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Introduction

Professional ethics is a branch of philosophy which deals with behavioural conduct of individuals keeping in consideration the difference between right and wrong (Martinov-Bennie and Mladenovic, 2015). In any business organisation, professionals are expected to behave with integrity and have the courtesy to give respect others. Code of conduct and practice are the principle that guide and govern the way an individual should behave within an enterprise. This report is based upon HSBC Holdings PLC which is a multinational banking and financial services corporation headquartered in London, UK. This is the 7th largest bank of world and also the largest within Europe. This report gains an insight into the principle of ethical behaviour and working. Also, it includes the ethical behaviour when working with internal and external customers. It also explores the actions to deal with suspected breach of ethical conduct. Besides this, it explains the concept of ethical sustainability along with responsibilities of finance professionals in upholding this within organisation.

Task 1

1.1 Fundamental principles of ethical behaviour

Ethics is a collection of moral principles that guide a professional about their behavioural conduct. In any banking organisation, professional accountants are expected to behave in an ethical, fair and dignified manner which does not involve getting engaged in any kind of illegal or unethical practice. In this regard, there are certain fundamental principles of ethical behaviour that are required to be adhered to by accountants, these are:-

Integrity: It is required by professional accountants to be honest as well as straightforward while getting involved in any financial transaction. Also, they should maintain integrity in corporate relationships.

Objectivity: Professional accountants should not allow bias or undue influence to affect their decisions or professional judgment in organisational context.

Professional competence and due care: Professionals in financial institutions are required to possess high knowledge level and skill set so as to deal with clients in an effective manner. It is essential that act as per the laws and legislations in accordance with professional competence and diligence.

Confidentiality: Professional accountants should not disclose important information of clients to any person without proper authority. As a result of professional or personal relationships, no professional is allowed to use confidential information of clients for any hidden motive or advantage.

Professional Behaviour: An accountant deals with the money of a large number of clients daily, thus it is their duty to act in compliance with all laws and legislations. They should not get engaged in any unethical or illegal practice (Duska, Duska and Kury, 2018).

1.2 Legal, regulatory and ethical requirements affecting the accounting and finance sector

Accounting and finance sector is largely concerned with dealing with funds of a large number of persons on daily basis. To avoid hindrance from government or professional bodies, accounts working within such organisations are required to have proper knowledge of all the laws and legislations governing this sector. This will enable them to act in a desirable manner without getting involved in unethical practices. Such laws affecting accounting and finance sector are briefly explained below:-

Civil law: It is a body of laws and regulations that protect the rights of citizens by offering legal remedies to them. It covers areas of statute such as torts, property, contracts and family law. Professionals are required to possess knowledge of this and act in public interest at all times.

Criminal law: It is a law that defines punishments for those who commit crimes like threatening a person, performing harmful activities for one’s or anyone else’s, acting against moral welfare of public. Professional accountants should possess this in mind and act ethically and fairly without harming interest of any client or customer.

Compliance: Professionals working in financial institutions such as banks are required to comply with all the laws and legislations governing the sector (Duska, Duska and Kury, 2018). This becomes imperative to save themselves as well as the organisation from any undesirable legal consequence.

Code of practice: Dealing with money of public, an accountant is required to act with due care and professional competence. Also, they should not be biased towards anyone or allow personal relationships to override professional duties.

1.3 Role of professional bodies in accounts and finance sector

A professional who is operating in the accounts and finance sector is required to abide by the rules and regulations set by professional bodies. The bodies making and governing the compliance of accountants are International Federation of Accountants (IFAC) and Federation of European Expert Accountants (FEE). Both these professional bodies are necessary because:-

  • They are responsible for promoting ethical conduct and behaviour by professionals
  • They are accountable for the assurance of services delivered by their members
  • They set rules and regulations that encourage Continuing Professional Development (CPD) of professionals and set requirements for accountants which needed to be abided by them at all times.
  • They enforce a disciplinary framework at workplace and put forwards ethical and professional behaviour guidelines.

