Ethics and Governance
3rd edition, 2020
MODULE 1: ACCOUNTING AND SOCIETY
Part A: Accountants as members of a profession 3
Public interest or self-interest? 3
Responsible decision making 3
Enlightened self-interest 6
What is a profession? 8
Self-regulation 9
From self-regulation to a co-regulatory process 10
What is a professional? 10
The accounting profession – traditional vs market control view 11
Trust and professions 11
Attributes of a profession 12
The Profession’s regulatory process 18
APESB 18
Quality Assurance process 19
Professional discipline 20
Part B: Interaction with Society 24
Accounting roles, activities and relationships 24
Social impact of accounting 32
Example: depreciation and behaviour 32
Credibility of the profession 34
Credibility under challenge 34
Key issues causing reduced credibility 34
Restoring credibility to accounting 36
Capability considerations 37
Business leadership capabilities 37
Technical skills, knowledge and experience 38
Soft skills, knowledge and experience 38
© Study Shortcut 2020
www.study-shortcut.com.au
,Ethics and Governance
3rd edition, 2020
PART A: Accountants as members of a profession p3
Public interest or self-interest? p3
Disclosure of information is in the public interest: supports efficient market hypothesis, is objective, is
accurate, is appropriate financial information
Serve public interest by informing people who make significant decisions on the allocation of resources.
Focus on acting with integrity, objectivity and without bias. Based on expertise.
Responsible decision making p3
Accountants make decisions within a systematic framework of principles. The best decisions are made where
governance, corporate accountability and ethics intersect.
– Governance framework of the profession: skill and knowledge exercised within framework (code of
behaviour)
– Corporate governance / accountability: within the relevant corporate governance framework
(instruments and articles of association) and policies and strategies formally approved by the Board.
Adherence to regulatory framework (such as disclosure requirements)
– Ethical conduct: commitment to integrity and honesty in the pursuit of professional purposes and
client interests
© Study Shortcut 2020
www.study-shortcut.com.au
,Ethics and Governance
3rd edition, 2020
Enlightened self-interest p6
It is possible to be committed to the public interest, yet possess a degree of self-interest ‘doing well by doing
good.’
The accounting profession would account for its existence in relation to the efficiency benefits for society as a
whole, arising from the existence of an institutionally organised body of accounting knowledge…In return for
their monopoly position, concerning the right to practise particular accountancy and auditing functions,
accountants would see themselves as serving the public interest (Robson & Cooper 1990, p379.)
Ideals of accounting – entrepreneurialism and professionalism p6
Some argue that professions never really had a public interest or service ideal (Abbott 2014; Johnson 1972).
Focus may be on ‘partner in business’ which may be a more lucrative role (Saravanamuthu 2004).
Focus may be the ‘four E’s’ (Carnegie and Napier (2010)):
• education,
• ethics,
• expertise and
• entrepreneurship.
Need to avoid too much focus on entrepreneurship at the expense of other ideals.
© Study Shortcut 2020
www.study-shortcut.com.au
, Ethics and Governance
3rd edition, 2020
What is a profession? p8
Profession: based on a high level of competence or skills in a given area, which are learnt through specialised
training and maintained by continuing professional development. Members are expected to behave ethically
and in the best interests of society.
Established professional associations / bodies with codes of conduct and training, education and quality
standards required.
Eight attributes suggesting the existence of a profession:
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
7. application of professional judgment
8. existence of a governing body.
Self regulation p9
Regulations provide the ability to provide a service to the public – after which a profession will have a
substantial amount of autonomy, and often regulate themselves.
A profession has members who hold each other to account for promoting the good reputation of the
profession on which public trust is based. Although, there is a formal regulatory process for the profession, the
element of public trust meant historically this process largely involved self-regulation.
This approach enables professionals to be judged by their peers and set a code of conduct that is appropriate
for the industry.
From self-regulating to a co-regulatory process p10
Self-regulation: Professional bodies: members are judged by their informed peers. Allows for internal
penalties and sanctions, in addition to legal breaches.
