ETHICS AND GOVERNANCE
CPA Australia - Semester 2 2025
MODULE 1: ACCOUNTING AND SOCIETY
Part A: Professionals
1. Overview
a. Accountants are responsible for providing information and advice that supports important
decisions affecting organisations, people and their lives, and the society as a whole. E.g. Is this
profitable, what price should I sell this for, how should I invest my money, etc.
b. Being a professional accountant does not only mean being good in technical knowledge, but
whether or not you are able to act in the public interest over personal interest. With the
privileges and benefits that accompany professional status comes a variety of obligations,
foremost of which is the obligation to put the good of society ahead of personal interest.
c. A social contract is an unwritten contract between a certain profession and a society – e.g. a
doctor has a "contract" to help people to stay healthy. Both parties are working together. Breach
of this social contract happens when a professional fails to put the social interest above personal
interest.
d. At the core of any profession is the idea that the members of the profession will act in the best
interest of society and that in return, society will provide a range of benefits for the profession
(p3)
i. altruism vs monopolistic professional
ii. service ideal and public interest
iii. extracting unwarranted wealth and influence
e. Accountants serve the public interest by giving a proper account.
f. Responsible decision making - framework of principles within which we make decisions:
Accountability, Responsibility, Ethics.
2. Attributes of the profession
a. Body of knowledge: theory construction supported by systematic research, involving a range of
skills and expertise and backed by a well-founded body of knowledge (e.g. IFRS, AASB)
b. Education process: Theory + Practice + Continued Professional Development = Education Process
c. Ideal of service: social contract (well-being of society, pursuit of excellence, community service)
d. Autonomy and independence: given the ability to regulate itself, however is now overseen.
Accounting Profession + Government = Co-regulation
e. Code of ethics: integrity, objectivity, professional competence and due care, professional
behaviour, confidentiality
f. Unique culture/ethos: values that distinguish one profession to another
g. Use of professional judgement: Ability to Diagnose + Ability to Solve = Professional Judgement
h. Governing body: Monitor the quality of professionals (e.g. CA, CPA) "
3. Regulation & Judgment
a. The profession of accountants in Australia is co-regulated – by the profession and external
parties, namely the FRC (AASB and AUSB).
i. Co-Regulation is where the profession is regulated by both the government and the
profession itself. Accountants in Australia are regulated by CPA, CAANZ and IPA - they
, have their own conducts. The government part of the co-regulation starts at the
Australian FRC, branching into AASB and AUSB.
b. APESB: Accounting Professional & Ethical Standards Board (combination of CPA and CAANZ).
Created to develop and issue, in the public interest, high quality professional and ethical
standards.
i. Auditing standards have the force of law
ii. Established in 2005
4. Quality Assurance Process
a. Standard Setting: starts at the FRC (Financial Reporting Council), which oversees the AASB
(Accounting) and AUSB (Audit).
b. Conformity with Standards: APES 205 – if you are a member of this profession, you must conform
with all the standards.
c. Practice Reviews: a lot of sign offs in the profession, especially in public practice, use the
powerful name of ‘CPA’ or other regulatory bodies. As part of participating in this branding, there
has to be a certain requirement that needs to be met and regular review every few years. There
will then be support plans to implement recommendations. This is to make sure every client that
comes to a CPA practice has a pleasant experience.
d. Accounting firm regulation: APES 320 – Helps establish a quality management system. This
includes policies and procedures for governance, leadership, professional standards, accepting
engagements, etc.
5. Professional Discipline
a. Standards aim to ensure that members of the profession work to the highest level of
professionalism, providing a quality of service that achieves credibility and public confidence.
b. Joining bodies like CPA means committing to upholding the reputation and following the
constitution. There is a formal process that enables complaints to be heard, evaluated and
disciplined.
i. Articles 36-40 CPA constitution
ii. Part 5 of the By-Laws of CPA
c. Regulation of Member Conduct and Penalties - see study guide page 23-25.
