chapter 01-ethics

8/10/2019 Chapter 01-Ethics

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Chapter One:

Professional Ethics Overview

Dr Duc Hong Thi [email protected]

Faculty of Accounting & Auditing,

niver!ity of "cono#ic! and $a%, ietna# 'ational niver!ity of HC(C

PROFESSIONAL

ETHICS
mailto:[email protected]:[email protected]


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What does ethics mean to you?

Responses from previous years students:

Ethics has to do with what my feelings tell

me is right or wrongEthics has to do with my beliefs

Being ethical is doing what the law requires

Ethics consists of the standards of behaviourour society accepts.


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What are ethics

Ethics are a set of moral principles thatguide behaviour

Individuals have ethical values and beliefsabout what constitutes right and wrong

behaviour.

Ethical valuesoften reflects those of theindividuals family, culture, and educationalenvironment they are brought up in.


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Questionoes the person is behaving ethically!

Airline pilot case

"n airline pilot who decides to ris# anemergency landing in severe bad weather fora passenger who is gravely ill and will die if

not treated very soon.


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Questionoes the person is behaving ethically!

Lottery winner

" lottery winner who decides to #eep all thewinnings for themselves and not to share itwith their family


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Accounting as a profession

What is profession?

$igh level of competence and s#ills in a given area%pecialised training and maintained by continuing

professional development

&ocus on intellectual or administrative s#ills ratherthan mechanical or physical actions


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Accounting as a profession !"

What is professional?

" person who has significant level of training%hows a high level of competence and s#illsBehaves in an ethical and appropriate manner


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#nteraction between Accountancy

and $ociety

)ource: *aplan +-/


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%rofession ' ()ar&et control* view

+reed replaces the ,service ideal

%elf-serving monopoly and unwarrantedwealth is the outcome


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$ervice ideal + attributes

hreeperspectives of the service ideal

'he well-being of society

'he pursuit of ecellence

/ommunity service


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%rofessionalisation

' )ar&et control view

0rofessions see# and achieve monopolypower in their field of activity.

1onopolies create power and wealth for thefew and eclude others

'raditional view of ,service ideal does not

eist as proven by repeated misconduct


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%ublic interest vs- self+interest

%ome accountants have demonstratedecessive self-interest at the epense of

others$owever

&or many others2 the service ideal is strong

and effectively shows that professions aregenuinely valuable for society


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%ublic interest or self interest?

3eed to consider the motivations andintentions of the accounting profession.

Enlightened self+interest: where a personacts for others or in the public interest but

has an underlying motive to benefitthemselves.


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.our Es of accounting profession

Education

Ethics

Epertise

Entrepreneurship


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/-!- #nteraction with society

Roles and relationships of accountantsEmployees within corporate entities

Employees or principals within accounting firmsEmployees of regulatory bodies 4governmentagencies5

"ccounting within small and medium enterprises


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Accounting environment

"ll accountants are bound by ethical rulesand must understand the range of pressures

that can arise from the many complerelationships that could eventuate.


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Accounting wor& environments

0ublic practice("ccounting firms

(%mall practices and sole practitioners 4/0"5 0rivate sector(6arge business(%1E

0ublic sector(%tate government(6ocal government


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E0ercise /1 %rofessional 2udgment

iscuss the professional accountingcapabilities that are li#ely to be required in

order that appropriate professional7udgment


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/-3- Legal framewor&s, regulations and

standards

for business ' 4ietnam and international

8ietnam: ecision 9;;?-B'/ )/hu@n mAc Co Dcngh nghiFp #iGm toHn vin*

International( "ccounting 0rofessional and Ethical %tandards Board 4"0E%B5

( 'he International &ederation of "ccountants 4I&"/5


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#.A5

'he International &ederation of "ccountants4I&"/5 is an international body representing

all the ma7or accountancy bodies across theworld.

Its mission is to develop the high

standards of professional accountants andenhance the quality of services theyprovide.