CPA: system of accreditation for degrees, membership qualification process, high levels of continuing
professional education, code of ethics, disciplinary process to address member misconduct
External authorities: Australian Financial Reporting Council (the AASB reports to the AFRC), regulations in the
Corps Act (which give audit and accounting standards the force of law); Tax Practitioners Board for tax
professionals
© Study Shortcut 2020
www.study-shortcut.com.au
3rd edition, 2020
MODULE 1: ACCOUNTING AND SOCIETY
Part A: Accountants as members of a profession 3
Public interest or self-interest? 3
Responsible decision making 3
Enlightened self-interest 6
What is a profession? 8
Self-regulation 9
From self-regulation to a co-regulatory process 10
What is a professional? 10
The accounting profession – traditional vs market control view 11
Trust and professions 11
Attributes of a profession 12
The Profession’s regulatory process 18
APESB 18
Quality Assurance process 19
Professional discipline 20
Part B: Interaction with Society 24
Accounting roles, activities and relationships 24
Social impact of accounting 32
Example: depreciation and behaviour 32
Credibility of the profession 34
Credibility under challenge 34
Key issues causing reduced credibility 34
Restoring credibility to accounting 36
Capability considerations 37
Business leadership capabilities 37
Technical skills, knowledge and experience 38
Soft skills, knowledge and experience 38
© Study Shortcut 2020
www.study-shortcut.com.au
,Ethics and Governance
3rd edition, 2020
PART A: Accountants as members of a profession p3
Public interest or self-interest? p3
Disclosure of information is in the public interest: supports efficient market hypothesis, is objective, is
accurate, is appropriate financial information
Serve public interest by informing people who make significant decisions on the allocation of resources.
Focus on acting with integrity, objectivity and without bias. Based on expertise.
Responsible decision making p3
Accountants make decisions within a systematic framework of principles. The best decisions are made where
governance, corporate accountability and ethics intersect.
– Governance framework of the profession: skill and knowledge exercised within framework (code of
behaviour)
– Corporate governance / accountability: within the relevant corporate governance framework
(instruments and articles of association) and policies and strategies formally approved by the Board.
Adherence to regulatory framework (such as disclosure requirements)
– Ethical conduct: commitment to integrity and honesty in the pursuit of professional purposes and
client interests
© Study Shortcut 2020
www.study-shortcut.com.au
,Ethics and Governance
3rd edition, 2020
Enlightened self-interest p6
It is possible to be committed to the public interest, yet possess a degree of self-interest ‘doing well by doing
good.’
The accounting profession would account for its existence in relation to the efficiency benefits for society as a
whole, arising from the existence of an institutionally organised body of accounting knowledge…In return for
their monopoly position, concerning the right to practise particular accountancy and auditing functions,
accountants would see themselves as serving the public interest (Robson & Cooper 1990, p379.)
Ideals of accounting – entrepreneurialism and professionalism p6
Some argue that professions never really had a public interest or service ideal (Abbott 2014; Johnson 1972).
Focus may be on ‘partner in business’ which may be a more lucrative role (Saravanamuthu 2004).
Focus may be the ‘four E’s’ (Carnegie and Napier (2010)):
• education,
• ethics,
• expertise and
• entrepreneurship.
Need to avoid too much focus on entrepreneurship at the expense of other ideals.
© Study Shortcut 2020
www.study-shortcut.com.au
, Ethics and Governance
3rd edition, 2020
What is a profession? p8
Profession: based on a high level of competence or skills in a given area, which are learnt through specialised
training and maintained by continuing professional development. Members are expected to behave ethically
and in the best interests of society.
Established professional associations / bodies with codes of conduct and training, education and quality
standards required.
Eight attributes suggesting the existence of a profession:
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
7. application of professional judgment
8. existence of a governing body.
Self regulation p9
Regulations provide the ability to provide a service to the public – after which a profession will have a
substantial amount of autonomy, and often regulate themselves.
A profession has members who hold each other to account for promoting the good reputation of the
profession on which public trust is based. Although, there is a formal regulatory process for the profession, the
element of public trust meant historically this process largely involved self-regulation.
This approach enables professionals to be judged by their peers and set a code of conduct that is appropriate
for the industry.
From self-regulating to a co-regulatory process p10
Self-regulation: Professional bodies: members are judged by their informed peers. Allows for internal
penalties and sanctions, in addition to legal breaches.
CPA: system of accreditation for degrees, membership qualification process, high levels of continuing
professional education, code of ethics, disciplinary process to address member misconduct
External authorities: Australian Financial Reporting Council (the AASB reports to the AFRC), regulations in the
Corps Act (which give audit and accounting standards the force of law); Tax Practitioners Board for tax
professionals
© Study Shortcut 2020
www.study-shortcut.com.au
