(updated) Index CPA Ethics & Governance - Sem 1 2020.

Accountants as members of a profession 1 3 -

A
AAA (American Accounting Association) 2 108 7 steps

AASB (Australian Accounting Standards Board) (2010) 1 19 Responsible to setting accounting standards
Two-strikes rule-shareholders spill the whole board but KMP are not eligible to vote.
KMP are- planning authority, controlling activities of entity directly or indirecty
AASB (Australian Accounting Standards Board) (2010) 4 214
AASB 124 Related Party Disclosures 4 214 Defined 'KMP' ('Two-strike' rule)

Abbott (2014) 1 6 Professions never had a public interest or service ideal
1.Predatory Pricing 2.Loss leading 3.ACCC competition and consumer Act S46
Abuse of market power 4 250
ACARA 2014 5 325 sustainability
Apply for permission for anti-competitive behaviors. Approval on the basis of 'the public
ACCC 4 257 interest'.
Undertakes a number of functions involving regulation, legislation development,
ACCC (Australian Competition and Consumer Commission) 4 251 competition law education, prosecution and administrative decision-making.
Can grant immunity from prosecution in return for blowing the whistle on the cartel
ACCC Immunity Policy for Cartel Conduct 4 253 conduct.
ACCC v. Cabcharge Australia Ltd (2010) FCA 1261 4 251 Market power misuse

ACCC v. Metcash Trading Ltd (2011) FCAFC 151 4 252 M&A

ACCC v. Midland Brick Co Pty Ltd (2004) FCA 693 (31 May Price-fixing
2004) 4 254
The duty to provide a report, or an account, of the actions and decisions made in regard
to those areas of activity for which an organisation is deemded to be responsible.
Accountability (Definition) 5 324
Strategy without accountability = recklessness; accountability without strategy =
Accountability + Strategy 3 139 paralysis
Accountant (business) 2 74
Accountant (public practice) 2 73 Independence

Accountant Roles in private business 1 28 Table 1.5 - Type of roles

Accountant roles performed is SME 1 28 End to end accounting and finance function

Accountant roles within public practice (Table 1.4) 1 26 -

Accountants (conformance vs. performance) 3 140 Accountant spend too much time on conformance and compliance based work.

Accountants and effective governance 3 140 -

Accountants as external advisers to SMEs 1 26 CPA Australia (2005)

Accountants employed in the large business environment 1 27 -

Accounting for the levels of emissions 5 358 Scope 1, Scope 2, Scope 3

Accounting in small and medium enterprises (SMEs) 1 28 -
Background
Accounting Professional and Ethical Standards Board (APESB) 1 18
Accounting roles, activities and relationships 1 24 -
...typically shaped by factors such as new and evolving technologies, changing market
conditions, legislative and regulatory developments, and the needs of a diverse range
of parties engaged in making resource allocation decisions and accountability
Accounting work environment 2 48 evaluations

Accounting work environments 1 25 Table 1.2 - Examples of accounting work environments

Ackman 2002 4 286 Whistleblower protection. Example 4.18

ACNC Guidance 3 189 Governance standards for not-for-profit organisations

Act beyond their power but innocently (Directors) 3 121 Example 3.2 Advance bank

Act in the corporation's best interests 3 120 -

Acting with sufficient expertise (s. 230) 2 85 -

Adams 2013 5 341 Integrated reporting

Adaptiation 5 355 adapting the effects of climate change

Adolf Berle 5 306 who embraced the shareholder primacy perspective.

Advance Bank Australia 3 121 Directors act beyond their power, however innocently

Advocacy threat 2 69 -
1) Monitoring costs, 2) bonding costs, 3) costs relating to residual loss
Agency costs 3 133 [embedded within para: audit fees and internal audit]
Agency costs (Examples) 3 134 Example 3.4 - Agency costs

Agency costs can arise as a result of: 3 133 information asymmetry, poor communication & understanding, self-interest, illegal
agents who are highly bonded will be expected to try to maximise the returns of their
Agency relationships 3 principals and will be expected also to seek returns for themselves
Agency theory 3 132 views CG through the relationship between agents and principals.