Part B: Interaction with Society
1. Social interactions
a. As accountants, we want to provide useful information to help decisions. As we do that, one of
the key things is to maintain relationships with various stakeholders (e.g. employees, regulators,
etc). How to do it:
i. Keep accounts in order
ii. Analyse and control costs
iii. Evaluate pricing and increase revenues
iv. Pay wages promptly
v. Pay tax obligations
vi. Know and comply with key laws including directors duties, financial reporting and trade
practices
vii. Maintain professional knowledge
viii. Provide prompt and accurate and cost effective solutions to work
, b. There are multiple factors affecting behaviour of individuals e.g. culture, personal moral
development, familial influences, organisation, laws and regulation, and professional aspects.
2. Accounting Work Environments
● Public practice (page 30-31): offer accounting services to businesses and the public. Comprises of
the Big Four, Second Tier and Small Practices/Sole Traders
● Private or Business Sector (page 31-33): PAIB (Professional Accountants in Businesses) are
employed by private sector businesses in varying roles, depending on the scale of the business.
● Public Sector (page 33): Includes a wide range of government and regulatory bodies. Where
governments provide for-profit services, they often set up entities called GBEs (Government
Business Enterprises) or SOEs (State Owned Enterprises), where qualified accounting
professionals can build their careers.
● Financial Advice (page 34): Accountants are often called upon to offer financial advice to clients
as they are knowledgeable and skilful in solving and interpreting complex financial information.
However this comes with significant risk and responsibilities.
● Not-for-Profit (page 34): These entities are formed for the purpose of providing goods/services
and do not permit them to be a source of income for the owners. The complexity of tendering
and accountability requirements grow in this sector, and so does the need for professionally
qualified staff.
3. Social Impact of Accounting
a. Accounting is often perceived as neutral - a set of black and white tasks performed in a
mechanical manner.
i. This understates its influence. The activity of accountants and the use of accounting
information, including the decisions that are made based on the outputs provided by
accountants, have a decisive impact on the social functioning of individuals, groups and
entities.
ii. The impact of accounting is far wider than at first might be apparent.
4. Credibility of the Profession
a. 5 key issues causing reduced credibility
i. Earning management: manipulating the final profit and earnings figures
■ Abusing accounting policies
■ Manipulation of reserves
■ Choice of valuation method
ii. Creative accounting: presenting information in ways that do not represent reality
■ Capitalising interest
■ Not writing off assets, ignoring liabilities
■ Recognizing revenues too early
iii. Poor audit quality
iv. Lack of auditor independence: conflicted auditors not acting in the public interest,
dependent on companies and lose their objectivity
v. Financial accounting distortions: accounting rules can sometimes trigger distress,
especially in extreme circumstances
, 5. Restoring credibility to accounting
a. Establish FRC
b. Accounting standards - backed by law
c. Auditors must apply APES 110
d. FRC needs to be responsible for auditor independence
e. More regulation
f. International standards
6. Capability Considerations
a. Business leadership capabilities: professional accountants are well-placed to attain leadership
roles within society. Leaders are required to develop the strategy, drive change and align the
organisation’s structure, resources and culture with the strategy. Leadership requires vision,
energy and drive from the professional accountant, the desire to be strategic and to be a key
contributor to the improvement and strategic growth of the organisation. As business leaders,
and as professionals, accountants must exercise a high degree of competence and due care, and
have a professional obligation to service ideals.
b. Technical skills, knowledge and experience (TSKE): this includes FR, tax, financial analysis, IT,
technical communications, understanding of law and regulation. The degree of TSKE varies
according to the tasks being undertaken by the accountant.
c. Soft skills, knowledge and experience (SSKE): primarily about people and related issues, including
the ability to listen, understand complex and difficult issues and their role in the decisions and
information needs of others, communicate effectively, discuss and debate without hostility,
persuade and convince based on logical and reasonable argument, time management, etc.
