Ethical behavior and professional judgment

1. Ethical behavior and professional judgment Ethics the study of right & wrong and the choices of action & behaviour

2. Objectives of PPP An introduction to the role of the accounting profession and to the work of the professional accountant A greater understanding of the key responsibilities of professional accountants An understanding of the application of professional judgment as an accounting practitioner and the practical implications of ethics An overview of the business environment in which the professional accountants operate and which they influence. Specific forms of regulation include Trade Practices Act 1974 Australian Competition and Consumer Commission (ACCC) Australian Securities and Investment Commission (ASIC) Australian Stock Exchange (ASX) Australian Taxation Office (ATO) Australian Prudential and Regulatory Authority (APRA) A broad understanding of the expectations placed on professional accountants based on corporate governance An understanding of financial reporting practice

3. Nature of Ethics Ethics refers to two things Ethics relates to a set of well-based standards of right and wrong that provide a framework of human behavior Supports the pursuit of moral values and standards for the individual, his/her relationship with others and society and for particular segments of society such as professional organisations Expressed as rights, obligations, responsibility, fairness and justice Codes of Professional conducts for professional organisations also prescribe additional standards of behavior such a objectivity, independence and due care

4. Nature of Ethics cont. Ethics relates to the study and development of one�s ethical standards, leading to the choice of actions or decisions Our ethical standards are continuously evolving and we are required to: Continuously study our moral beliefs Be aware of changes in our surroundings Have the capacity to identify the right choice of actions

5. Business Ethics and professional ethics Ethics is a practical process of problem solving that tries to resolve actual or potential conflicts of interest What are normal expectations for good or bad behavior? What is morally right or wrong What are the obligations of the individuals involved?

6. Business Ethics Manuel Velasquez is a noted ethicist who stated that ethical questions in business should be addressed at 3 different levels: The general level of the business as part of the social system The company or firm as a basic unit The individual or micro level

7. The general level of the business as part of the social system Business is a part of a social system that includes various economic, legal and political institutions Focus is on the ethical rightness or wrongness of the social system What is the impact of a particular economic system in its distribution of goods and service or equity Main stakeholders � business, government and citizens

8. The company or firm as a basic unit Examines the ethical dimensions of decisions impacting on the firm that may affect other organisations, the government, the workforce or the community E.g.- relocation of a plant - introduction of taxes and effect of distribution of wealth Stakeholders- shareholders, employees, labour unions or suppliers

9. The individual or micro level Focus is on the individual within the organisation e.g. Discrepancies in budget earnings Understated expenses Unfair dismissal of employees Occupational and safety issues Ethical dilemma � loyalty to the company vs. integrity of financial reports What do you do if you are asked to do something that violates you own moral code? Stakeholders: superiors, subordinates and peers

10. Ethical dilemmas in business Can organisations afford the luxury of being ethical? Can we afford the cost of making this product safe? (Ford Pinto) Can we afford to admit negligence even though we know that we did the wrong thing? (Asbestos -Hardy�s) Can we afford to let the company's accounts show the real value of our assets? (One Tel) Can we afford to refuse to carry our a clients instructions even when, in all good conscience, we believe to follow them would harm the community? (Glen Wheately) Can we afford to resist paying bribes in order to secure a contract in a difficult overseas market? Can we afford to resist taking advantage of an unintended loop-hole in the law or a contract?

11. In groups of 3��. Investigate and report on�. Ford Pinto, any other car problems�. James Hardy�s Building Products�.. One Tel�. Glen Wheatley Steve Visard

12. Challenge of conflicting duties How does one balance the duty to maximise the return to shareholders with that owed in respect of the remuneration and welfare of employees? How does one balance the duty to safeguard jobs with the duty to bear the additional costs of protecting the environment

13. Ethical issues from an individual perspective Examples of situations that give rise to conflicts that involve ethics from a personal perspective Pressure to cheat in an exam to secure a pass or gain a work promotion so as to satisfy family expectations � rationalisation of actions Tendency to treat others unfairly or differently because of a desire to maintain some personal relationship Pursuing personal benefits from work or satisfying personal desires, such as stealing or hacking into confidential information held in the computer with the motive of advancing self interests

14. Is good ethics good business? 1.1 The Ford Pinto http://www.fordpinto.com http://www.mojones.com Would it have been ethical to have allowed the Pinto�s production to continue Would it have been a sound business decision in the sense of maximisation of shareholders wealth?

15. Professional ethics A system of code of conduct based on moral duties and obligations that include how one should behave. Professional ethics for accountants refers to the objectives of the accounting profession to work to the highest standards of professionalism and performance so as to meet public expectations The Code of Ethics for Professional Accountants replaced the Joint Code of Professional Conduct and establishes the ethical requirements for professional accountants see www.cpaaustralia.com.au

16. Role of Professional Judgment Some writers argue that professional judgement is the single most important attribute that differentiates professionals from non professionals Professionals must have an awareness of the uncertainty, complexity, instability and uniqueness that surrounds many of the problems that the tackle in practice

17. Applications of professional judgement Important for all accountants, irrespective of their field of employment What is the difference between an error of judgement and clear-cut negligence � was the decision reached after consideration of all the facts and therefore reasonable

18. Applications of professional judgement in auditing Auditing is based on sampling & skilled judgement- Selection of the appropriate audit plan Evaluation of sampling process � completeness, sufficient quantity & quality Evaluation of the results and ensuring that the conclusion is soundly based

19. Application of professional judgement in financial accounting Measurement system � is it appropriate to the organisation Is the information system appropriate include choice of hardware and software Are the controls appropriate Judgements about investment strategies eg expansion overseas Decisions about pricing strategies

20. Application of professional judgement in financial accounting Instituting a system of internal control Identifying areas of performance in the company's operations which require the attention of management Determining appropriate course of action where some action is required to correct unfavourable performance Interpreting results for management and preparing reports Determine how the financial statements will be presented- application and interpretation of standards and other regulations materiality, disclosure, going concern,

21. Research Google/Yahoo search for : Ethics Ethical behaviour Write a summary (at least one page) on what your research found.