interest, as part of wealth creation for all. This is the ‘trust me’ model. This
model has been eroded as society recognised as it could not trust business to ‘do the right
thing’ particularly in the arena of non-financial focussed activity. So after the 1960s/1980s
when major companies became manager-run and led rather than family-owned and led, the
model evolved to ‘involve me’.
This model has continued to evolve through the stages of ‘show me’, asking companies to
demonstrate how they do their business; to ‘prove to me; where society expects companies
to provide independent verification and assurance of how they do their business. The ultimate
model, if companies do not behave, is to impose law on them to do so: ‘obey me’. The law is
a blunt instrument in curing behaviour because it cannot define or cover all instances of poor
behaviour, and leads to a compliance or tick the box culture rather than one based on ‘doing
the right thing’ naturally.

Page# 18
Md.Monowar Hossain FCA, CPA, FCS, CGA, CIPFA(UK), FCMA
CFO & Head of ICC, Agrani Bank Limited
eMail: md.monowar@gmail.com
Fundamentals of Ethics,
Corporate Governance and Business Law
2nd Edition (April-2020)

Rules based and framework approaches to ethics

There is a different approach to those codes and standards that are compliance based and
those ethics based. This is human nature. The former tends to be tick box and the latter
principle based. These are two different aspects of internal culture which organizations sign
up to: compliance because they have to and ethics because they feel they ought to. In
governance terms they are deemed an important way of engendering trust from others.

This can be demonstrated in the following table contrasting the characteristics of a

compliance-driven framework versus one primarily driven by values, principles and ethics.

Ethics Compliance

Slow burner Constant monitoring

Long time frame Short time frame

Prevention Detection

Principles based Law based

Values driven Fear driven

Implicit Explicit

Spirit of the law Letter of the law

Grey Black and white

Alignment with values Requires obedience

Discretionary Mandatory

More difficult Easier

Page# 19
Md.Monowar Hossain FCA, CPA, FCS, CGA, CIPFA(UK), FCMA
CFO & Head of ICC, Agrani Bank Limited
eMail: md.monowar@gmail.com
Fundamentals of Ethics,
Corporate Governance and Business Law
2nd Edition (April-2020)

An example of applying the different approaches above would be a company which has a
strong rules-based culture where individuals clearly have a sense of what they can and cannot
do (letter of the law, black and white, mandatory, explicit) and what will hap-pen if they do
not (fear-driven, requires obedience, mandatory). However, if an employee is faced with a
situation not covered by the ‘rule book’ they will be required to use their own judgement as
to what to do. In most instances, the decision they take will be the right one but any potential
for the wrong decision being made will be reduced if the employee has guiding values and
principles which will underpin that difficult deci-sion-making. So, an ethical framework of
guidance is likely to be more wide-ranging in its applicability than a fully rules-based
one.

The ‘Seven Principles of Public Life’ – selflessness, integrity, objectivity,

accountability, openness, honesty and leadership.
In the public sector in the UK, employees are governed by ‘The Seven Principles of Public
Life’ issued by the Committee of Standards in Public Life
(1). Selflessness - Holders of public office should act solely in terms of the
public interest.
(2). Integrity - Holders of public office must avoid placing themselves under
any obligation to people or organizations that might try inappropriately to
influence them in their work. They should not act or take decisions in order to
gain financial or other material benefits for themselves, their family, or their
friends. They must declare and resolve any interests and relationships.
(3). Objectivity - Holders of public office must act and take decisions
impartially, fairly and on merit, using the best evidence and without
discrimination or bias.

(4). Accountability - Holders of public office are accountable to the public for
their decisions and actions and must submit themselves to the scrutiny
necessary to ensure this.
(5). Openness - Holders of public office should act and take decisions in an
open and transparent manner. Information should not be withheld from the
public unless there are clear and lawful reasons for so doing.
(6). Honesty - Holders of public office should be truthful.

Page# 20
Md.Monowar Hossain FCA, CPA, FCS, CGA, CIPFA(UK), FCMA
CFO & Head of ICC, Agrani Bank Limited
eMail: md.monowar@gmail.com
Fundamentals of Ethics,
Corporate Governance and Business Law
2nd Edition (April-2020)

(7). Leadership - Holders of public office should exhibit these principles in

their own behaviour. They should actively promote and robustly support the
principles and be willing to challenge poor behaviour wherever it occurs.

Professional accountants need to adhere to all these codes. They also need to be aware
that if they find themselves in situations where they might not be able to comply with the
legal, regulatory or standards frameworks they have a duty to raise these concerns to
themselves and their profession. They need to speak up and be heard.

Page# 21
Md.Monowar Hossain FCA, CPA, FCS, CGA, CIPFA(UK), FCMA
CFO & Head of ICC, Agrani Bank Limited
eMail: md.monowar@gmail.com