Agency theory (two key assumptions) 3 132 self-interest / in a position of power

Agent 3 138 Those who assumes responsibilities to look after = agents

Agent of the board 3 129 managers are the agent of the board

Agreements between competitors—cartel conduct 4 253 Horizontal agreement/ Collusive behaviour/ Cartel conduct/ Cartel provision

AICD (Australian Institute of Company Directors) (2010) 4 217 Adopting diversity

AICD Report (2010) 4 218 Refer to page for key points of NAB's diversity approach

Alan Fels (Prof. Fels 1999) 4 241 relevant competition and consumer law and page 318 "compliance programs"

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,Allan, G. (2006) 1 11 Professions - question the independence of Anderson
Also known as 'market sharing', consumers are not offered choise
Allocating customers, suppliers or territories (Cartel conduct) 4 253
North Europe: top tier-supervisory board + second tier-mangement board (strong
Alternative board structures and relationships 3 131 employee representation) // In Japan have banks on board to get stable financing
Alternative international approaches to governance 3 161 Market-based systems vs. Relationship-based systems

Altman and Hotchkiss (2006） 4 208 Management inadequancies lead to corporate failure
Describes action that brings no benefit to oneself, and may even at one's own expense.
This view then aligns with the concept that professional accountants act in the public
Altruism 1 3 interest

American Accounting Association model 2 108 7 steps

America's most overpaid CEOs (Example 4.3 ) 4 223 Cisco. John Chambers, CEO, highest paid

An asset by any other name 2 109 Example 2.21
companies are run for shareholders, being the owners of the companies, with the duty
Anglo-American legal approach 3 174 to stakeholders being a derivative of this primary duty
The underlying rule: The key duty of directors is to act for proper purposes and to act in
Anglo-American model 3 174 good faith in the interests of the company as a whole.
rights of individuals, contracts, negligence, property; and ownership rights,'common law
Anglo-American system (Legal) (community wide laws) 4 238 jurisdictions' refer page for countries
Anti-competitive Behaviour (automatically illegal) 4 253 dealt with civil basis.
M1) Code of Ethics of professional Accountants
M2) CPAA to investigate complaints against member under its investigation, discipline
and appeals procedure.
1 21 M2) Professional ethics framework - ethical responsibilities of accountants
APES 110 [Code of Ethics] 2 60 M2) role of members in business

APES 110 [Part 1: Fundamental Principles and conceptual Fundamentals [s. 110-115] 1) integrity, 2) objectivity, 3) professional competence and
framework] 2 63 due care, 4) confidentiality, 5) professional behaviour
- Objectivity + Integrity
APES 110 [Part 4: Independence] 2 88 - common threats to indepedence + safeguards
APES 110 [s. 111] Integrity 2 63 "Having the courage to pursue one's convictions"
1) be impartial/unbias, 2) requires avoidance of situations that may compromise
APES 110 [s. 112] Objectivity 2 64 professional judgment, 3) avoid conflict of interest
1) attain & maintain knowledge & skill, 2) act diligently in accord w/ technical&profess
APES 110 [s. 113] Professional competence and due care 2 64 standard
3 exceptions: 1) law permits & client agrees, 2) disclosure required, 3) professional duty
or right to disclose
- Should first seek legal advice
APES 110 [s. 114] Confidentiality 2 65 - Dislcosing information after resigning = Breach
avoid situation actions or decisions that would be unprofessional or could bring
APES 110 [s. 115] Professional behaviour 2 65 profession into disrebute
- Institutional safeguards
APES 110 [s. 120.10] Addressing Threats 2 73 - safeguards for the work environment
1) identify threats, 2) evaluate threats, 3) address threats by elim or reduce to
APES 110 [s. 120.2] three steps 2 68 acceptable level
encourage to document process and consider consulting: 1) TCWCG, 2)professional
APES 110 [s. 120.20] Documentation and Advice 2 74 body, 3) regulatory body, 4) legal counsel
The exercise of professional judgement is important part of work of accounting --> deals
APES 110 [s. 120.5-120.5 A4] 2 69 with how a member should view the exercise of professional judgment
APES 110 [s. 120.6] Threats categories 2 69 1) intimidation, 2) advocacy, 3) self-review, 4) self-interest, 5) familiarity
- Acceptable level
APES 110 [s. 120.7] Evaluating threats 2 71 - qualitative and quantitative factors must be considered
Alerts accountants that now facts & circumstances need to be allowed for the context of
APES 110 [s. 120.9-120.9 A2] 2 69 decision making
refers member to the additional responsibilities of accountants who have senior roles
within business --> provides guidance on how senior accountant may be able to
APES 110 [s. 200.5 A3] 2 69 influence outcomes

