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Chapter 3

Chapter 3. Professionalism and Ethics. Outline. Objectives Characteristics of a professional Ethics concepts Ethics codes in accounting Resolution of ethical dilemmas Recent ethics cases. Bell:: Communicates Thinks Technical knowledge Integrates . Ethical behavior

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Chapter 3

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  1. Chapter 3 Professionalism and Ethics

  2. Outline • Objectives • Characteristics of a professional • Ethics concepts • Ethics codes in accounting • Resolution of ethical dilemmas • Recent ethics cases

  3. Bell:: Communicates Thinks Technical knowledge Integrates Ethical behavior Recognizes outside influences Actively seeks additional knowledge Characteristics of a professional

  4. Characteristics of a professional McDonald: • Specialized knowledge • Complexity • Autonomy • Code of ethical behavior

  5. Characteristics of a professional Houle : • Conceptual • Performance • Collective identity

  6. What is ethics? What is metaethics? What is normative ethics What is applied ethics? Ethics concepts

  7. Ethics concepts Schools of ethical thought • Utilitarianism: • Rights and duties: • Justice: • Virtues:

  8. Ethics codes in accounting Institute of Management Accountants

  9. Association of Certified Fraud Examiners Professionalism Avoid bad conduct integrity Obey the law Don’t determine guilt Confidentiality Full disclosure Continuing education Ethics codes in accounting

  10. American Institute of CPAs Principles of Professional Conduct Rules: Applicability and Definitions Independence, Integrity and Objectivity General Standards Accounting Principles Responsibilities to Clients Responsibilities to Colleagues Other Responsibilities and Practices Ethics codes in accounting

  11. Resolution of ethical dilemmas Langenderfer and Rockness proposed an eight-step process: • ID • Facts • Ethics issues • stakeholders involved • Define • Norms • principles • values

  12. Resolution of ethical dilemmas Langenderfer and Rockness (continued) • ID alternative actions • Decide best action • Evaluate the consequences of each possible course of action

  13. Resolution of ethical dilemmas Langenderfer and Rockness (concluded) • If appropriate, discuss the alternative with a trusted person • Reach a decision

  14. Recent ethics cases • Charles Ponzi • Multi-million dollar fraud with international postal reply coupons • Used money from new investors to pay off old investors • Five years in federal prison for mail fraud with additional time in Massachusetts

  15. Recent ethics cases • Adelphia Cable • Rigas family • Company funded over $2 billion in personal loans to family • Deceptive accounting practices • Co-mingled personal assets with corporate assets

  16. Enron Natural gas and pipeline industries Moved into trading rights for oil and gas pipelines Earnings increased without cash flow Stock price increased 20 quarters in a row Earnings management, off balance-sheet debt, related-party transactions, disclosure issues Bankruptcy in December 2001 Demise of Arthur Andersen followed Recent ethics cases

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