Module 1: ACCOUNTING AND SOCIETY
Concept Author Module Page Content/note
Public interest or self interest 1 19 Act in the public interest
Acts with integrity, objectivity and without bias
Altruism: action that brings no benefit to an individual and
may even be at their own expense
Responsible decision-making Westpac Bank (2014) 1 20,21 Governance, accountability and ethics
Enlightenced self interest Lee (1995) 1 22 protecting the public interest in a self-interested way
Enlightened self-interest vs. Robson & Cooper 1990 1 22
public interest - integrated
Ideals of accounting - Saravanamuthu 2004 1 23 public service or service ideal may have existed in the past
entrepreneurialism and but abandoned for a more lucrative roles as "partner in
professionalism business"
Four Es of the ideals of Carnegie and Napier 1 23 education, ethics, expertise and entrepreneurship
accounting professionalism 2010
Profession - definition by 1 23 an occupational area or vocation that "involves prolonged
Oxford dictionary training and a formal qualification'
Profession - key attributes Greenwood 1957 1 24 1. systematic body of theory and knowledge;
2. extensive education process for its members;
3. ideal of service to the community;
4. high degree of autonomy and independence;
5. code of ethics for its members;
6. distinctive ethos or culture (values, norms, symbols);
7. application of professional judgment; and
8. existence of a governing body
Self regulation 1 24 - professions exist primarily to serve society
- have substantial degree of independence or autonomy:
have a greater level of authority to set their own rules and
regulations and have less government regulation
Autonomy 1 25 - self regulate commonly extends to memberships and
membership rules of a profession
- allows members of a profession to be judged by their
informed peers
- enables internal penalties or sanctions for matters that
ignore or not be able to identify by legal au.
Co-regulatary process 1 25 Regulation share bw the profession and external sources
Professional - Definition 1 25 person who has a significatn level of training and a high
level of competence and skills in an areas
Professional - Market control Allan 2006 1 26 - Traditional view: serving society
view - Market control view: self interested and less concern with
the public interest than their own career
Professional - Evolution West 2003 1 26 altruism, ethical service and self-regulation --> self
interested collectives
Professional - Market control 1 26 Comments on HIH vs. Arthur Andersen: the independence
view of Andersen is highly questionable
Systematic body of theory and IFAC 1 27 Skill and expertise
knowledge
Extensive education process 1 28 knowledge and skills will be further enhanced
Service ideal Wilensky 1964 1 28 any profession that abandons the service ideal will very
quickly lose the moral claim to professional status
Service ideal Willmott 1990 1 28 In performing its role, accounting is widely understood to
serve the public interest
Service ideal 1 29 - professions exist primarily to serve society
- 3 perspectives
+ The well-being of society
+ the pursuit of excellence
+ community service - "pro bono" (for the good)
,High degree of autonomy and 1 30 substantial degree of autonomy ( professional judgment.
independence Adherence code of ethics) and independence (objectives
and integrity) from government interaction and control
Code of ethics 1 31 APES 110
,A distinctive ethos or culture 1 32 values, norm and symbols
Monopoly - Public interest or Larson 1977 1 26 professions and professionals are about maintaining
self interest monopolies and extracting unwarranted wealth and
influence from that position
Monopoly - Public interest or Buckley 1978 1 26 society grants the professions monopoly power over
self interest professional affairs and the power to use this monopoly
power as they see fit, as long as the power is used in the
public interest
Professional judgement Baker 1982 1 32 - the ability to diagnose and solve complex, unstructured
values-based problems of the kind that arise in
professional practice
- professional judgment is the single most important
attribute that differentiates professionals from non-
professionals
Professional judgement Schon 1983 1 32 professional people must have an ‘awareness of the
uncertainty, complexity, instability, uniqueness, and value
conflict
Professional judgement 1 32 Difference between "a judgment made in error - in mistake"
and "a negligently formed judgment"
Professional judgement - audit 1 32 Keys judment
Professional judgement - West 2003 1 33 without judgment, accounting becomes nothing more than
accounting a book of rules for compliance
The existence of a governing 1 33 ensure these attributes listed are achieved and maintained
body
Accounting Professional and 1 34 - initiative of CPA Australia and the Chartered Accountants
Ethical Standards Board Australia and New Zealand (CAANZ)
(APESB) - 3 members: CPA, CAANZ (previously ICAA = Institute of
Chartered Accountants in Australia)
- Roles
Quality assurance process 1 35 Components: standard setting, conformity with standards,
pratice reviews, firm regulations
Accounting relationships and 1 39 Key professional relationships: employees, clients,
roles employees, peers (colleagues, other accountants)
Factors influence accountants 1 39 culture, standard, ethical evaluation
Accounting work environment 1 39 - Public pratice
- Private or business sector
- Public sector
- Financial advice
- Not for profit sector
Public pratice accounting 1 40 Professional accountants who offer accounting services to
businesses and the public:
- Big Four accounting firms
- Second-tier accounting firms
- Small practices and sole practitioners
Professional accountants in 1 42 - Roles of accountants in large business environment
business
SME accounting 1 43 - Roles of accountants in SME business environment:
more detailed work and decision making activities
, Roles of professional International Federation 1 43 - implementing and maintaining operational and fiduciary
