Accounting for Accountability Presentation by wlp14137

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									ACCOUNTING & INTEGRITY CAPACITY
       ACCOUNTABILITY


       Dr. Joseph A. Petrick
            Executive Director
     Institute for Business Integrity
         Wright State University



     2007 Dayton Accounting Show
       The Ohio Society of CPAs
             May 23, 2007
  Raj Soin College of Business
    Wright State University

• The only Accounting Department in
  the country whose students have won
  the IMA National Case Competition on
  5 different occasions.
• Business student teams won the
  National Intercollegiate Ethics Bowl in
  2002 and in 2004 were National
  runner-up champions.
                      Agenda

A.   Accounting and Rebuilding Stakeholder Trust
B.   Integrity Capacity Model for Professional Development
        1. Accounting Process Integrity Capacity
        2. Accounting Judgment Integrity Capacity
        3. Accounting Developmental Integrity Capacity
        4. Accounting System Integrity Capacity
C.   Microeconomic and Macroeconomic Improvements
        1. Improved Microeconomic Moral Accountability
        2. Improved Macroeconomic Moral Accountability
D.   New Agenda for Responsible Leadership in Accounting
Organizations & Accounting Ethics

•   AICPA Standards & JEEP
•   IMA Standards
•   Global & Industry Standards
•   SEC Standards
•   SOX Accounting Oversight Board
•   Independence Standards Board (ISB)
•   State Societies of CPAs & NASBA
•   Others: GAO, DOL, ASB, FASB
    among others.
  Corporate Reporting Supply Chain
    (DiPiazza: PricewaterhouseCoopers, 2002)

    Rebuilding Accounting Stakeholder Trust

1. Renewed Spirit of Transparency and Assurance
   a. Tier 1: Global GAAP
   b. Tier 2: Industry-Based Standards
   c. Tier 3: Company-Specific Information
2. Culture of Accountability
3. People of Integrity
Integrity Capacity Theoretical Model


The individual and collective capability
for repeated process alignment of
moral awareness, deliberation,
character and conduct that
demonstrates balanced judgment,
enhances sustained moral
development, and promotes
supportive systems for moral decision
making.
            Instrumental Value of
              Integrity Capacity



Accounting Integrity        Reputational
     Capacity                 Capital

     Sustainable Competitive Advantage,
           Public Trust & World-Class
                  Performance
      Dimensions of Accounting
         Integrity Capacity


1. Accounting Process Integrity Capacity
2. Accounting Judgment Integrity Capacity
3. Accounting Developmental Integrity
   Capacity
4. Accounting System Integrity Capacity
Accounting Process Integrity Capacity



The alignment of individual and/or
collective accounting moral awareness,
deliberation, character, and conduct on a
sustained basis, so that enhanced
reputational capital results.
Accounting Process Integrity Capacity

MORAL AWARENESS
 Perception
 Sensitivity
MORAL DELIBERATION
 Analysis
 Resolution
MORAL CHARACTER
 Cognitive Readiness to Act
 Volitional Readiness to Act
MORAL CONDUCT
 Responsible
 Sustainable
 Virtues That Build Professional
   & Organizational Character


1.   Intellectual Virtues
2.   Moral Virtues
3.   Social Virtues
4.   Emotional Virtues
5.   Political Virtues
         Accounting Judgment
           Integrity Capacity


The balanced and inclusive use of key
ethics theories and their subordinated
cognate theoretical resources in the analysis
and resolution of individual and/or collective
accounting moral issues.
    Accounting Judgment Integrity
          Capacity (R2C2)

                    Flexibility

           Build               Enhance
           Virtuous            Supportive
           Character           Contexts

Internal                                    External
           Follow              Achieve
           Right               Good
           Rules               Results

                     Control
               Positive & Negative Zones of Accounting
             Professional Moral Judgment Integrity (R2C2)

                                             Negative Zone

                            Abdicates                                     Wastes Energy               Context
                            Authority        Positive Zone
                                   Shows Consideration       Envisions Changes
Character
             Slows                                                                       Disrupts
             Production                                                  Acquires        Continuity
                             Facilitates                                 Resources
                             Interaction

                                             Negative Zone

                                                    Amoral
                                                Professionalism
                               Collects
                               Information                            Initiates Action
            Neglects                                                                     Destroys
            Possibilities                                                                Cohesion     Results
  Rules
                                     Maintains Structure   Provides Structure

                               Stifles                                   Offends
                               Progress                                  Individuals
            Accounting Judgment Integrity Capacity
              Based on Four Human Nature Drives

                          Negative Zone

                                                         Context
                          Positive Zone


Character      DRIVE TO                       DRIVE TO
                BOND                          LEARN

                          Negative Zone

                               Amoral
                           Professionalism


               DRIVE TO                      DRIVE TO
               DEFEND                        ACQUIRE     Results
 Rules
             ACCOUNTING PARTNER EXTREME CONCERN FOR PROFITS
                            Flexibility
                                                  Context

                                                (ADAPTABILITY)


 Character
(INVOLVEMENT)



  Internal                                           External




                                                  Results
                                                (EFFECTIVENESS)
    Rule
      s
  (CONTINUITY)