1.4 Reason behind individuals, organisations or industry sectors expected to adhere to code of conduct and practice

Code of conduct and practice is a written document that lays down the rules and regulations that have to be followed by individuals and organisations. Also, professional bodies enforce certain laws and guidelines that need to be strictly followed by professionals, entities and accounts and finance sector (Collis, Holt and Hussey, 2017). Compliance with code of conduct and practice allows professionals and organisations to maintain their membership within professional bodies. Breach of any rule or law may even lead to expulsion of membership. Also, code of conduct demonstrates a desirable way in which people and businesses within accounts and finance are expected to behave and thus, lead to an ethical practice.

1.5 Risks of improper practice to enterprise and the importance of vigilance

A financial enterprise and professionals within it are expected to behave in accordance with code of conduct and practice. There are many risks that are associated with improper practice of accountants functioning within banking organisations like HSBC. Such risks are described below:-

Operational Risks: It is the risk associated with non compliance of any set internal process, people or system within financial institutions. It can include unethical activities like tax evasion, market manipulation, fiduciary breach, data entry errors, bribery, misuse of confidential information etc. (Duska, Duska and Kury, 2018).

Money Laundering: It is the misuse of financial systems wherein professional accountants showcase that the money of client originally originated from conduct of illegal practices is obtained from a legal activity.

Terrorist Financing: It is an act wherein professionals within financial institutions provide finance or any type of financial assistance to terrorists or any non-state actor.

Such risks give rise to the importance of vigilance within an organisation. It keeps a check upon the activities within the enterprise and ensures that all professionals that are a part of the entity acts with due diligence and care. Also, it is a regulatory framework that makes sure that no fraud is being committed within organisation.

1.6 Maintaining up-to-date knowledge of changes to code of practice, regulations and legislation within accounts and finance sector 

Financial institutions like banks provide finance to public as well as take deposits from them. During this process, an accountant makes an interaction with a number of persons on a daily basis. Thus, it is required by them to possess adequate knowledge regarding the sector as well as the laws and legislations governing it. With inflexion of time, there are changes in accounting rules and regulations which an accountant must possess proper knowledge of. Thus, professionals can update their knowledge by way of journals, commercial magazines, taking short courses. Also, entities can obligate accountants to mandatorily attend Continuous Professional Development (CPD) training (Martinov-Bennie and Mladenovic, 2015).

TASK 2

2.1 Acting ethically while working with clients, suppliers, colleagues and others

Within a financial institution like HSBC Bank, professionals interact with many persons on a daily basis like suppliers, colleagues, clients, business associates etc. Thus, it is required by them to behave in an ethical and fair manner with due care and diligence so as to prevent getting involved in any kind of conflicts. Display of undesirable behaviour, use of abusive language, manipulation, misleading statements while having communication with any of them at work are all immoral activities that professionals are expected to stay away from. Individuals should act properly with integrity, professional competence and fairness while dealing with clients, suppliers and colleagues (Gray III, 2015). For this, they should develop and follow a principle-based approach to communicate with clients and work upon determining logical solutions to conflicts.

2.2 Importance of objectivity and maintaining professional distance between professional duties and personal life

Objectivity states a professional should be unbiased and act with honesty and integrity at all times. Accountants should not let personal or professional relationships override their decisions or professional judgement. It is essential for professional accountants to maintain a professional distance between personal life and professional duties so as to avoid being influenced by personal judgements (Murphy, 2017). A professional accountant may face certain situations that may pose threat to objectivity. They are expected and required not to perform a professional service when any relationship or circumstance unduly influences the professional judgement of accountant.

2.3 Importance of adhering to organisational and professional values, codes of practice and regulations

It is important for professionals within accounting and finance sector to comply with code of conduct and practice to engage in good and desirable activities. Also, it is essential that accountants follow all the rules and regulations set by financial organisations and professional bodies. This is important to ensure that individuals behave in an ethical and fair manner without getting involved in any illegal activity like money laundering, discrimination, terrorist financing, fraud, misappropriation of cash or assets etc. (Weiss, 2014). Also, there is a probability of getting prosecuted if accountants are found guilty of any moral or legal offense, involved in fraudulent activities.