APES 110 [s. 210,310] 2 74 circumstance / safeguards


APES 110 [s. 220] Preparation and presentation of information 2 84
APES 110 [s. 230] Acting with sufficient expertise 2 85
commissions - self interest threatnto objectivity
- banned: a wide range of benefits, gifts or other incentives, including soft dollar
APES 110 [s. 230] Commissions and soft dollar benefits 2 78 benefits and commisions on sales, volume, preferential commissions
self-interest threat
APES 110 [s. 240,330] Remuneration, incentives, fees & forms - circumstances that create self interest threat / safeguards to prevent self interest
of payment] 2 77 threat
- self-interest threat
APES 110 [s. 250, 340] Inducements, gifts, hospitality 2 - factors to consider / safegaurds
[260.11] Senior members in Business,
[260.24] Accountants other than senior members
APES 110 [s. 260, 360] Responding to non-compliance 2 81 NOCLAR for members in public practice

APES 110 [s. 270] Pressure to breach fundamental principles 2 86
- Factors to consider when evaluating a threat
- communication (with predecessor or existing accountant
APES 110 [s. 320] Professional Appointments 2 87 - Referrals

APES 110 [s. 321] Second opinions 2 87
APES 110 [s. 350] Custody of client assets 2 88
APES 110 [s. 600 - 610] Provision of Non-assurance services to self-review threat
an audit client 2 93

APES 110 [s. 800, 990] Special purpose financial statements 2 89
APES 205 [Confirmity with accounting standards] 1 19
APES 210 [Confirmity with Auditing Standards] 1 19
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, Quality assurance process. 1.Leadership respobsibilities for quality within the firm.
2.Ethical requirements. 3.Acceptance and continuance of client relationships and
specific engagements. 4. Human resources. 5.Engagement Performance. 6.Monitoring.
APES 320 [Quality control of firm] 1 19
APES GN 40 Ethical Conflicts in the Workplace 2 106 APES GN 40 Ethical Conflicts in the Workplace
Accounting Professional Ethical Standards Board (INDEPENDENT, not control by a gov
APESB 2 60 body)
was the result of an initiative of CPA Australia and the Insititute of Chartered
APESB (Accounting Professional and Ethical Standards Board) 1 18 Accountants in Australia (ICAA) - 4 Nov 2005

APESB (Fulfils its role by) 1 18 See page for list

APESB (Technical board) 1 18 Include two members of CPA Australia

APESB Code of ethics 2 60 -
Single most important attribute of a profession. Diagnose and solve complex,
Application of professional judgment 1 16 unstructured valus based problem. Becker-1982
Applying ethics 2 51 -

Appointment 4 211 Board appointment and cessation (ending, termination)

Approaches to consumer protection (misleading conduct) 4 259 Hong Kong, Malaysia, Japan and Australia

Approvals procedures 4 257 exception of anti competive conduct. E.g. TAXI fare
Financial institutions will be informed of the reason behind a director's resignation by
APRA (Australian Prudential Regulation Authority) 4 212 APRA.
instituted a rigorous policy of RM in major financial institutions.
APRA (Australian Prudential Regulation Authority) (2015, p.1) 4 229
ARA Australian Reporting Award 5 353 Example of best practice and innovative reporting

Arbitrator (law as arbitrator) 4 249 clear rules that establish competition policies within the corporation.