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Accountant and ethics

"s an accountant2 your values and attitudesflow through everything you do

professionally.

'hey contribute to the trust the wider

community puts in the profession and theperception it has on it.


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6usinesses and ethics

Ethics in business

'he application of ethical values to

business behaviour


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3 elements of businesses ethics

Element E0planation

# Ethics concern an individuals professional responsibility to act.

78 Ethics concern the ,real world practical actions an individual can ta#e.It is important to consider how an individual acts and not always what

they do.6E$ Ethics concern choices between different courses of action. 'hese may

involve ta#ing a course of action which is less unpalatable thananother.


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9ey reasons for accountants to

behave ethically

Ethical issues may be a matter of lawandregulationand accountants are epected to

apply them.

"n accountants ethical behaviour serves to

protect the public interest


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Approaches to accountancy ethics

he %rofessional 8versight 6oard for

Accountancy %86"

Registration and monitoring

'raining and education

/ontinuous professional development 4/05/onduct and discipline


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Approaches to accountancy ethics

cont"

Issuing audit standards

Issuing adviceon the applicationof auditstandards and assistance with dealingemerging issues

eveloping publics understanding of theroles and responsibilities of auditorsm


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: %rinciples of public life

/- $elflessness

Individual should act solely in the publicinterest and not for personal gain or that offriends and family.


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!- #ntegrity

Individuals should avoid actions which wouldplace them under financial or otherobligations whereby the person holding their

obligation could influence their public duties.


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3- 8b2ectivity

"ll choices2 especially those regardingawarding contracts2 rewarding or providingbenefits to others and ma#ing public

appointments must be made purely on merit.


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M. "ccountability

Individuals are responsible for their ownactions and are accountable to others. 'heymust sub7ect themselves to whatever scruitiny

comes with their office.


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;- 8penness

Individuals must be openabout theirdecisions and actions. Information regardingthe reasons for their decisions must be freely

available- Restrictions on information areonly permitted when it is in the wider publicinterest.


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:- Leadership

Individuals must promote and respect theother si principles through leadership andeample.


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$even principles of public life

Ohich of the following are included in theseven principles of public life!

a.%elflessnessb.Boldness

c.$onesty

d.Lbediencee.6eadership

$ i i l f bli lif


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$even principles of public life '

filling the missing words

'he principle of PPPPPPPPP means thatindividuals should act solely in the public

interest and not for personal gain.

'o meet the principle of PPPPPPPP individuals

should declare private interests that relate totheir public ones.

$ i i l f bli lif


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$even principles of public life '

filling the missing words !"

By ensuring information regarding thereasons for their decisions are freely

available means that individuals meet theprinciple of PPPPPPPPPPPP.

PPPPPPPPPPPP involves the promotion andrespect of the si other principles.


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Accountability

$ow can accountants demonstratesaccountability!

".By questioning wor# given to them

B.By ta#ing responsibility for a mista#e

/.By ensuring their wor# is free from error.By replying to an email on behalf of anunavailable colleagues


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8b2ectivity

Ohich statement describes the principle ofob2ectivity!

".By following this principle2 an accountant minimises the ris# ofpassing on incorrect information.

B.&ollowing this principle requires an accountant to #eep theirmind free from bias.

/.&ollowing this principle requires an accountant to staytechnically up to date.

.&ollowing this principle requires scepticism and close attentionto detail when reviewing information.


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5onfidentiality

Qnder which circumstance might anaccountant have to disclose confidential

information give to them!

".Ohen requested by a regulator

B.Ohen requested by a lawyer/.Ohen requested by a fellow employee or client

.Ohen requested by an employer


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$cepticism

Ohich three of the following allow accountants todemonstrate the professional quality of scepticism!

i.By #eeping their mind free from distractions

ii.By see#ing supporting evidence before acceptinginformation is accurate

iii.By investigating why information was given to themiv.By reviewing the wor# of a 7unior before accepting it ascorrect

v.By being straightforward and honest at all times


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#ntegrity

Ohich three of the following eplain why theprinciple of integrityis important!