accountant in business (PAIB) of Accountants 2005 controls
(IFAC) - providing analytical support for strategic planning and
decision making,
- ensuring that effective risk management processes are in
place, and
- assisting management in setting the tone for ethical
practices
Roles of professional International Federation 1 44
accountant in mid-sized of Accountants (IFAC)
enterprises (ME) 2008
Accountants external advisers CPA 2005 1 45 97% of SME purchases accounting services from an
to SMEs external accountant
Social impact of accounting 1 48 - Reporting as active foundation for a variety of outcomes:
providing information to support managers in decision-
making
- Macro and micro level
Creditability of the profession - Brewster 2003, 1 50 - Loss of trust in accounting profession in 2001, 2002
- International - Key issues: creative accounting, poor audit quality, lack
Federation of of auditor indepencence, financial accounting distortions
Accountants (IFAC) - International Federation of Accountants (IFAC) critical
2003 matters:
• the payment of incentives that encourage the
manipulation or misstatement of information;
• lack of actual or perceived auditor independence;
• lack of audit effectiveness both through lack of skill or
deliberate action; and,
• too much flexibility and loopholes in reporting practices
Creative accounting Chambers 1973 1 50 - Using the choices available to present information in
ways that do not clearly represent reality, and which
provide a distorted and often favourable view of the
organisation
- Continue to support companies that are weaker than their
accounts' presentation
Poor audit quality - Sikka 2009; Sikka, 1 51 - perceived inability of auditors to identify a company is
Filling & Liew 2009; distress prior to collapse
Woods et al. 2009 - GFC corporate failures
- Kruger 2012 - Auditor failure in the case of ABC learning
Lack of auditor indepencence Sikka, Filling & Liew 1 51 The basic auditing model is ‘flawed since it makes auditors
2009 financially dependent on companies’. Auditors will not give
Authur andersen objective independent professional judgments because
their incomes depend on the survival of the audit ‘target -->
not act in the public interest
Financial accounting 1 51 the GFC was at least in part caused by ineffective
distortions accounting standards for complex financial instruments
Retoring creditability of 1 53 - Establishment of the Financial Reporting Council
accounting profession - Accounting Standards are backed by law
- Auditors must apply the code of ethics - APES 110 The
Code of Ethics for Professional Accountants
- Financial Reporting Council (FRC) responsible for auditor
independence
- Enhanced Regulation: Sarbanes–Oxley Act 2002 in the
US, COSO 2004, CLERP 9 Act in Australia
- Adoption of international standards
Concept Author Module Page Content/note
Public interest or self interest 1 19 Act in the public interest
Acts with integrity, objectivity and without bias
Altruism: action that brings no benefit to an individual and
may even be at their own expense
Responsible decision-making Westpac Bank (2014) 1 20,21 Governance, accountability and ethics
Enlightenced self interest Lee (1995) 1 22 protecting the public interest in a self-interested way
Enlightened self-interest vs. Robson & Cooper 1990 1 22
public interest - integrated
Ideals of accounting - Saravanamuthu 2004 1 23 public service or service ideal may have existed in the past
entrepreneurialism and but abandoned for a more lucrative roles as "partner in
professionalism business"
Four Es of the ideals of Carnegie and Napier 1 23 education, ethics, expertise and entrepreneurship
accounting professionalism 2010
Profession - definition by 1 23 an occupational area or vocation that "involves prolonged
Oxford dictionary training and a formal qualification'
Profession - key attributes Greenwood 1957 1 24 1. systematic body of theory and knowledge;
2. extensive education process for its members;
3. ideal of service to the community;
4. high degree of autonomy and independence;
5. code of ethics for its members;
6. distinctive ethos or culture (values, norms, symbols);
7. application of professional judgment; and
8. existence of a governing body
Self regulation 1 24 - professions exist primarily to serve society
- have substantial degree of independence or autonomy:
have a greater level of authority to set their own rules and
regulations and have less government regulation
Autonomy 1 25 - self regulate commonly extends to memberships and
membership rules of a profession
- allows members of a profession to be judged by their
informed peers
- enables internal penalties or sanctions for matters that
ignore or not be able to identify by legal au.
Co-regulatary process 1 25 Regulation share bw the profession and external sources
Professional - Definition 1 25 person who has a significatn level of training and a high
level of competence and skills in an areas
Professional - Market control Allan 2006 1 26 - Traditional view: serving society
view - Market control view: self interested and less concern with
the public interest than their own career
Professional - Evolution West 2003 1 26 altruism, ethical service and self-regulation --> self
interested collectives
Professional - Market control 1 26 Comments on HIH vs. Arthur Andersen: the independence
view of Andersen is highly questionable
Systematic body of theory and IFAC 1 27 Skill and expertise
knowledge
Extensive education process 1 28 knowledge and skills will be further enhanced
Service ideal Wilensky 1964 1 28 any profession that abandons the service ideal will very
quickly lose the moral claim to professional status
Service ideal Willmott 1990 1 28 In performing its role, accounting is widely understood to
serve the public interest
Service ideal 1 29 - professions exist primarily to serve society
- 3 perspectives
+ The well-being of society
+ the pursuit of excellence
+ community service - "pro bono" (for the good)
,High degree of autonomy and 1 30 substantial degree of autonomy ( professional judgment.