CPA Australia - Semester 2 2025
MODULE 1: ACCOUNTING AND SOCIETY
Part A: Professionals
1. Overview
a. Accountants are responsible for providing information and advice that supports important
decisions affecting organisations, people and their lives, and the society as a whole. E.g. Is this
profitable, what price should I sell this for, how should I invest my money, etc.
b. Being a professional accountant does not only mean being good in technical knowledge, but
whether or not you are able to act in the public interest over personal interest. With the
privileges and benefits that accompany professional status comes a variety of obligations,
foremost of which is the obligation to put the good of society ahead of personal interest.
c. A social contract is an unwritten contract between a certain profession and a society – e.g. a
doctor has a "contract" to help people to stay healthy. Both parties are working together. Breach
of this social contract happens when a professional fails to put the social interest above personal
interest.
d. At the core of any profession is the idea that the members of the profession will act in the best
interest of society and that in return, society will provide a range of benefits for the profession
(p3)
i. altruism vs monopolistic professional
ii. service ideal and public interest
iii. extracting unwarranted wealth and influence
e. Accountants serve the public interest by giving a proper account.
f. Responsible decision making - framework of principles within which we make decisions:
Accountability, Responsibility, Ethics.
2. Attributes of the profession
a. Body of knowledge: theory construction supported by systematic research, involving a range of
skills and expertise and backed by a well-founded body of knowledge (e.g. IFRS, AASB)
b. Education process: Theory + Practice + Continued Professional Development = Education Process
c. Ideal of service: social contract (well-being of society, pursuit of excellence, community service)
d. Autonomy and independence: given the ability to regulate itself, however is now overseen.
Accounting Profession + Government = Co-regulation
e. Code of ethics: integrity, objectivity, professional competence and due care, professional
behaviour, confidentiality
f. Unique culture/ethos: values that distinguish one profession to another
g. Use of professional judgement: Ability to Diagnose + Ability to Solve = Professional Judgement
h. Governing body: Monitor the quality of professionals (e.g. CA, CPA) "
3. Regulation & Judgment
a. The profession of accountants in Australia is co-regulated – by the profession and external
parties, namely the FRC (AASB and AUSB).
i. Co-Regulation is where the profession is regulated by both the government and the
profession itself. Accountants in Australia are regulated by CPA, CAANZ and IPA - they
, have their own conducts. The government part of the co-regulation starts at the
Australian FRC, branching into AASB and AUSB.
b. APESB: Accounting Professional & Ethical Standards Board (combination of CPA and CAANZ).
Created to develop and issue, in the public interest, high quality professional and ethical
standards.
i. Auditing standards have the force of law
ii. Established in 2005
4. Quality Assurance Process
a. Standard Setting: starts at the FRC (Financial Reporting Council), which oversees the AASB
(Accounting) and AUSB (Audit).
b. Conformity with Standards: APES 205 – if you are a member of this profession, you must conform
with all the standards.
c. Practice Reviews: a lot of sign offs in the profession, especially in public practice, use the
powerful name of ‘CPA’ or other regulatory bodies. As part of participating in this branding, there
has to be a certain requirement that needs to be met and regular review every few years. There
will then be support plans to implement recommendations. This is to make sure every client that
comes to a CPA practice has a pleasant experience.
d. Accounting firm regulation: APES 320 – Helps establish a quality management system. This
includes policies and procedures for governance, leadership, professional standards, accepting
engagements, etc.
5. Professional Discipline
a. Standards aim to ensure that members of the profession work to the highest level of
professionalism, providing a quality of service that achieves credibility and public confidence.
b. Joining bodies like CPA means committing to upholding the reputation and following the
constitution. There is a formal process that enables complaints to be heard, evaluated and
disciplined.
i. Articles 36-40 CPA constitution
ii. Part 5 of the By-Laws of CPA
c. Regulation of Member Conduct and Penalties - see study guide page 23-25.