J.'o prevent passing on misinformation


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>esponsibility

Ohich of the following statements best describes

corporate responsibility!".'he company must appear ethically in all its mar#eting materials

B.'he company must put the needs of the community2 itsshareholders and employees at the heart of all its decisions

/.'he company develops policies on issues such as how to supportthe local community and charities to ensure it plays a positive rolein its local area

.'he company must develop relationships with its sta#eholders

so it can learn from them and meet their needs in a more efficientand environmentally friendly way.


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5ode of conduct

0rofessional bodies have duty to protect thepublic interest.

'o ensure members acts in the ethicalmanner2 most professional bodies have

developed codes of conduct to guidebehaviour.


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5ode of ethics

)%et of standardsgoverningby the conductof members of a certain profession2 by

specifying epected standards forcompetence2 professional behaviour andintegrity* (CIMA Official terminology)


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5odes of ethics

'wo theoretical approaches:

/ompliance-based 4or Rules-based5

Ethics-based 4or &ramewor#-based5


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5ompliance+based approach

Advantages 7isadvantages

Rules are specific to eachcircumstances

6ong and lengthy ruleboo#s

Encourages consistentapplication of rules

1embers cannot ,learn everyrule

Rule breaches are clearlyidentifiable

/an be seen to reducemembers to robots2 7ust

following a set of rules


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Ethic+based approach


Encourage proactivemembers2 issues have to

addressed rather thanpassively following the law

Interpretation of rules canlead to lengthy2 comple and

disciplinary hearings

'reats members asprofessionals and enables

them to ma#e their owndecisions

0otential for inconsistentapplication of rules


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Ethic+based approach !"


Best-suited to deal withcomple situations and

evolving environments whereit is difficult to thin# up rulesfor every possible case

"mbiguous rules mayconfuse members

1a#es it harder for members

to search for ways round therules

,+eneral guidelines may

become detailed rules overtime


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7ifferences in approaches

5haracteristics 5ompliance+based Ethics+based

Enforceability 1andatory iscretionary

/hoices Lbedience;

disobedience

udgement

%tandards Eplicit Implicit

1otivation &ear-driven 8alues-driven

"pproach 6aw-based 0rinciples-based

Lb7ective etection 0revention

1easure Rules 0rinciples 4values5


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5odes of conduct for organisations

'hree elements to creating an effective ethicalprogram:

J."ctive leadership


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/- Active leadership

%enior board member should be appointed as,Ethical /hampion whose initial role is topersuade all other senior eecutives to lead

by eample.


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!- 6uy+in

"ll staff should understand ethical codes2reflect the ethical principles of the codes intheir everyday activities .


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3- raining

'raining should be provided to ensure allunderstand what is epected of them.

$elplines provides employees with advicefor dealing with ethical problems.


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Why develop an ethical code?

/ommunication

/onsistency of conduct

Ris# reduction /ompliance with /orporate +overnance

rules


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5odes of ethics for accountants

I&"/s ethics committee established codes ofethics globally.

0art " ( +eneral "pplication of the /ode

0art B ( 0rofessional "ccountants in 0ublic 0ractice

0art / ( 0rofessional "ccountants in Business


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Ethical guidelines

&undamental principles

Bedroc#s of professional 7udgements2

decisions2 reasoning2 and practice Snow T apply daily

&ramewor# or ethic-based approach

%erious consequences for failing to followethical guidelines

"pply to all students and members


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.undamental ethic principles

J. Integrity

. 0rofessional behaviour


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E0ample of unethically action

/- #ntegrity

$anding over wor# to colleague that you#now contain errors


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!- 8b2ectivity

"llowing personal feelings about somethingto cloud your 7udgement

f i i


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3- %rofessional competence and due care

'a#ing on wor#s that you are not qualified todo

E l f hi ll i


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- 5onfidentiality

6eaving sensitive or confidential informationwhere anyone can loo# at it

E l f hi ll i


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;- %rofessional behaviour

/heating in professional eams

; liti f t t


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; @ualities of an accountant

J. Reliability


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p e o ; @u es o

accountant

/- >eliability

"ccountants consistenty deliver on time whatis as#ed for

E0ample of ; @ualities of an


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p @

accountant

!- >esponsibility

"ccountants ta#e ownershipon their wor#and be accountablefor their actions anddecisions.