Aronson 2002 2 95 Arthur Andersen

Aronson, B. 2002, ‘The Enron collapse and auditor Case Study 2.2: Arthur Andersen
independence:… 2 95
Arthur Andersen (Billing Enron) 4 227 Billed Enron 52 million for audit (25 mil audit & 27 non audit services)

Arthur Anderson 2 95 Case study 2.2

ASA 3 142 Australian Shareholders' Association: prevent smaller shareholders

ASC v. Gallagher (1993) ASCR 43 3 122 Directors' duty of care and diligence

ASIC (Australian Securities & Investments Commission) 3 150 List of traits of a sound regulatory system (as 'regulators' in CG)

ASIC (Australian Securities and Investments Commission) Steve Vizard banned for 10 years and fined $390,000. Civil case
(2005) Pecuniary penalty 4 240
- 1) make info about Co available to public, 2) promote confidence by investors in the
finance system, 3) review FS on annual basis & raise concerns w/ Co if any arise
- ASIC conducts financial reporting survellance and seeks FS amendments from
1, 33, entities that failed to properly apply a certain accounting standard
ASIC (roles) 2 44
ASIC's Power 1 33 example 1.6

Assertiveness 1 38 self-confidence (a transferable skill)

Asset (Definition, from Conceptual Framework) 5 294 Limitations of traditional financial reporting

Assumption of agency theory 3 132
ASX CGC - Development 3 160 Development of CG in Australia

ASX CGC (2010) - Diversity 4 216 Promote Board diversity: particularty gender diversity

ASX CGC (2014) 4 220 Payments for past and future performance

ASX CGC (2014) - Summary 3 178 8 principles + 29 recommendations

ASX Continuous Disclosure Guide (ASX 2014) 3 123 Examples of information that can be market sensitive
for admission to S&P/ASX 300 Index, must have a remuneration committee comprised
ASX Listing rule (ASX CGC 2019) 3 178 solely of NEDs
ASX Listing rule 14.4 4 212 Australia election exception for managing director

ASX Principle 1 - Lay solid foundation for management and Recommendation 1.1 - 1.7
oversight 3 179
ASX Principle 2 -nomination committee 3 180 nomination committee requirements
A listed entity should disclose the names of directors considered by the board to be
independent; also a checklist of factors to consider when assessing a director's
ASX Principle 2.3 3 181 independence
ASX Principle 3 - instil culture of acting lawfully, ethically,
responsibly 3 182
Audit committee for listed co = 3 members + all NEDs + Majority INEDs + chaired by
ASX Principle 4 - Audit committee 3 183 INEDs
ASX Principle 5 - Make timely and balanced disclosure 3 183
ASX Principle 6 - Respect the rights of security holders 3 184
184, Establish a sound RM framework, periodically review the effectiveness
ASX Principle 7 - Risk management 3 178
Remuneration committee for listed co = 3 members + majority INEDs + chaired by
ASX Principle 8 - Remuneration committee 3 185 INEDs
ASX Principle 9 - additional recommendations 3 186
8 traditional attributes of a profession. 1.Body of knowledge.2.Education
process.3.Ideal of service. 4.Autonomy and independence. 5.code of ethics. 6.Ethos
Attributes of the accounting profession 1 12 and culture. 7.Professional judgement. 8. Governing body.
became a Commonwealth statutory body (rather than remaining controlled by the major
AUASB (Auditing and Assurance Standards Board) 3 161 accounting bodies in Australia)
Audit and related regulation 4 227 -


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, Sarbanes-Oxley and FRC requeire at least one financial person on the board. But ASX
Audit committe (ASX Principle 4) 3 183 does not include this requirement.
Audit committee 3 147 Most important of the committees

Audit committee (Benefits) 3 148 List of benefits
To ensure independence, committee should comprise only non-executive members,
Audit committee (Independence) 3 147 with majority being independent.
Audit committee (Limitations) 3 148 List of limitations
Top 500 companies on ASX must have audit committee. Top 300 must conform to the
recommendations in the ASX principles. Under US Sarbanes-Oxley Act (US Congress
2002) all US listed companies must have an audit committee. (only independent
Audit committee (Mandatory) 3 183 director)
reviewing half year and full year financial statements prior to board approval (Percy
Audit committee (Responsibilities) 3 148 1995)
Audit committee (Sarbanes Oxley) 3 148 All members must be independent.
Sarbanes-Oxley Act requires audit committees to establish procedures for hearing
Audit committees 4 284 complaints.
Audit Deficiencies 1 33 example 1.7
is the term used when an audit is deficient due to negligence, incompetence or lack of
Audit failure-defination 3 150 independence by the auditor.
Auditing and Assurance Standards Board (AUASB) 1 18 AUASB+AASB report to FRC

