IAI Actuarial Core Principles · Business Finance · Ethical responsibilities of owners and managers
A manufacturing company adopts a code of conduct that bans staff from accepting gifts from suppliers above a small value and requires them to report any such offers. Which ethical risk is this provision primarily designed to reduce?
A gift limit and reporting rule mainly reduces conflicts of interest and bribery in procurement. Accepting valuable gifts from suppliers could bias staff decisions in the supplier's favour, so the code requires limits and disclosure to keep decisions objective.
- AConflict of interest and bribery affecting procurement decisionsCorrect
- BWindow dressing of year-end accounts
- CExcessive gearing in the capital structure
- DInformation asymmetry between shareholders and lenders
- Transfer pricing between group companies
Explanation
Gifts from suppliers can influence buying decisions in return for favours, creating conflicts of interest and corruption risk. The gift rule targets this directly. The other options concern accounting, financing or tax matters and are not addressed by a gift policy.
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