accaspace€¦ · part b internal control and review part c identifying and assessing risk part d...

ACCAspace

Provided byACCA Research Institute

Copyright © ACCAspace.comACCAspace 中国ACCA特许公认会计师教育平台

ACCA P1

Governanace, Risk and Ethics (GRE)

公司治理，风险管理及职业操守

ACCA Lecturer: Cindy Li

Copyright © ACCAspace.comACCAspace 中国ACCA特许公认会计师教育平台 2

What is P1 About?

Part A Governance and responsibility

Part B Internal control and review

Part C Identifying and assessing risk

Part D Controlling risk

Part E Professional values, ethics and social responsibility


P1 Chapter 11 Social and Environmental Issues in the Conduct of Business and Ethical Behavior

1

2

Professional and the public interest

Social and Environmental Issues in the Conduct of

Business and Ethical Behavior


1. Professional and the public interest

1.1 Profession and professionalism

1.2 Accountancy profession and the public interests

1.3 The role of accountancy profession in the

organizational context and society

1.4 The ethical responsibilities of a professional

accountant both as an employee and as a professional


1.1 Profession and professionalism

1. Profession

A body of theory and knowledge which is used to support the public interest

A body of theory included

Ethical standard

Auditing standard

Examination

Accounting standard

Continue profession development

2. Professionalism

Taking action to support the public interest

Action included Reactive approach and Proactive approach


1.2 Accountancy profession and the public interest

The public interest (‘common well-being’ or ‘general

welfare’)

No set of definition

Concept tend to apply to providing information that

society as a whole should be aware of

No law to confirm this action but encourage doing so


1.3 The role of accountancy profession in the

organizational context and society

Financial accounting

Cost and Management accounting

Financial manangement

Auditing


1.4 The ethical responsibilities of a professional

accountant both as an employee and as a professional

Responsibilities to employer:

An accountant’s responsibilities to his or her employer extend to acting with

diligence, probity and with the highest standards of care in all situations.

Accountant to observe employee confidentiality as far as possible

He or she will show loyalty within the bounds of legal and ethical good practice.

Responsibilities as a professional:

Professional accountants are expected to observe the letter and spirit of the law

in detail and of professional ethical codes where applicable

In any professional or ethical situation where codes do not clearly apply, a

professional accountant should apply ‘principle-based’ ethical standards

Finally, and in common with members of other professions, accountants are

required to act in the public interest


P1 Chapter 11 Social and Environmental Issues in the Conduct of Business and Ethical Behavior

1

2

Professional and the public interest

Social and Environmental Issues in the Conduct of



2. Social and Environmental Issues in the Conduct of


2.1 The impact of economic activity on the environment and

society

2.2 Sustainability

2.3 Accounting for sustainability

2.4 Environmental management and audit scheme (EMAS)

2.5 Social and environmental audit


2.1 The impact of economic activity on the

environment and society

Environmental footprint

The year 2000 report published by the World watch Institute, a highly

respected research group made the following alarming environmental

trends that are shaping he future of civilization. This includes:

1) Rising temperature

2) Falling water tables

3) Sinking cropland per person

4) Shrinking forest

5) Loss of plant and animal species


2.2 Sustainability

According to World Commission of Environment and Development

(1987), sustainable development is defined as development that meets

the needs of the present without compromising the ability of future

generation to meet their own needs.

Hence, sustainability is now regarded as comprising three components –

environmental, economic, and social i.e. the notion of a ‘triple bottom

line’.

2.2.1 Environmental perspectives

2.2.2 Economic perspectives

2.2.3 Social perspectives


2.2.1 Environmental perspectives

The basic principles of sustainability in the environmental perspective

concern the effective management of physical resources so that they are

conserved for the future. All bio systems are regarded as having finite

resources and finite capacity and hence sustainable human activity must

operate at a level that does not threaten the health of those systems.

Even at the most basic level, these concerns suggest a need to address a

number of critical business problems, such as the impacts of

industrialization on biodiversity, the continued use of non-renewable

resource such as oil, steel and coal, as well as the production of

damaging environmental pollutants like greenhouse gases from

industrial plants.


2.2.2 Economic perspectives (1/2)

A narrow concept of economic sustainability focuses on the

economic performance of the corporation itself: the responsibility

of management is to develop, produce and market those products

that secure the long-term economic performance for the

corporation. This includes a focus on those strategies which, for

example, lead to a long-term rise in share price, revenues and

market share rather than short-term ‘explosions’ of profits at

the expense of long-term viability success.


2.2.2 Economic perspectives (2/2)

A broader concept of economic sustainability would include the

company’s attitude towards and impacts upon the economic

framework in which it is embedded. Paying brides or building

cartels, for instance, could be regarded as economically

unsustainable because these activities undermined the long-term

functioning of markets. Corporations which attempt to avoid

paying corporate taxes through subtle accounting tricks might be

said in an unsustainable way: if they are not willing to fund the

political institutional environment (such as schools, hospitals, the

police and the justice system), they erode one of the key

institutional bases of their corporate success.


