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Business and Professional Ethics Journal

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					TABLE 4.1
WHAT MAKES A PROFESSION

 Essential Features                               (Bayles)
    Extensive training
    Provision of important services to society
    Training and skills largely intellectual in character
 Typical Features
    Generally licensed or certified
    Represented by organisations, associations, or institutes
    Autonomy
 Foundation of Ethical Values                                        (Behrman)
    Significantly delineated by and founded on ethical considerations rather
     than techniques or tools




          L.J. Brooks, Business & Professional Ethics for Directors, Executives, & Accountants, 3e, Thompson, South-Western, 2004.
TABLE 4.2
FEATURES, DUTIES, RIGHTS, AND VALUES OF THE ACCOUNTING PROFESSION
  Features
      Provision of important fiduciary services to society
      Extensive knowledge and skill are required
      Training and skills required are largely intellectual in character
      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 stakeholders
      Development and maintenance of required knowledge and skills
      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 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 and audit practice
      Access to some or all fields of accounting and audit endeavour
  Values necessary to discharge duties and maintain rights
      Honesty
      Integrity
      Objectivity, based on independent judgement
      Desire to exercise due care
      Competence
      Confidentiality
      Commitment to place the needs of the public, the client, the profession, and the employer or firm before the
       professional's own self-interest

                       L.J. Brooks, Business & Professional Ethics for Directors, Executives, & Accountants, 3e, Thompson, South-Western, 2004.
TABLE 4.3
MOTIVES INFLUENCING PEOPLE AT
KOHLBERG’S SIX STAGES OF MORAL REASONING

  STAGE DESCRIPTION                                                   MOTIVE FOR DOING RIGHT
  Preconventional                                                     Self-interest
   1. Obedience                                                       Fear of punishment and authorities
   2. Egotism–instrumental                                            Self-gratification, concern only for oneself
        and social exchange                                             “Let’s make a deal”
  Conventional                                                        Conformity
   3. Interpersonal concordance                                       Role expectation or approval from others
   4. Law and duty (social order)                                     Adherence to moral codes,
                                                                        or to codes of law and order
  Post-conventional,
    Autonomous or Principled                                          Interests of Others
   5. General individual rights                                       Concern for others, and broader
        and standards agreed                                            social welfare
        upon by society
   6. Self-chosen principles                                          Concern for moral or ethical principle


           L.J. Brooks, Business & Professional Ethics for Directors, Executives, & Accountants, 3e, Thompson, South-Western, 2004.
TABLE 4.4
NATIONAL AND INTERNATIONAL ACCOUNTING
ORGANISATIONS OPERATING IN NORTH AMERICA
  NAME                                                 DESIGNATION                    PRIME MANDATE(S)                                LOCATION
  American Institute of Certified                      CPA                            Auditing, management                            United States, some
    Public Accountants (AICPA)                                                          accounting                                      Canadian provinces
  Institute of Management                              CMA                            Management                                      United States
    Accountants (IMA)                                                                  accounting
  Canadian Institute of Chartered                      CA                             Auditing, management                            Canada
    Accountants (CICA)                                                                  accounting
  Society of Management                                CMA                            Management                                      Canada
    Accountants of Canada (SMAC)                                                       accounting
  Certified General Accountants                        CGA                            Management accounting,                          Canada,
    Association of Canada (CGAAC)                                                      auditing                                         some provinces




                   L.J. Brooks, Business & Professional Ethics for Directors, Executives, & Accountants, 3e, Thompson, South-Western, 2004.
TABLE 4.5
CONTRIBUTIONS TO THE NORTH AMERICAN
REGULATORY FRAMEWORK FOR PROFESSIONAL ACCOUNTANTS

 ORGANIZATION                                                 CONTRIBUTION GOVERNING ORGANISATION’S MEMBERS/USERS
 AICPA                                                        Statements of Auditing Standards (SAS), research studies, journal articles,
                                                                code of conduct
 IMA                                                          Statements of accounting practice, research studies, journal articles, code of conduct
 Financial Accounting Standards Board (FASB)                  Financial Accounting Standards (FAS)
 CICA                                                         Accounting and auditing standards in Canada research studies, journal articles,
                                                                code of conduct
 SMAC                                                         Statements of accounting practice, research studies, journal articles, code of conduct
 CGAAC                                                        Statements of accounting practice, research studies, journal articles, code of conduct
 U.S. Securities and Exchange                                 Regulations related to U.S. public securities markets including corporate
   Commission (SEC)                                             disclosure and governance, GAAP, GAAS, behaviour of auditors and other
                                                                professionals practising before the SEC. Regulation in respect to disclosure for
                                                                companies raising funds in the USA. Standards of independence for CPAs auditing
                                                                SEC companies.
 Ontario Securities Commission (OSC)                          Regulations related to financial disclosure in Canada's principal securities market
                                                                (Ontario), whose regulations are accepted by the SEC.
 US and Canadian courts                                       Common law decisions affecting legal liability
 International Federation of Accountants (IFAC)               International Code of Ethics, and accounting and auditing standards that
    and the International Accounting Standards                   may facilitate international harmonisation
    Board (IASB)
 Public Accounting Oversight Boards                           Oversight in the U.S. and Canada