Part B: Interaction with Society
1. Social interactions
a. As accountants, we want to provide useful information to help decisions. As we do that, one of
the key things is to maintain relationships with various stakeholders (e.g. employees, regulators,
etc). How to do it:
i. Keep accounts in order
ii. Analyse and control costs
iii. Evaluate pricing and increase revenues
iv. Pay wages promptly
v. Pay tax obligations
vi. Know and comply with key laws including directors duties, financial reporting and trade
practices
vii. Maintain professional knowledge
viii. Provide prompt and accurate and cost effective solutions to work
, b. There are multiple factors affecting behaviour of individuals e.g. culture, personal moral
development, familial influences, organisation, laws and regulation, and professional aspects.
2. Accounting Work Environments
● Public practice (page 30-31): offer accounting services to businesses and the public. Comprises of
the Big Four, Second Tier and Small Practices/Sole Traders
● Private or Business Sector (page 31-33): PAIB (Professional Accountants in Businesses) are
employed by private sector businesses in varying roles, depending on the scale of the business.
● Public Sector (page 33): Includes a wide range of government and regulatory bodies. Where
governments provide for-profit services, they often set up entities called GBEs (Government
Business Enterprises) or SOEs (State Owned Enterprises), where qualified accounting
professionals can build their careers.
● Financial Advice (page 34): Accountants are often called upon to offer financial advice to clients
as they are knowledgeable and skilful in solving and interpreting complex financial information.
However this comes with significant risk and responsibilities.
● Not-for-Profit (page 34): These entities are formed for the purpose of providing goods/services
and do not permit them to be a source of income for the owners. The complexity of tendering
and accountability requirements grow in this sector, and so does the need for professionally
qualified staff.
3. Social Impact of Accounting
a. Accounting is often perceived as neutral - a set of black and white tasks performed in a
mechanical manner.
i. This understates its influence. The activity of accountants and the use of accounting
information, including the decisions that are made based on the outputs provided by
accountants, have a decisive impact on the social functioning of individuals, groups and
entities.
ii. The impact of accounting is far wider than at first might be apparent.
4. Credibility of the Profession
a. 5 key issues causing reduced credibility
i. Earning management: manipulating the final profit and earnings figures
■ Abusing accounting policies
■ Manipulation of reserves
■ Choice of valuation method
ii. Creative accounting: presenting information in ways that do not represent reality
■ Capitalising interest
■ Not writing off assets, ignoring liabilities
■ Recognizing revenues too early
iii. Poor audit quality
iv. Lack of auditor independence: conflicted auditors not acting in the public interest,
dependent on companies and lose their objectivity
v. Financial accounting distortions: accounting rules can sometimes trigger distress,
especially in extreme circumstances
, 5. Restoring credibility to accounting
a. Establish FRC
b. Accounting standards - backed by law
c. Auditors must apply APES 110
d. FRC needs to be responsible for auditor independence
e. More regulation
f. International standards
6. Capability Considerations
a. Business leadership capabilities: professional accountants are well-placed to attain leadership
roles within society. Leaders are required to develop the strategy, drive change and align the
organisation’s structure, resources and culture with the strategy. Leadership requires vision,
energy and drive from the professional accountant, the desire to be strategic and to be a key
contributor to the improvement and strategic growth of the organisation. As business leaders,
and as professionals, accountants must exercise a high degree of competence and due care, and
have a professional obligation to service ideals.
b. Technical skills, knowledge and experience (TSKE): this includes FR, tax, financial analysis, IT,
technical communications, understanding of law and regulation. The degree of TSKE varies
according to the tasks being undertaken by the accountant.
c. Soft skills, knowledge and experience (SSKE): primarily about people and related issues, including
the ability to listen, understand complex and difficult issues and their role in the decisions and
information needs of others, communicate effectively, discuss and debate without hostility,
persuade and convince based on logical and reasonable argument, time management, etc.
