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 CHAPTER 2
Ethics in Cost Accounting

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 Definition

 Morality
 Right or wrong  
 Good or bad   
 Just or unjust   

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 Ethical Behaviour

 Acting morally
 Acting in an acceptable way

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 Ethical Dilemmas

 Improper conduct is ethical to one self but

unethical to others
 Not prohibited by law

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 Ethical Issues

 Rules selectively applied

 Few benefit at the expense of many
 Misrepresenting information
 Collusion to gain advantage
 Favouritism to divide and rule
 Safety of whistleblowers compromised

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 Religion in Ethics

Main sources of ethics

Teachings of various religions

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 Greek Philosophy in Ethics

 Virtue ethics
 Ethics of:
‒ Socrates
‒ Plato
‒ Aristotle

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 Other Philosophies

Utilitarianism
Human rights
Justice

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 Ethics in Islam

 The Quran commands the observance of ethical

and moral code in human behaviour
 Shariah is a body of principles and injunctions
that guides the conduct of men
 Fiqh is Islamic law applied in transactions and
contracts

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 Ethics in Islam (cont.)

 Riba is prohibited but trade is permitted (2:275)

‒ Types:
• Riba al-nasiah
• Riba al-fadl
• Riba al-jahiliyyah
 Gharar is uncertainty or risk prohibited

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 Ethics in Cost Accounting

Cost accountants held to the highest ethical

standards
Consistency in practice and applications
Adhere to code of conduct

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 Ethical Issues

 Arbitrary allocation of costs

 Improper way of assigning costs
 Charging costs to wrong jobs
 Quoting an incorrect cost
 Overstating costs
 Including costs that should not be included
 Understating costs

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 Ethical Issues (cont.)

 Code of ethics have been developed by

professional accounting bodies
– Maintain professional competence
– Refrain from disclosing confidential information
– Maintain professional integrity
– Maintain objectivity
 Code of ethics of companies: Credo

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