Professionalism and Ethics

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
Characteristics of a professional

• Bell
• Communicates
• Thinks
• Technical knowledge
• Integrates

• Ethical behavior
• Recognizes outside influences
• Actively seeks additional knowledge

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
Ethics concepts

• What is ethics?
• What is metaethics?
• What is normative ethics
• What is applied ethics?

7
Ethics concepts

• Schools of ethical thought
• Utilitarianism
• Rights and duties
• Justice
• Virtues

8
Ethics codes in accounting

• Institute of Management Accountants

9
Ethics codes in accounting

• Association of Certified Fraud Examiners
• Professionalism
• Avoid bad conduct
• integrity

• Obey the law
• Dont determine guilt
• Confidentiality
• Full disclosure
• Continuing education

10
Ethics codes in accounting

• 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

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
Recent ethics cases

• 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