2.2.3 Social perspectives

The key issue in the social perspective on sustainability is that of

social justice. Despite the impressive advances in standards of

living that many of us have enjoyed, the United Nations 2005

Report on the Wood Social Situation identified persistent and

deepening inequality across the globe. With 80 percent of the

wood’s gross domestic product belonging the 1 billion people

living in the developed world and the remaining 20 percent

shared by the 5 billion people living the developing countries, the

report suggested that ‘failure to address this inequality

predicament will ensure that social justice and better living

conditions for all people remain elusive, and that communities,

countries and regions remain vulnerable to social, political and

economic turmoil’.



(1) Background

The policy impetus for full cost accounting (FCA) comes from the call from

the European Commission’s Fifth Action Programmed (subtitled Towards

Sustainability), for the accountancy profession to develop FCA so that ‘the

consumption and use of environmental resources are accounted for as part of

the full cost of production and reflected in market prices’

FCA is thus an accounting tool that seeks to identify all external

environmental costs (and benefits) associated with a particular activity and to

incorporate this information in decision-making processes. The assumption

underlying the desire for FCA is that if one were to account or externalities

then society could be better informed as to which decisions would be more

likely to make sustainable development achievable.



（2）The approach

To undertake FCA, four generic steps are necessary for each exercise.

These are:

Define the object of the FCA exercise (be it a product, process a

part or whole of an organization);

Determine the scope of the FCA exercise (that is, where the

boundary of the analysis will be);

Identify and measure external impacts in physical terms and

Monetize the external impacts



（3）The limitations

FCA requires substantial amounts of physical data about the

object of the exercise and requires extensive modeling of complex

real world relationships.

The main conceptual issue that arises with FCA is deciding how to

monetize externalities. Moreover, different approaches to

monetization may often result in different conclusions being

drawn from and FCA exercise.

（4）The benefits of undertaking FCA

FCA highlights that some externalities can be eliminated by the

redesign of production processes or by organizations operating

differently.


2.4 Environmental management and audit scheme

(EMAS)The European Union’s EMAS was adopted in 1993 and relied on ‘market

forces’to encourage businesses to improve their environmental

protection measures. The idea was that companies who registered for

the scheme and who, as a result, were permitted to use the eco-logo,

were rewarded by the various corporate stakeholders. Under the EMAS

scheme, companies are encouraged to:

Set their own objective for environmental performance and to provide

the information needed to develop management systems which would

achieve those objectives.

Initiate a pattern of eco-auditing to assess their environmental

performance and to provide the information needed to develop their

environmental management systems.

Show commitment to externally validated assessment of their progress

in meeting these objective; and make information available to the public

in a concise, comprehensive form.



(EMAS)

As far as making information available to the public was concerned, the EMAS regulation

required that the environmental statement should include, in particular:

A description of the company’s activities at the site considered

An assessment of all the significant environmental issues of relevance to the

activities concerned

A presentation of the company’s environmental policy, program and management

system implemented at the site concerned

The deadline set for submission of the next statement

A summary on the figures on pollutant emissions, waste generation consumption of

raw material, energy, water, noise

Other significant environmental aspects as appropriate, as well as other factors

regarding environmental performance

Companies were also required to draw attention to significant changes since the

previous statement

The name of the accredited environmental verifier



(EMAS)

The ISO 14000 certification requires a company to:

Develop an environmental policy for the organization

Establish an environmental management system (EMS)

Identify the most significant aspects of the organization’s past, present

and future activities, products and services.

Clarify and respect the legal and other requirements that apply to the

organization’s environmental aspects.

Set environmental objectives and targets for all relevant functions and levels

within the organization.

Create programs to implement the organization’s environmental policy

and achieve the environmental objectives and targets.

Evaluate the environmental management system in order to identify

opportunities form improvement.



（1）What is Assurance?

Assurance is an evaluation method that uses a specified set of principles and

standards to assess the qualify of an organization’s subject matter and the

underlying systems, processes and competencies that underpin its

performance.

（2）Stages in an environmental audit

Environmental auditing contains three stages:

The first stage is agreeing and establishing the metrics involved and

deciding on what environmental measures will be included in the audit.

This selection is important because it will determine what will be

measured against, how costly the audit will be and how likely it is that

the company will be criticized for ‘window dressing’ and

‘greenwashing’.



The second stage is measuring actual performance against the

metrics set in the first stage. The means of measurement will

usually depend upon the metric being measured.

The third stage is reporting the levels of compliance or

variances. The issue here is how to report the information and

how widely to distribute the report.

accaspace€¦ · part b internal control and review part c identifying and assessing risk part d...

Documents