@PROFDOCDIGITALLIBRARIES
CPA Ethics and Governance (E&G) HD Study Notes for Semester 2-
latest-2024/2025
Complete Guide A+ || Latest Updated Version
Module 1 - Accounting and Society
Part A: Accountants as members of a profession (p.3)
Public interest or self-interest? (p.3)
• Altruism: Actions that bring no benefit to an individual and may even be at their own
expense
• Enlightened self-interest: Professionals are motivated by maintaining monopolies and
extracting unwarranted wealth and influence from being in that position
Responsible Decision-Making (p.3):
PR
• An accountant’s decision is made within a systemic framework of principles which include:
1. Governance
a. The skill and knowledge of an accountant must be exercised within the
governance framework of their profession, which stipulates certain codes of
behaviour
b. Decision-making must be within the relevant corporate governance framework
O
of the entity, in terms of the instruments and articles of association as well as
the policies and strategies approved by the board of directors
2. Accountability
FD
a. Accounting work and decision-making must comply with the requirements of
regulatory authorities with the appropriate disclosure to all stakeholders
3. Ethics
a. Any decision-making must be done within an ethical framework which is based
on a commitment to integrity and honesty in the pursuit of professional
O
purposes and client interests
C
Enlightened self-interest (p.6)
• An accountant must never let the economic self-interest of his behaviour to outweigh the
primary commitment to serving the public interest
• Lee (1995) described the enlightened self-interest as protecting the public interest in a self-
interested way (E.g. Volunteering at a charity to gain favour with your boss who runs it)
Ideals of Accounting – Entrepreneurialism and Professionalism (p.6)
• Carnegie and Napier (2010) identify the ideals of accounting professionalism as:
1. Education
2. Ethics
3. Expertise
,@PROFDOCDIGITALLIBRARIES
4. Entrepreneurship (Conflict with objectivity)
PR
O
FD
O
C
,@PROFDOCDIGITALLIBRARIES
What is a profession? (p.8)
• A Profession is based on a high level of competence and skills in a given area, which are
learnt through specialised training, being ethical and in the best interests of society as well
as maintained by continuing professional development
• Professionalisation: The process of establishing professional bodies and codes of conduct
aimed at raising the standards of the occupation, and to invest in training, education and
respecting quality standards
• The 8 key attributes of a profession developed by Greenwood (1957):
1. Systematic body of theory and knowledge
▪ Theory construction, body of knowledge and systematic research
2. Extensive education process for its members
▪ Education process = Theory (University) + Practice (Internship) + CPD (CPA)
3. Ideal of service to the community
▪ Social contract to help society (E.g. Helping charities)
▪ 3 aspects: Wellbeing of society, pursuit of excellence and community service
4. High degree of autonomy and independence
PR
▪ Co-regulation = Accounting profession + Government
5. Code of ethics for its members
▪ 5 principles: Integrity, Objectivity, Professional Competence and Due Care,
Professional Behaviour and Confidentiality (How we should behave)
6. Distinctive ethos or culture
O
▪ Use of values and norms enhances belonging (E.g. Symbols and images)
7. Application of professional judgement
▪ Professional judgement = Diagnose + Solve unstructured problems
FD
• Application of knowledge and skills
8. Existence of a governing body
▪ Professional accounting bodies set minimum requirements, monitor
members and their professional development (E.g. CPA Australia)
O
C
, @PROFDOCDIGITALLIBRARIES
• Monopoly control: The situation where members of the profession control who is allowed to
work in the industry by establishing licensing rules and regulations which creates protection
against competition (E.g. Exclusivity requirement for auditors under the Corporations Act)
• Service Ideal: Professionals should both serve society and act in the public interest
Self-regulation:
• Professions are typically allowed to provide services to the public through regulatory
processes (e.g. Doctors are allowed by law to prescribe specific drugs to patients)
• Once given permission, the professions are allowed a level of independence/autonomy,
which means that they have a greater level of authority to set their own rules and
regulations and have less detailed government intervention
• Professional bodies set the educational requirements, professional ethical standards and
disciplinary/legal processes for members of their profession
• Autonomy enables members of the profession to be judged by their informed peers, rather
than by regulators who have limited knowledge and greater bias due to less experience
• Autonomy also enables internal penalties/sanctions for matters that a legal process might
PR
not be able to identify (E.g. Ethical breaches of a professional code of conduct)
From self-regulation to a co-regulatory process:
• There can be a negative outcome from this autonomy if the profession fails to demonstrate
self-control and self-regulation and doesn’t hold its members to account when they act
O
inappropriately
• If this is allowed to continue through lack of self-regulation, trust in the profession will be
eroded and the value and the status of the profession will be damaged
FD
• Regulations from external sources are in place leading to co-regulation with regulatory
bodies (E.g. Australian Financial Reporting Council which has been given auditing and
accounting standards and the force of law)
Professions – The traditional view and the ‘market control’ view (p.11)
O
There are 2 contrasting views of the accounting profession
1. Traditional (Ideal) view:
a. The accounting profession is seen as demonstrating a range of attributes that are
C
focused on serving society
b. Attributes: Systematic body of knowledge, extensive education process, code of
ethics, culture and a governing body
2. Market control view:
a. Professional accountants are self-interested and less concerned with the broader
public interest, than with their own careers (Monopoly creation)
b. The accounting profession has created a “monopoly” in order to ensure that on
certain people (“members of the profession”) can work in this field (E.g. Collapse of
Arthur Andersen)
c. Outcomes: Generates greater financial returns as well as better status and prestige
in the community
Trust and professions (p.11)