                              Control
DILBERT CEO LACK OF JUDGMENT
     INTEGRITY CAPACITY
  Ranges of Moral Judgment
   Evaluation using R2C2 ™
Quantitative   Qualitative Anchors
 Ranges
   0–1         Extremely Unacceptable
               Under-emphasis
    2          Unacceptable Under-emphasis
    3          Minimally Acceptable Emphasis
    4          Below Average Emphasis
    5          Average Emphasis
    6          Above Average Emphasis
    7          Optimal Emphasis
    8          Unacceptable Over-emphasis
  9 – 10       Extremely Unacceptable
               Over-emphasis
  Judgment Integrity Capacity Graph &
Global Accounting Ethics Communication
      Accounting Developmental
          Integrity Capacity
The organizational and extra-organizational
cultural cognitive improvement of individual
and/or collective accounting moral
reasoning capabilities from a stage of self-
interested connivance, through a stage of
external conformity, and onto a stage of
internalized commitment to moral principles.
   Accounting Cultural Context:
    Moral Development Stages

Principled Integrity
                            HOUSE OF INTEGRITY

Democratic Participation        (Commitment)



Allegiance to Authority
                           HOUSE OF COMPLIANCE

Popular Conformity              (Conformity)


Machiavellianism
                           HOUSE OF MANIPULATION

Social Darwinism                (Connivance)
Accounting System Integrity Capacity


The development and alignment of the moral
infrastructure within the organization and the
shaping of the external moral environment of
the accounting organization to provide a
supportive context for sound moral decision
making.
Internal System Integrity Capacity

Organizational Moral Environment
• Compliance-Based Systems
     •   Prevent Criminal Misconduct
     •   U.S. Federal Sentencing Guidelines
     •   Sarbanes-Oxley Act
     •   Professional Association Standards
• Integrity-Based Systems
     • Enable Responsible Conduct
  Compliance-Based Organization
         Internal Systems
1. Establish compliance standards and
   procedures
2. Assign high level individuals to oversee
   program
3. Exercise due care in delegating
   discretionary authority
4. Communicate and train
  Compliance-Based Organization
         Internal Systems
5. Monitor, audit, and provide safe
   reporting system
6. Enforce appropriate discipline with
   consistency
7. Respond to offences and prevent
   further misconduct
8. Comply with SOX requirements
9. Comply with professional standards
    Integrity-Based Organization
          Internal Systems
1. Moral Leadership at the Top
2. Ethics Needs Assessment &
   Compliance Standards in Place
3. Ethics in Strategy and Structure
4. Integrity Steering Committee
5. Statement of Values/Written
   Code of Conduct
6. Ethics Policy and Procedure Manuals
     Integrity-Based Organization
           Internal Systems
7.  Ethics in Selection, Socialization, and
    Performance Subsystems
8. Ethics in Appraisal,
    Rewards/Recognition/Incentive,
    and Development Subsystems
9. Ethics in Communication Processes
    and Work Attitudes
10. Ethics Training and Education Programs
11. Ethics in Decision-Making/Meeting
    Processes
    Integrity-Based Organization
          Internal Systems
12. Organizational Integrity Advisor
    Responsibilities
13. Ethics Reporting, Whistleblower
    Protection and Conflict Resolution
    Processes
14. Enforcement Processes of Ethical
    Standards
15. Ethics Monitoring, Auditing &
    Improving Subsystems
16. Ethics System and Quality Work
    Process Control and
    Improvement
External System Integrity Capacity
1. Domestic External Moral Environment
      • Corruption Elimination and/or Control
      • Industry & Professional Standards
      • Proactive Positive Stakeholder Relations &
        Triple Bottom Line Accountability

2. Global External Moral Environment
      • Corruption Elimination and/or Control
      • Industry & Professional Standards
      • Proactive Positive Stakeholder Relations &
        Triple Bottom Line Accountability
  Improved Microeconomic Moral
         Accountability
A. Individual Accountability Improvement
   1. Demonstrated Process Integrity
      Capacity
   2. Demonstrated Judgment Integrity
      Capacity
B. Partner Accountability Improvement
   1. Demonstrated Developmental Integrity
      Capacity
   2. Demonstrated System Integrity
      Capacity
    Improved Macroeconomic Moral
 Accountability Improved Macroeconomic
          Moral Accountability
A. Professional Association/Industry
   Accountability Improvement
   1. More rigorous quality control & enforcement
   2. Partner with competent stakeholders for reform
   3. Strengthen accounting professional education

B. Political Economy Accountability Improvement
   1. Financial markets & statistical variation
   2. Types of capitalism/forms of economic
      democracy
   3. International accounting harmonization
   New Agenda for Responsible
    Leadership in Accounting

• National commission with task forces on
  improving microeconomic levels of
  integrity capacity accountability
• International commission with task
  forces on improving macroeconomic
  levels of moral accountability
• Integrity capacity building skills in
  mainstream accounting professional
  education
ACCOUNTING & INTEGRITY CAPACITY
       ACCOUNTABILITY


       Dr. Joseph A. Petrick
            Executive Director
     Institute for Business Integrity
         Wright State University



     2007 Dayton Accounting Show
       The Ohio Society of CPAs
             May 23, 2007
3, 2007

								
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