2.4 Importance of complying with organisational policies for handling clients’ money

It is imperative for professional accountants within banks like HSBC to adhere to organisational policies and code of conduct while dealing with funds of public. It is required by them to act in a fair and diligent manner without getting involved in any kind of fraudulent acts. Also, they should act in public interest so as to avoid getting penalised or prosecuted by professional bodies or statute (Ismaeel and Blaim, 2012). In addition to this, as per the new Money Laundering Regulations of UK (2017), if a person is engaged in handling of any proceeds from a crime or monies and assets that represent proceeds of crime, it is deemed to be a money laundering offense. Any individual caught guilty of money laundering offense is punishable by statute and may even be sentenced to penalty or imprisonment.

2.5 Circumstances when confidential information should be disclosed and users of information

It is the professional duty of accountants within accounting and finance sector not to disclose information of clients to any third party. Also, they are expected not to misuse personal data of clients for their personal advantage (Idowu and et. al., 2013). While collecting data from clients, only relevant and suitable information is gathered. However, there are certain situations when they can disclose information to third parties, these are described below:-

  • Personal information of clients may be forwarded to other HSBC Group companies, any agent or third party service providers until and unless doing so is prohibited by statue.
  • At times, government, judicial bodies, agencies may ask to reveal certain personal information about clients, in such cases, information may be provided to them.
  • We may be required from time to time to disclose your personal information to Governmental or judicial bodies or agencies or our regulators, but we will only do so under proper authority.
  • In case of death of any client, personal information regarding them can be disclosed to nominee or other family members only after full investigation of matter.

2.6 Importance of working within limits and confines of one’s own professional experience, knowledge and expertise

A professional functioning within financial institutions like HSBC is required to gain a clear understanding of their roles and duties before beginning to carry out any financial transaction or activity. It is required by accountants to maintain quality of their work by keeping and maintaining up to date knowledge of all the rules, laws and regulations. Also, professionals should undertake steps so as to improve their knowledge and skill set. They must demonstrate best practice by way of working efficiently within the limits of their role. Also, the Principle of Professional Competence and Due Care require the same. Furthermore, the code of ethics given by IFAC emphasizes upon acting with adequate expertise (Hibbert and Cunliffe, 2015).

TASK 3

3.1 Relevant authorities and internal departments to which unethical behaviour, breaches of confidentiality, suspected illegal acts or other malpractice should be reported

Professionals within financial institutions like HSBC are required to act with due care and diligence at all the times. They should not get involved in any kind of illegal or unethical activity that puts a question on their professionalism. Also, if any professional suspects any unethical behaviour, illegal activity, breach of principle of confidentiality or any other malpractice, they should report about these to senior personnel present within the organisation (Fracarolli Nunes and Lee Park, 2016). Such authorities and internal department to whom all the immoral activities can be reported are:-

  • Money Laundering Reporting Officer (MLRO) within the organisation or National Crime Agency (NCA) for cases related to terrorist financing or/and money laundering.
  • MLRO/NCA for taxation errors
  • Other relevant and high authorities within United Kingdom like HMRC (Her Majesty's Revenue and Customs) and local police

3.2 Appropriate action taken when requests for work are beyond employee’s competence

When a professional is asked to complete any work for which they do not possess adequate knowledge, skills and expertise, it becomes a matter of concern for them. Generally, an individual is expected to work within the limits and confines of one’s knowledge and practice. Professionals should recognise the extent to which there is variance between their job role and the request for work. In case where the variance is high, professionals are required to convey their concern through employer’s confidential helpline or any relevant and appropriate professional body. With this, professionals will receive guidance upon the way to act in such extreme conditions and they can then act accordingly.

