22 Questions
What is the main function of professional ethics?
To guide behavior in a business environment
How are professional ethics different from values?
Professional ethics are codified as a set of rules, while values are unique to each person
What is the primary purpose of a code of ethics?
To provide guidelines for professional conduct
What do professional ethics encompass?
Personal, organizational & corporate standards
How do professional ethics differ from personal ethics?
Professional ethics cover only behavior in a business environment, while personal ethics cover all aspects of life
What is the primary difference between personal ethics and professional ethics?
Personal ethics apply to everyday life, while professional ethics apply to work environment
In what scenario might personal and professional ethics clash according to the text?
When a doctor disagrees with the chosen medical treatment of a patient but is required to respect the patient's autonomy under the Code of Ethics for the Medical Association
What is the purpose of codes of professional ethics as stated in the text?
To guide professionals in maintaining client relationships and preserving the integrity of the applicable profession
What is expected of a professional in terms of expertise, according to the text?
To be competent and skillful in their field
What is the main responsibility of an accountant as a professional, according to the text?
Recognizing a responsibility to the public, client, and fellow practitioners including honorable behavior
What is the primary focus of corporate governance theories?
Balancing the interests of stakeholders
Which theory emphasizes the role of management as stewards who act in the best interest of the shareholders?
Stewardship theory
According to agency theory, what is a potential issue when managers pursue their own interests over the shareholders' interests?
Principal-agent conflict
Which theory focuses on the relationships between an organization and its external environment, such as suppliers and creditors?
Resource dependence theory
In the context of corporate governance, which theory emphasizes the broader impact of business decisions on society?
Stakeholder theory
According to resource dependence theory, what can organizations do to reduce their vulnerability to external resource providers?
Diversify resource sources
Which theory emphasizes the need for clear, transparent communication and collaboration between an organization and its various stakeholders?
Stakeholder theory
How does stewardship theory differ from agency theory regarding the behavior of managers?
Managers act in their own interest in stewardship theory, but as agents for shareholders in agency theory.
Which factor is NOT central to resource dependence theory?
The role of managers as stewards of shareholder interests
What is a key focus of agency theory in relation to the principal-agent relationship?
Aligning the incentives of managers with those of shareholders
In what way does stakeholder theory differ from stewardship theory?
Stakeholder theory emphasizes considering societal impacts, while stewardship theory focuses on maximizing shareholder wealth.
What is a potential implication of minimizing resource dependence according to resource dependence theory?
Increased reliance on external entities like suppliers and creditors
Study Notes
Professional Ethics
- The main function of professional ethics is to provide guidelines for behavior and decision-making in a professional context.
- Professional ethics differ from values in that they are specific to a profession and are based on the values and principles of that profession.
- The primary purpose of a code of ethics is to establish standards of conduct and behavior for professionals in a particular field.
Personal vs. Professional Ethics
- Professional ethics encompass the rules, norms, and standards that guide a professional's behavior and decision-making.
- Professional ethics differ from personal ethics in that they are specific to a profession and are based on the values and principles of that profession.
- The primary difference between personal ethics and professional ethics is that personal ethics are individual and subjective, while professional ethics are external and based on the profession.
Code of Ethics
- The purpose of codes of professional ethics is to provide guidelines for behavior and decision-making in a professional context.
- Codes of ethics outline the expectations for professional behavior and decision-making.
Expertise and Responsibility
- Professionals are expected to have a high level of expertise in their field and to stay up-to-date with developments in their profession.
- The main responsibility of an accountant as a professional is to provide accurate and unbiased financial information.
Corporate Governance Theories
Agency Theory
- Emphasizes the principal-agent relationship, where managers (agents) act on behalf of shareholders (principals).
- A potential issue arises when managers pursue their own interests over the shareholders' interests.
Stewardship Theory
- Emphasizes the role of management as stewards who act in the best interest of the shareholders.
- Differ from agency theory in that managers are seen as stewards rather than agents.
Resource Dependence Theory
- Focuses on the relationships between an organization and its external environment, such as suppliers and creditors.
- Organizations can reduce their vulnerability to external resource providers by diversifying their resources or building relationships with multiple providers.
Stakeholder Theory
- Emphasizes the broader impact of business decisions on society.
- Differs from stewardship theory in that it considers the interests of all stakeholders, not just shareholders.
Communication and Collaboration
- The purpose of stakeholder theory is to facilitate clear, transparent communication and collaboration between an organization and its various stakeholders.
Test your knowledge on the ethics in finance and accounting professions with this quiz based on the learning outcomes provided by Dr. Hamdino Hamdan. Topics include professional ethics, types and purposes of code of ethics, and the differences between personal ethics and professional ethics.
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