of a Professional Accountant
Why is understanding it critical?
Public expectations of:
Implications for services offered
Judgements and values
Sources of ethical guidelines
Understanding the Role
Who really is our client: the company, the
management, current shareholders, future
shareholders, the public?
Do I owe primary loyalty to my employer, client,
boss, profession, myself, or the public?
Am I a professional accountant bound by
professional standards, or just an employee?
Is professional accounting a profession or a
business - can it be both?
When should I not offer a service?
Can I serve two clients with competing interests?
Is there any occasion when breaking the
profession's guideline against revealing confidences
Lang Michener Affair
Are expectations for professional
standards above non-professionals?
Lawyers actions not up to
expectations, or obligation to
clients, prof., law society, public?
Is self-regulation effective?
Is an honest mistake “of no
Dilemma of an Accountant
Pressure for a “clean opinion”
Problem is not material
No one read or cared about those
Removal of working papers
Public Expectations of a Profession
Essential Features: (Bayles)
Provision of important services to society
Training and skills largely intellectual in character
Generally licensed or certified
Represented by organizations, associations,
Foundation of Ethical Values: (Behrman)
Significantly delineated by and founded on ethical
considerations rather than techniques or tools
Features, Duties, Rights & Values Of
the Accounting Profession… Table 4.2
Duties essential to a fiduciary
Rights permitted by most
Values necessary to discharge duties
and maintain rights
Features and Duties
Provision of important fiduciary services to society
Extensive knowledge and skill are required
Training and skills required are largely intellectual
Overseen by self-regulating membership organisations
Accountable to governmental authority
Duties essential to a fiduciary relationship:
Continuing attention to the needs of clients and other
Development & maintenance of required knowledge &
Maintenance of the trust inherent in a fiduciary
relationship by behaviour exhibiting responsible values
Maintenance of an acceptable personal reputation
Maintenance of a credible reputation as a profession
Rights Permitted, Values Necessary
Rights permitted in most jurisdictions:
Ability to hold oneself out as a designated professional to
render important fiduciary services
Ability to set entrance standards and examine candidates
Self-regulation and discipline based on codes of conduct**
Participation in the development of accounting & audit
Access to some or all fields of accounting & audit endeavour
Values necessary to discharge duties & maintain rights:
Honesty & Integrity (i.e. truth & the whole truth)
Objectivity - based on independent judgement
Desire to exercise due care
Commitment to place the needs of the public, the client, the
profession, and the employer or firm before the
professional's own self-interest
Dominance of ethical values vs.
Priority of duty
Confidentiality: strict vs assisted
For Services offered
Standards for behaviour
Importance of Values To Value-added &
Development of Judgement
Kohlberg’s Six Stages of Moral Reasoning
Preconventional Self-interest Motivation
1. Fear of punishment & authorities
Conventional Conformity Motivation
3. Approval from others
4. Adherence to moral codes, law & order
Principled Interests of others
5. Concern for others, broad social welfare
6. Concern for moral or ethical principles
Sources of Ethical Guidance
Codes of conduct
Laws & jurisprudence
When codes & laws don’t count
Legal Liability Developments
Personal liability: history, rationale,
Joint & several liability……deep pockets sued
Self-insurance plus $50-150 mil external ins.
Burden getting too high……how to limit?
Lawsuit trend - Victoria Mtge - GAAP but misleading
Limited Liability Partnerships (LLP,LLC, PSLLC)
1994 New York State Law protects innocent partners from
personal liability for the negligence and malpractice of
other partners, not from commercial losses, or from their
own misdeeds, or from losing their invested capital.