independence Adherence code of ethics) and independence (objectives
and integrity) from government interaction and control
Code of ethics 1 31 APES 110
,A distinctive ethos or culture 1 32 values, norm and symbols
Monopoly - Public interest or Larson 1977 1 26 professions and professionals are about maintaining
self interest monopolies and extracting unwarranted wealth and
influence from that position
Monopoly - Public interest or Buckley 1978 1 26 society grants the professions monopoly power over
self interest professional affairs and the power to use this monopoly
power as they see fit, as long as the power is used in the
public interest
Professional judgement Baker 1982 1 32 - the ability to diagnose and solve complex, unstructured
values-based problems of the kind that arise in
professional practice
- professional judgment is the single most important
attribute that differentiates professionals from non-
professionals
Professional judgement Schon 1983 1 32 professional people must have an ‘awareness of the
uncertainty, complexity, instability, uniqueness, and value
conflict
Professional judgement 1 32 Difference between "a judgment made in error - in mistake"
and "a negligently formed judgment"
Professional judgement - audit 1 32 Keys judment
Professional judgement - West 2003 1 33 without judgment, accounting becomes nothing more than
accounting a book of rules for compliance
The existence of a governing 1 33 ensure these attributes listed are achieved and maintained
body
Accounting Professional and 1 34 - initiative of CPA Australia and the Chartered Accountants
Ethical Standards Board Australia and New Zealand (CAANZ)
(APESB) - 3 members: CPA, CAANZ (previously ICAA = Institute of
Chartered Accountants in Australia)
- Roles
Quality assurance process 1 35 Components: standard setting, conformity with standards,
pratice reviews, firm regulations
Accounting relationships and 1 39 Key professional relationships: employees, clients,
roles employees, peers (colleagues, other accountants)
Factors influence accountants 1 39 culture, standard, ethical evaluation
Accounting work environment 1 39 - Public pratice
- Private or business sector
- Public sector
- Financial advice
- Not for profit sector
Public pratice accounting 1 40 Professional accountants who offer accounting services to
businesses and the public:
- Big Four accounting firms
- Second-tier accounting firms
- Small practices and sole practitioners
Professional accountants in 1 42 - Roles of accountants in large business environment
business
SME accounting 1 43 - Roles of accountants in SME business environment:
more detailed work and decision making activities
, Roles of professional International Federation 1 43 - implementing and maintaining operational and fiduciary
accountant in business (PAIB) of Accountants 2005 controls
(IFAC) - providing analytical support for strategic planning and
decision making,
- ensuring that effective risk management processes are in
place, and
- assisting management in setting the tone for ethical
practices
Roles of professional International Federation 1 44
accountant in mid-sized of Accountants (IFAC)
enterprises (ME) 2008
Accountants external advisers CPA 2005 1 45 97% of SME purchases accounting services from an
to SMEs external accountant
Social impact of accounting 1 48 - Reporting as active foundation for a variety of outcomes:
providing information to support managers in decision-
making
- Macro and micro level
Creditability of the profession - Brewster 2003, 1 50 - Loss of trust in accounting profession in 2001, 2002
- International - Key issues: creative accounting, poor audit quality, lack
Federation of of auditor indepencence, financial accounting distortions
Accountants (IFAC) - International Federation of Accountants (IFAC) critical
2003 matters:
• the payment of incentives that encourage the
manipulation or misstatement of information;
• lack of actual or perceived auditor independence;
• lack of audit effectiveness both through lack of skill or
deliberate action; and,
• too much flexibility and loopholes in reporting practices
Creative accounting Chambers 1973 1 50 - Using the choices available to present information in
ways that do not clearly represent reality, and which
provide a distorted and often favourable view of the
organisation
- Continue to support companies that are weaker than their
accounts' presentation
Poor audit quality - Sikka 2009; Sikka, 1 51 - perceived inability of auditors to identify a company is
Filling & Liew 2009; distress prior to collapse
Woods et al. 2009 - GFC corporate failures
- Kruger 2012 - Auditor failure in the case of ABC learning
Lack of auditor indepencence Sikka, Filling & Liew 1 51 The basic auditing model is ‘flawed since it makes auditors
2009 financially dependent on companies’. Auditors will not give
Authur andersen objective independent professional judgments because
their incomes depend on the survival of the audit ‘target -->
not act in the public interest
Financial accounting 1 51 the GFC was at least in part caused by ineffective
distortions accounting standards for complex financial instruments
Retoring creditability of 1 53 - Establishment of the Financial Reporting Council
accounting profession - Accounting Standards are backed by law
- Auditors must apply the code of ethics - APES 110 The
Code of Ethics for Professional Accountants
- Financial Reporting Council (FRC) responsible for auditor
independence
- Enhanced Regulation: Sarbanes–Oxley Act 2002 in the
US, COSO 2004, CLERP 9 Act in Australia
- Adoption of international standards