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p @

accountant

3- imeliness

"ccountants produce wor#s within a specifiedtimeframe.

"ccountants should be on time for wor# andappointment.



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p @

accountant

- 5ourtesy

"ccountants conduct themselves withcourtesy, consideration, and general good

manners towards their clients2 colleagues and

others.



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p @

accountant

;- >espect

"ccountants develop constructiverelationships to their clients2 colleagues andothers, and recognise their values and rights.

professional @ualities e0pected of


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p @ p

an accountant

J. Independence


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p gindependence

"ccepting a valuable gift from an audit client that isabout to be reported on

"uditing a client which they were recently

employed by $aving a large amount of fee income 4UJ>V5

reliant on one client

Snowing an audit client for a long period of timesocially $aving a domineering manager who is a friend of

an audit client

Question


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Which of the professional @ualities has the accountant in

the scenario below failed to display?

"n accountant found substantialmisstatements during the audit of a ma7or

client who provides their practice with >>V ofits total audit fee income. 'he relationshipbetween the practice and the client has beenstrained recently and because of this theaccountant ignored the misstatements andensured the client stayed with the firm.

%ersonal development and


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p

lifelong learning

%ersonal development

evelopment of personal qualities such ascommunication s#ills2 assertiveness2 timemanagement and relationship building



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p

lifelong learning !"

Lifelong learning

3ever stop learning and be open to new ideas2decisions2 s#ills or behaviours



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lifelong learning 3"

What counts as development?

%tudy for professional or academic

qualificationsReading professional publications

Research and pro7ect wor#

"ttending the events organised by theprofessional bodies

5hapter summary


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5hapter summary

$umans have developed a framewor& of rules toregulate behaviour

Ethics are a set of moral principles that guidebehaviour

Individuals have ethical values and beliefs aboutwhat constitutes right and wrong behaviour.

Ethical valuesoften reflects those of theindividuals family, culture, and educationalenvironment they are brought up in.

5hapter summary !"


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5hapter summary !"

Ethics are not the same thing as law or therules of religion

"s an accountant2 your values and attitudesflow through everything you do

professionally. 'hey contribute to the trustthe wider community puts in the professionand the perception it has of it.

5hapter summary 3"


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5hapter summary 3"

0rofessional bodies 4such as "//"2 /I1"2/0" "ustralia5 have a duty to protect thepublic interestby developing codes ofconduct to guide the members behaviour

0rofessional bodies ethical guidelines givefundamental principles that members shouldfollow in their professional lives

5hapter summary ;"


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5hapter summary ;"

'he personal @ualities that an accountantshould demonstrate are:

(Reliability(Responsibility('imeliness

(/ourtesy

(Respect

5hapter summary


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5hapter summary


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5hapter summary :"

%ersonal development is the development ofpersonal qualities such as communication2assertiveness2 time management2 andrelationship building

Lifelong learning is the concept that anindividual never stops learning and should beopen to new ideas2 decisions2 s#ills or

behaviours

>eferences


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>eferences

1o&2 ecisions 9;;?W-B'/ 0rofessionalethics standards for public auditors

/I1" ( /> &undamentals of ethics2 corporate

governance and business law ( Chapter 17 "//" ( 0J ( /hapter J< /0" "ustralia ( Ethics and +overnance (Module 1 'rXn 'hY +iang 'Zn ( %Hch chuyn #h[o:o c

ngh nghi!p "i #$i %&' c lp

chapter 01-ethics

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