the role of a professional accountant why is understanding it critical? scandals rededication ...
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The Role of a Professional Accountant Why is understanding it critical? Scandals Rededication Public expectations of:
All professionals Professional accountants
Fiduciary relationships Implications for services offered Judgements and values Sources of ethical guidelines
Understanding the Role Answers Questions Who really is our client: the company, the
management, current shareholders, future shareholders, the public?
Do I owe primary loyalty to my employer, client, boss, profession, myself, or the public?
Am I a professional accountant bound by professional standards, or just an employee?
Is professional accounting a profession or a business - can it be both?
When should I not offer a service? Can I serve two clients with competing interests? Is there any occasion when breaking the
profession's guideline against revealing confidences is warranted?
Lang Michener Affair
Are expectations for professional standards above non-professionals?
Lawyers actions not up to expectations, or obligation to clients, prof., law society, public?
Is self-regulation effective? Is an honest mistake “of no
consequence?”
Dilemma of an Accountant
Pressure for a “clean opinion” Problem is not material No one read or cared about those
statements anyway Removal of working papers Action???
Public Expectations of a Profession Essential Features: (Bayles)
Extensive training Provision of important services to society Training and skills largely intellectual in character
Typical Features: Generally licensed or certified Represented by organizations, associations, institutes Autonomy
Foundation of Ethical Values: (Behrman) Significantly delineated by and founded on ethical considerations rather than
techniques or tools
FIDUCIARY RELATIONSHIPS
Features, Duties, Rights & Values Of the Accounting Profession… Table 4.2
Features Duties essential to a fiduciary
relationship Rights permitted by most
jurisdictions Values necessary to discharge duties
and maintain rights
Features and Duties
Features: Provision of important fiduciary services to society Extensive knowledge and skill are required Training and skills required are largely intellectual Overseen by self-regulating membership organisations Accountable to governmental authority
Duties essential to a fiduciary relationship: Continuing attention to the needs of clients and other
stakeholders Development & maintenance of required knowledge & skills Maintenance of the trust inherent in a fiduciary relationship
by behaviour exhibiting responsible values Maintenance of an acceptable personal reputation Maintenance of a credible reputation as a profession
Rights Permitted, Values Necessary
Rights permitted in most jurisdictions: Ability to hold oneself out as a designated professional to render
important fiduciary services Ability to set entrance standards and examine candidates Self-regulation and discipline based on codes of conduct** Participation in the development of accounting & audit practice Access to some or all fields of accounting & audit endeavour
Values necessary to discharge duties & maintain rights: Honesty & Integrity (i.e. truth & the whole truth) Objectivity - based on independent judgement Desire to exercise due care Competence Confidentiality Commitment to place the needs of the public, the client, the
profession, and the employer or firm before the professional's own self-interest
Important Implications
Dominance of ethical values vs. technical competence
Priority of duty Public Profession Client/employer Professional
Confidentiality: strict vs assisted
Important Implications
For Services offered
Critical value-added
Standards for behaviour
Importance of Values To Value-added & Development of Judgement
Kohlberg’s Six Stages of Moral Reasoning
Preconventional Self-interest Motivation
1. Fear of punishment & authorities
2. Self-gratification
Conventional Conformity Motivation 3. Approval from others 4. Adherence to moral codes, law & order
Principled Interests of others 5. Concern for others, broad social welfare
6. Concern for moral or ethical principles
Sources of Ethical Guidance
Codes of conduct
Laws & jurisprudence
When codes & laws don’t count
Legal Liability Developments Personal liability: history, rationale,
partnership Joint & several liability……deep pockets sued Self-insurance plus $50-150 mil external ins. Burden getting too high……how to limit? Lawsuit trend - Victoria Mtge - GAAP but misleading Limited Liability Partnerships (LLP,LLC, PSLLC)
1994 New York State Law protects innocent partners from personal liability for the negligence and malpractice of other partners, not from commercial losses, or from their own misdeeds, or from losing their invested capital.
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