CPA Ethics and Governance key terms

The systematic study of moral principles and the application of those principles to decisions and conduct, especially where a person's choices affect the interests of others.

An approach that judges whether an action is right by its consequences, asking which option produces the greatest overall good; utilitarianism is the best-known version.

An approach that judges actions against duties, rules and rights rather than outcomes, holding that some acts are inherently wrong even if they produce good results.

An approach centred on the character of the decision-maker, asking what an honest, fair and courageous person would do, and how good habits can be cultivated.

The position that right and wrong depend on the norms of a particular culture, group or individual, so that no single moral standard applies to everyone.

The collective wellbeing of the community that a profession exists to serve, which members are expected to place ahead of the interests of any one client or employer.

Freedom from relationships, interests or circumstances that could compromise, or appear to compromise, objectivity in audit and assurance work; it has both a mental and an apparent dimension.

A fundamental ethical principle requiring accountants to prevent bias, conflict of interest, undue influence or personal gain from overriding their professional judgement and conclusions.

A fundamental ethical principle requiring accountants to be straightforward and honest in all professional and business dealings, and not to be associated with misleading or false information.

A fundamental ethical principle requiring accountants to protect information obtained through professional relationships and not disclose it without authority or a legal or professional duty to do so.

A fundamental ethical principle requiring accountants to maintain current knowledge and skill, act diligently in line with applicable standards, and decline work they are not competent to perform.

A fundamental ethical principle requiring compliance with relevant laws and regulations and avoidance of conduct that would discredit the profession in the eyes of reasonable observers.

A questioning mind and critical assessment of evidence, alert to bias, misstatement or fraud, so that information is not accepted at face value without corroboration.

A situation in which a personal, financial or other interest could improperly influence professional judgement, or could be seen to do so, harming a client, employer or third party.

Categories of pressure that endanger ethical compliance - self-interest, self-review, advocacy, familiarity and intimidation - together with actions such as independent review, rotation or disclosure that reduce them to an acceptable level.

A situation in which competing ethical obligations or values conflict, so that every available course of action requires the decision-maker to compromise something important.

Disclosing suspected wrongdoing inside or outside an organisation to a person able to act on it, often at personal risk; protected disclosures are shielded by law in many jurisdictions.

The framework of rules, practices and processes by which an organisation is directed, controlled and held to account, allocating authority and responsibility among the board, management and shareholders.

A theory explaining governance as the relationship in which owners (principals) delegate to managers (agents) whose self-interest may diverge, generating agency costs that monitoring and incentives seek to control.

A theory holding that an organisation should be accountable to everyone affected by its activities - employees, customers, suppliers, communities and lenders - and not only to shareholders.

A theory assuming managers are trustworthy stewards who identify with the organisation's long-term interests, so governance should empower them rather than impose heavy monitoring.

The view that the board's overriding objective is to maximise long-term shareholder wealth within the law, with other stakeholder interests treated as constraints or means to that end.

The body elected or appointed to oversee strategy, appoint and supervise senior management, approve financial reporting and risk appetite, and account to shareholders for the company's performance.

A non-executive director assessed as free of business, personal or other relationships that could materially interfere with objective judgement about the company's affairs.

The arrangement whereby one individual serves as both board chair and chief executive, concentrating power and weakening board monitoring; most governance codes recommend separating the roles.

A board committee, usually of independent directors, that oversees financial reporting, internal control, risk management, and the independence and performance of internal and external auditors.

A board committee that designs and recommends executive pay and incentive arrangements, aiming to attract and retain talent while aligning rewards with long-term performance and shareholder interests.

The legal obligation of directors and officers to act in good faith and in the company's best interests, avoid undisclosed conflicts, and not misuse their position or inside information.

The ethical climate signalled by the board and senior executives through their words, decisions and example, which strongly shapes whether employees behave ethically under pressure.

The obligation to explain and answer for decisions, performance and conduct to those with a legitimate right to ask, and to accept the resulting consequences.

The timely, accurate and open disclosure of information about performance, risk and governance so that outsiders can make informed judgements without relying on insiders.

The ASX Corporate Governance Council's approach under which a listed entity either adopts each recommendation or explains why it has not and what alternative practice it uses instead.

A business's commitment to manage its economic, social and environmental impacts and treat stakeholders fairly beyond the minimum required by law or regulation.

A framework that evaluates organisational performance across three dimensions - economic, social and environmental - rather than reporting financial results alone.

Disclosure of an entity's environmental, social and governance performance and impacts, allowing stakeholders to judge long-term viability and contribution to sustainable development.

A theory proposing that organisations seek to operate within society's norms and expectations, using disclosure and action to obtain, maintain or repair a social licence to operate.

Presenting misleading or exaggerated environmental claims in reports or marketing so that stakeholders form an unduly favourable impression of an entity's sustainability performance.

A concise corporate report showing how strategy, governance, performance, risk and resources interact to create or destroy value over the short, medium and long term.