CPA Ethics and Governance (E&G) HD Study Notes for Semester 2-
latest-2024/2025
Complete Guide A+ || Latest Updated Version
Module 1 - Accounting and Society
Part A: Accountants as members of a profession (p.3)
Public interest or self-interest? (p.3)
• Altruism: Actions that bring no benefit to an individual and may even be at their own
expense
• Enlightened self-interest: Professionals are motivated by maintaining monopolies and
extracting unwarranted wealth and influence from being in that position
Responsible Decision-Making (p.3):
PR
• An accountant’s decision is made within a systemic framework of principles which include:
1. Governance
a. The skill and knowledge of an accountant must be exercised within the
governance framework of their profession, which stipulates certain codes of
behaviour
b. Decision-making must be within the relevant corporate governance framework
O
of the entity, in terms of the instruments and articles of association as well as
the policies and strategies approved by the board of directors
2. Accountability
FD
a. Accounting work and decision-making must comply with the requirements of
regulatory authorities with the appropriate disclosure to all stakeholders
3. Ethics
a. Any decision-making must be done within an ethical framework which is based
on a commitment to integrity and honesty in the pursuit of professional
O
purposes and client interests
C
Enlightened self-interest (p.6)
• An accountant must never let the economic self-interest of his behaviour to outweigh the
primary commitment to serving the public interest
• Lee (1995) described the enlightened self-interest as protecting the public interest in a self-
interested way (E.g. Volunteering at a charity to gain favour with your boss who runs it)
Ideals of Accounting – Entrepreneurialism and Professionalism (p.6)
• Carnegie and Napier (2010) identify the ideals of accounting professionalism as:
1. Education
2. Ethics
3. Expertise
,@PROFDOCDIGITALLIBRARIES
4. Entrepreneurship (Conflict with objectivity)
PR
O
FD
O
C
,@PROFDOCDIGITALLIBRARIES
What is a profession? (p.8)
• A Profession is based on a high level of competence and skills in a given area, which are
learnt through specialised training, being ethical and in the best interests of society as well
as maintained by continuing professional development
• Professionalisation: The process of establishing professional bodies and codes of conduct
aimed at raising the standards of the occupation, and to invest in training, education and
respecting quality standards
• The 8 key attributes of a profession developed by Greenwood (1957):
1. Systematic body of theory and knowledge
▪ Theory construction, body of knowledge and systematic research
2. Extensive education process for its members
▪ Education process = Theory (University) + Practice (Internship) + CPD (CPA)
3. Ideal of service to the community
▪ Social contract to help society (E.g. Helping charities)
▪ 3 aspects: Wellbeing of society, pursuit of excellence and community service
4. High degree of autonomy and independence
PR
▪ Co-regulation = Accounting profession + Government
5. Code of ethics for its members
▪ 5 principles: Integrity, Objectivity, Professional Competence and Due Care,
Professional Behaviour and Confidentiality (How we should behave)
6. Distinctive ethos or culture
O
▪ Use of values and norms enhances belonging (E.g. Symbols and images)
7. Application of professional judgement
▪ Professional judgement = Diagnose + Solve unstructured problems
FD
• Application of knowledge and skills
8. Existence of a governing body
▪ Professional accounting bodies set minimum requirements, monitor
members and their professional development (E.g. CPA Australia)
O
C
, @PROFDOCDIGITALLIBRARIES
• Monopoly control: The situation where members of the profession control who is allowed to
work in the industry by establishing licensing rules and regulations which creates protection
against competition (E.g. Exclusivity requirement for auditors under the Corporations Act)
• Service Ideal: Professionals should both serve society and act in the public interest
Self-regulation:
• Professions are typically allowed to provide services to the public through regulatory
processes (e.g. Doctors are allowed by law to prescribe specific drugs to patients)
• Once given permission, the professions are allowed a level of independence/autonomy,
which means that they have a greater level of authority to set their own rules and
regulations and have less detailed government intervention
• Professional bodies set the educational requirements, professional ethical standards and
disciplinary/legal processes for members of their profession
• Autonomy enables members of the profession to be judged by their informed peers, rather
than by regulators who have limited knowledge and greater bias due to less experience
• Autonomy also enables internal penalties/sanctions for matters that a legal process might
PR
not be able to identify (E.g. Ethical breaches of a professional code of conduct)
From self-regulation to a co-regulatory process:
• There can be a negative outcome from this autonomy if the profession fails to demonstrate
self-control and self-regulation and doesn’t hold its members to account when they act
O
inappropriately
• If this is allowed to continue through lack of self-regulation, trust in the profession will be
eroded and the value and the status of the profession will be damaged
FD
• Regulations from external sources are in place leading to co-regulation with regulatory
bodies (E.g. Australian Financial Reporting Council which has been given auditing and
accounting standards and the force of law)
Professions – The traditional view and the ‘market control’ view (p.11)
O
There are 2 contrasting views of the accounting profession
1. Traditional (Ideal) view:
a. The accounting profession is seen as demonstrating a range of attributes that are
C
focused on serving society
b. Attributes: Systematic body of knowledge, extensive education process, code of
ethics, culture and a governing body
2. Market control view:
a. Professional accountants are self-interested and less concerned with the broader
public interest, than with their own careers (Monopoly creation)
b. The accounting profession has created a “monopoly” in order to ensure that on
certain people (“members of the profession”) can work in this field (E.g. Collapse of
Arthur Andersen)
c. Outcomes: Generates greater financial returns as well as better status and prestige
in the community
Trust and professions (p.11)
