Ethics and Professionalism “The Integrity of the Upright Shall Guide Them” (Proverbs 11:3)

Learning Objectives n Reflect on the meaning and importance of ethics in personal and professional life n Define a profession; differentiate from trade n Understand why professionals need ethics n Understand basic ethical standards in the Code of Professional Conduct for CPAs n Learn and practice a process of ethical decision making

Ethics: What is it? n “A discipline of good and evil and moral duty.” (Funk and Wagnalls) n Actions and how they affect people

Where did you get your ethics? n Parents n Religion n School n Peers

Concepts at the heart of ethics n Fairness n Trust n Respect n Compassion n Cooperation “He hath showed thee, o man, what is good, and what doth the Lord require of thee, than to do justly, and to love mercy, and to walk humbly with thy God.” (Micah 6:8)

The Sinking of the Titanic n What were the facts? n Who were the stakeholders? n What were the issues and values? n What were the alternatives? n What actions were taken? n What were the consequences?

When God Comes to Work (managing religious diversity) n Facts? n Stakeholders? n Issues and values? n Alternatives? n Actions? n Check?

The Heinz Dilemma n Facts? n Stakeholders? n Issues and values? n Alternatives? n Actions? n Check?

Ethical problem you faced today? n Facts? n Stakeholders (persons involved)? n Issues and values? n Alternatives? n Action? n Did you check yourself?

What is a profession? n A group of people pursuing a learned art with a common calling

Factors unique to a profession n Common body of knowledge n Formal educational process n Standards of entry n Recognition of public responsibility n Willingness to act with restraint for the common good n Adoption of Codes of Conduct

Codes of Conduct for Accountants n AICPA n IMA n IIA n State Boards of Accountancy n SEC

Code of Professional Conduct n AICPA Professional Standards, Vol. 2 (ET) n Composition – Principles – Rules n Interpretations, Rulings n Applicability n Compliance

Principles n Preamble – Requires all CPAs to assume the obligation of self-discipline above and beyond requirements of law. – Calls for unswerving commitment to honorable behavior, regardless of personal advantage.

n Article I -- Responsibilities n Members should exercise sensitive professional and moral judgments in all activities – Primary responsibility is to the “public” – Responsibility to cooperate with each other to improve the art of accounting, maintain public confidence, and carry out self-governance.

n Article II --The Public Interest n Serve the public interest, honor the public trust, commitment to professionalism. n Public interest: collective well being of the people and institutions served

n Article III --Members should perform with the highest sense of integrity n The test for all decisions: “What would a person of integrity do?” n Characteristics: – Honesty – Candor – Protective of confidentiality

n Article IV -- A member should maintain objectivity and be free from conflicts of interest. n A state of mind: the distinguishing feature of our profession n Impartiality, intellectual honesty, freedom from conflicts of interest. n Requires independence in attest situations.

n Article V -- Due Care. A member should observe the profession’s technical and ethical standards, strive continually to improve competence and quality of service, and be duly diligent in performing services. n Continual quest for excellence, commitment to life-long learning and improvement. n Requires assessment of competence, due diligence, planning and supervision..

n Article VI -- Member in public practice should observe these principles in determining scope and nature of services. n Practice in firms that have quality controls n Determine whether other services might impair audit independence. n Assess whether all roles assumed are consistent with the role of a professional accountant.