Auditors (Internal and external) 3 150 -

Auditors key judgement 1 17 -

Auditors' report 4 226 addressed to the "intended users"

Australian Accounting Standards Board (AASB) 1 18 AUASB+AASB report to FRC

Australian Bureau of Statistics 3 195 2,200 ASX-listed vs. 2 M small business
crimal and civil. fines or jail sentence, in Aus, penalties for up to 10 years' jail for
Australian cartel provision 4 241 individuals or 10 Million or 10% group turnover
Australian Charities and Not-for-profit Commission (ACNC) 4 232 4000 charities failed to lodge financial reports.

Australian Competition and Consumer Act 4 243 Creates the Australian version of this new type of 'employee' protection

Australian Competition and Consumer Act 2010 (Cwlth) 4 249 Misuser of market power

Australian Corporations Act - Test for disclosure 3 123 Test of whether disclosure is required for market sensitive information

Australian Corporations Act - Whistleblowers' protection 4 284 who can be whistleblowrs and when "blow the wistle"
in 2011 Cwlth amended to provide for two stikes and re-election of all board members.
this rule was recommended in 2009 by Executive remuneration in Australia by the
Australian Corporations Act 2001 (Cwlth) - Two-strikes rule 4 214 productivity commission
Directors must give details of the entity's performance in relationto environmental
Australian Corporations Act s.299(1)(f) 5 331 regulaitons.
Directors' report must include info about operations & business strateiges for future
Australian Corporations Act s.299A(a) 5 331
Australian Shareholders' Assoication (ASA) 3 142 represent interests of smaller shareholders
A new best practice requirment to disclose any material exposures to sustainabilty risks
Australian Stock Exchange Corporate Governance Council 5 332
Automatic disqualification 4 215 Dishonest = automatic disqualification. E.g

Automatically illegal (per se illegal) (anti-competitive behave) 4 253 -

Autonomous entity 3 136 consider the corporate to act as an autonomous entity (limited liability)
means, less detailed government regulation, setting your own rules, holding your own
Autonomy 1 9 member accountable. This reduce over time, and now we have co-regulation
describes the roles of 'the board', but 'the board is not in place to actually run the
AWA Ltd v. Daniels (1992) 10 ACLC933 3 130 business itself' (need to rely on management). Also "Rogers C J".
AWB Ltd (Australian Wheat Board) 4 211 Lack of good CG

B
Bargaining process fails 4 247 Industrial action may occur.- go slows, work to rule, strikes

Barings bank 4 275 Example of Rogue Trading

Barraket et al. 2010 5 324 Social enterprises

Baumhart cited in Mitchell 2003 2 44 Survey: what does ethics mean to you

BBC (British Broadcasting Commission) (2009) 4 251 Example 4.17: Intel fined Eur1.06 billion
Diversity: increase the number of women in senior executive positions to 50% within 10
BCA 2013 4 218 years
B-Corporations 5 324 In 2014, Natura from Brazil become the first publicly listed B-Corp.
argues that professional judgement is the single most important attribute that
Becker (1982) 1 16 differentiates professional from non-professionals
Benefit of applying ethical framework 2 44
Berle, Adolf (Professor) 5 306 Shareholder primacy perspective

Best practice corporate governance for addressing climate
change 5 353
Junior accountants require higher levels of technical skills such as taxation and
Bhamornsiri & Guinn (2005) 1 38 financial reporting.
Bhopal, India, 1984 5 319 Environmental disasters

BHP Billiton 3 156 tension between the board and management - call for protocols

BHP Billiton 4 223 Example 4.4: BHP Billiton. Good CG. Severance payments

Bid-rigging (Cartel conduct) 4 253 Bid price should be confidential

Big Four accounting firms - Second-tier acconting firms - Small Table 1.3 - PWC, Deloitte, Ernst & Young and KPMG. 150 000 employees, Annual rev
practies and sole practitioners 1 25 20bil


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