                       L.J. Brooks, Business & Professional Ethics for Directors, Executives, & Accountants, 3e, Thompson, South-Western, 2004.
TABLE 4.6
TYPICAL FRAMEWORK FOR A CODE OF CONDUCT
FOR PROFESSIONAL ACCOUNTANTS

 Introduction and purpose
 Fundamental principles and standards
 General rules
 Specific rules
 Discipline
 Interpretations of rules




         L.J. Brooks, Business & Professional Ethics for Directors, Executives, & Accountants, 3e, Thompson, South-Western, 2004.
TABLE 4.7
FUNDAMENTAL PRINCIPLES IN CODES OF CONDUCT
FOR PROFESSIONAL ACCOUNTANTS

 Members should:
  at all times maintain the good reputation of the profession and its ability
   to serve the public interest,
  perform with:
       integrity
       due care
       professional competence
       independence
       objectivity
       confidentiality, and
  not be associated with any misleading information or misrepresentation.




            L.J. Brooks, Business & Professional Ethics for Directors, Executives, & Accountants, 3e, Thompson, South-Western, 2004.
TABLE 4.8
POSSIBLE SANCTIONS FOR UNETHICAL BEHAVIOUR UNDER PROFESSIONAL
ACCOUNTING CODES OF CONDUCT AND REGULATORY AUTHORITIES
                                                                                                                        LEVIABLE ON THE
                                                                                                   PROFESSIONAL                             ACCOUNTING FIRM
   Caution                                                                                                   Yes                                   Yes
   Reprimand                                                                                                 Yes                                   Yes
   Review by peer                                                                                            Yes                                   Yes
   Requirement to complete courses                                                                           Yes                                   No
   Suspension:
    for a specified period                                                                                  Yes                                   No
    for an indefinite period                                                                                Yes                                   No
    until specific requirements are completed                                                               Yes                                   No
    from appearing before regulatory agencies (SEC, OSC)                                                    Yes                                   Yes
    from auditing SEC or OSC registrant companies                                                           Yes                                   Yes
   Expulsion from membership                                                                                 Yes                                   No
   Compensation for damage                                                                                   Yes                                   Yes
   Fine                                                                                                      Yes                                   Yes
   Costs of hearing                                                                                          Yes                                   Yes
   Ancillary orders
    for community work                                                                                      Yes                                   No
    financial support, etc.                                                                                 Yes                                   Yes

SOURCE: Distillation of discipline cases from the professional accounting and regulatory bodies in the United States and Canada.

                        L.J. Brooks, Business & Professional Ethics for Directors, Executives, & Accountants, 3e, Thompson, South-Western, 2004.
TABLE 4.9
THE MACDONALD COMMISSION:
OVERVIEW OF PRINCIPAL RECOMMENDATIONS
  Recommendations to strengthen auditor independence/integrity:
      Improvement of auditor relationships (#11)
      Strengthen professional standards (7)
      Strengthen professional code of conduct (3)
  Recommendations to strengthen auditor professionalism:
      Increase responsiveness to public concerns (6)
      Emphasise vital role of professional judgement (4)
      Improve self-regulation (2)
  Recommendations to improve financial disclosure:
      Expand accounting standards and improve financial disclosures (13)
      Greater auditor responsibility for those disclosures (2)
  Recommendations to lessen public misunderstanding of the auditor's role:
      Publish a statement of management responsibility (24)
      Expand audit report to clarify auditor's role and the level of assurance
       the audit provides (25)
      Audit committee to report annually to shareholders (3)

SOURCE:   The Macdonald Commission: Report of the Commission to Study the Public's Expectation of Audits, CICA, Toronto, June 1988.

