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Ethics by Duyen-Tho Nguyen (Professional Ethics (3. Ethical challenges…
Ethics
by Duyen-Tho Nguyen
Professional Ethics
1. Impact of ethical or unethical
decisions
Ethics decision can have a negative effect
Ethical action is desirable as it is likely to limit losses and lead to faster resolutions
2. Ethics
An agreed outcome that identifies right or wrong in particular circumstances by way of a decision intended to be achieved in a good way or a good outcomes;
Subjective
3. Ethical challenges within the
accounting profession
Most frequent ethical issues:
Misleading reporting, fraud/ tax evasion, lack of transparency in accounting decisions; etc.
Reasons for misconduct:
pressure from client; conflict of interest; pressure from boss
Response:
said NO (30%), sought advice, educated follow professional/ client; report to management; resigned.
4. The accounting work environment:
Respected for their technical and professional competence;
trusted advisers involved in executive management decisions;
rewards assosiated with responsibility and extreme pressure
Ethical theories
5. Normative theories
Ethics of conduct:
teleological and deontological
Ethics of character:
called virtue ethics
propose principles that distinguish right from wrong by establish a norm of correct behavior
6. Teleological (consequential)
Based on the results or consequences of the decision or action; if benefits of a proposed action outweigh cost, the action is considered correct.
Types
Egoism:
actions bring best result for the individual taking/ making decision
Utilitarianism:
actions bring best result to the greatest number of people
7. Deontological theories (duty based)
Motive:
far more important than the action
More important considerations than outcomes; intention is important.
Theory of Rights:
a good decision is one that respects the rights of others
Justice theory:
concerned with issues of fairness and equality
8. Virtue ethics
Ethical character is more important than the right action
Virtues are not inborn but are developed through learning and practice
APES 110
Code of Ethics for professional accountants
9. The public interest
the accountant's primary duty is to the public and society (not client and employer)
10. The APESB Code of Ethics
Part 1
fundamental principles and conceptual framework
Integrity
(s.111) centered on concepts of trust, honesty, honourable and reliable behaviour; courage to pursue one's conviction
Objectivity
(s.112) state or quality of being true, outside anyone feeling or interpretation.
Avoid relationship/ situation that compromise objectivity
Competence and Due Care (s. 113)
attain and maitain professional skills and knowledge;
act diligently in accordance with technical and professional standard
Professional behavior
(s.115) comply with laws and regulations and avoid conduct that member knows or should know might discredit the profession
Confidentiality (s.114)
Respect the ownership of information ; not disclose to 3rd parties unless legal/ professional right or duty to disclose, even after the relationship ends.
The conceptual framework
(s.120) to determine if any threats to the fundamental principles
3 steps:
identify threat
evaluate threat
address it by eliminating or reducing to an acceptance level
Threats
Self-interest
financial/ other interest inappropriate influence judgment/ behavior.
Self review
inappropriate evaluate the result of previous judgment/ service performed by the member or individual within the member's firm/ employing organization
Advocacy
promote clients or employers to point that compromise the member's objectivity
Familiarity
long or close relationship with a client or employer; too sympathy to their interest or accepting their work
Initimidation
Being deterred from acting objectively because of actual or perceived pressures
Safeguard
Work environment
oversight structure, internal controls
Institutional safeguard
created by profession, legislation or regulation
Part 2 member in business
210. Conflict of interest
220. Preparation and presentation of information
230. Acting with sufficient expertise
260. Responding to non-compliance with laws
and regulations
By senior members in business
By non-senior members in business
By member in public
240. Financial interests, compensation linked to financial reporting
-> self interest threat
250. Inducements, including gifts and hospitality
prohibit the offer or acceptance of inducements
270. Pressure to breach the fundamental
principles
Not allow pressure from others to result in a breach of compliance of fundamental principles
Not place pressure on other members to breach the code.
Part 4
applied into assurance engagements
Definition of independence:
link to both objective and integrity
Of mind
In appearance
Part 4A
independence of audit and review engagements
Part 4B
assurance engagements other than audit and review engagements
Part 3 member in practice
310. Conflicts of interest
320. Professional appointments
321. Second opinion
340. Inducements, including gifts and hospitality
330. Fees and other types of remuneration
contigent fee; referral fee; commission and soft dollars
350. Custody of client assets
unless permitted by law; must seperate
360. Responding to non-compliance with laws and regulations
11. Examples of ethical failures by
accountants
Ethical decision making
12. Factors influencing decision making
individual factors
organisational factors: corporate culture
professional factors:
society factors: law and regulation; culture
13. Ethical decision-making models
reduce the possibility of incorrect decision
Philosophical model
(4 questions)
Benefits outweigh harms to oneself?
Benefits outweigh harms to others?
Rights of stakeholders are considered and respected?
Benefits and burdens justly distributed?
American accounting association model (7 steps)