3.3 Inappropriate client behaviour and how to report it

It is essential for professionals to behave in an ethical and courteous manner while dealing with clients. Also, it is necessary that professional accountants who meet large number of persons on a daily basis recognise any inappropriate or unacceptable client behaviour. This can include violence, use of abusive language or any other immoral activity (Godemann and et. al., 2014). In such cases, professionals should communicate in a formal and decent manner so as to pacify the client at first. Where client still continues with inappropriate behaviour, this should be recorded and reported to employers, who are then expected to file an Incident Report for the same.

3.4 Internal and external reporting procedures if an employee suspects employer, colleague or client has committed or may commit illegal or unethical act

In case any illegal or unethical act is detected or suspected by an individual, professionals can report it internally or externally or both ways. Internally, they are required to communicate about such act to line managers first who would then pass it on to their superiors and finally, following the hierarchal system, the information reaches employer. In case where employee suspects employer to be a part of any fraudulent activity, they can take assistance from external bodies like NCA or HMRC.

3.5 Strategies to prevent ethical conflicts

Ethical conflicts arise as a consequence of an accountant failing to apply fundamental principle of ethical behaviour in practice or business. In such cases, the policies and norms set by organisation as well as professional bodies act as safeguards and prevent or limit ethical conflicts within organisations like HSBC. When an ethical conflict arises, it gives rise to the need of its resolution. Certain factors are kept in consideration when initiating any informal or formal conflict resolution process. These are relevant parties and facts, ethical issues involved, fundamental principles associated with conflict and set internal procedures to deal with such conflicts and alternative course of action (Dierksmeier, 2011). After considering all these, accountant takes relevant decision regarding the conflict. If conclusion can still not be drawn, they seek advice from professional bodies.

TASK 4

4.1 Importance of ethical approach to sustainability

Professional accountants are required to act in public interest at all the times. They have a duty to work towards protecting the interest of society as a whole. Thus, these professionals are required to keep in consideration the economic, social and environmental aspects of work and behaviour portrayed by them at workplace. This is necessary so as to support the approach of sustainability and sustainable development within organisations like HSBC. Also, sustainable development is a key element of any organisation’s Corporate Social Responsibility (CSR). Thus, professionals should facilitate the running and functioning of enterprise in a sustainable manner.

4.2 Responsibilities of finance professionals in upholding principles of sustainability

Accounting and finance professionals develop and encourage an ethics-based culture where there is no unethical or illegal practice like fraud, bribery, money laundering, theft, terrorist financing, non-compliance with rules and regulations, discrimination etc. (Crane and Matten, 2016). They foster working in a manner that meet the needs of the present generation without having to compromise with the future generations. Also, these professionals take in consideration the social, environmental and economical factors while behaving within an organisation.

Conclusion

From the above report, it is concluded that professionals should comply with ethical code of conduct and practice in order to remain free from any prosecution or penalty. Also, it has been analysed that these individuals should follow the fundamental principle of ethical conduct at all times. It has been assessed that accountants are required not to get engaged in activities like terrorist financing, money laundering etc. In addition to this, it has been evaluated that professionals should act keeping in consideration the social, environmental and economical factors to adopt a sustainable approach. 

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References

  • Collis, J., Holt, A. and Hussey, R., 2017. Business accounting. Palgrave.
  • Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press.
  • Dierksmeier, C., 2011. The freedom–responsibility nexus in management philosophy and business ethics.Journal of Business Ethics. 101(2). pp.263-283.
  • Duska, R. F., Duska, B. S. and Kury, K. W., 2018. Accounting ethics. Wiley-Blackwell.
  • Fracarolli Nunes, M. and Lee Park, C., 2016. Caught red-handed: the cost of the Volkswagen Dieselgate.Journal of Global Responsibility. 7(2). pp.288-302.
  • Godemann, J. and et. al., 2014. United Nations supported principles for responsible management education: purpose, progress and prospects.Journal of Cleaner Production. 62. pp.16-23.
  • Gray III, A. W., 2015. Evaluating ethics education for accounting students. Management Accounting Quarterly. 16(2). p.16.
  • Hibbert, P. and Cunliffe, A., 2015. Responsible management: Engaging moral reflexive practice through threshold concepts.Journal of business ethics. 127(1). pp.177-188.

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