                      L.J. Brooks, Business & Professional Ethics for Directors, Executives, & Accountants, 3e, Thompson, South-Western, 2004.
FIGURE 4.1
IFAC CODE OF ETHICS VALUES FRAMEWORK


                                                       Duty to Society,
                                                   Serve the Public Interest

                                                  Objectives
                                      Meet Expectations for Professionalism,
                                          Performance, Public Interest

                                                Basic Needs
                               Credibility, Professionalism, Highest Quality
                                            Services, Confidence
                                  Fundamental Principles
                Integrity, Objectivity, Professional Competence and Due Care,
                  Confidentiality, Professional Behavior, Technical Standards

Source: IFAC, November, 2001.



                   L.J. Brooks, Business & Professional Ethics for Directors, Executives, & Accountants, 3e, Thompson, South-Western, 2004.
FIGURE 4.2
IFAC CODE’S FRAMEWORK FOR PROPER JUDGMENT


                           1. Protect the Public Interest
                        2. Professional Service to Clients



                                                     Judgement


                                                                                                     Professional
        Integrity                                     Objectivity
                                                                                                      Skepticism



                     Independence of Mind & Appearance


        L.J. Brooks, Business & Professional Ethics for Directors, Executives, & Accountants, 3e, Thompson, South-Western, 2004.
FIGURE 4.3
ASSURING INDEPENDENCE OF MIND AND APPEARANCE




     Identify and Evaluate                                                                   Eliminate Threats
      Circumstances and                                                                       Or reduce to an
         Relationships                                                                       Acceptable Level
          that Create                                                                               by
   Threats To Independence                                                                  Applying Safeguards

         Self-Interest                                                                               Profession
          Self-review                                                                                Legislation
          Advocacy                                                                                   Regulation
          Familiarity                                                                                Within Client
         Intimidation                                                                                Within Firm




          L.J. Brooks, Business & Professional Ethics for Directors, Executives, & Accountants, 3e, Thompson, South-Western, 2004.
TABLE 4.10
SAFEGUARDS REDUCING THE RISK OF CONFLICT OF INTEREST SITUATIONS

  Safeguards Created by the Profession, Legislation or Regulation
     Education, training, experience requirement for entry
     Continuing education
     Professional standards, monitoring, and disciplinary processes
     External review of firm’s quality control system
     Legislation governing independence requirements of the firm
                                                                                                                                              IFAC Code, 8.37
  Safeguards Within a Client
     Appointment of auditors ratified/approved by other than management
     Client has competent staff to make managerial decisions
     Policies and procedures emphasizing client’s commitment to fair financial reporting
     Internal procedures to ensure objective choices in commissioning non-assurance engagements
     A corporate governance structure, such as the audit committee, that provide appropriate oversight and
    communications regarding a firm’s services
                                                                                                    IFAC Code, 8.38
  Safeguards Within a Professional Accounting Firm’s Own Systems and Procedures
     Leadership stressing importance of independence, and expectation of service/action in the public interest
     Policies and procedures to implement and monitor control of assurance engagements
     Documented independence policies regarding the identification and evaluation of threats to independence,
      applications of safeguards to eliminate or reduce those threats to an acceptable level
     Policies and procedures to monitor and manage the reliance on revenue from a single assurance client
     Using partners with separate reporting lines for the provision of non-assurance services to an assurance client
     6 other firm-wide and 9 other specific items
                                                                                                    IFAC Code, 8.41,2

                   L.J. Brooks, Business & Professional Ethics for Directors, Executives, & Accountants, 3e, Thompson, South-Western, 2004.
TABLE 4.11
CONFLICTS OF INTEREST FOR PROFESSIONAL ACCOUNTANTS:
CATEGORIES, SPHERES OF ACTIVITY AFFECTED AND EXAMPLES

  STAKEHOLDER                               SPHERE OF ACTIVITY
  CATEGORY                                  AFFECTED                                                       EXAMPLES
  Self vs. others                           Services offered                                               Conflicting services, shaving quality
                                            Improper use of influence                                      Improper purchases of client goods
                                            Misuse of information                                          Improper investments by relatives

  Self & others                             Services offered                                               Over-involvement with management
   vs. others                                                                                                or Directors erodes objectivity

  Client vs. client                         Services offered                                               Serving competing clients
   Employer vs. employer                                                                                     at the same time

  Stakeholder                               Misuse of information                                          Whistle-blowing, reporting to
    vs. stakeholder                         (confidentiality)                                               government or regulators




                    L.J. Brooks, Business & Professional Ethics for Directors, Executives, & Accountants, 3e, Thompson, South-Western, 2004.

				
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