ETHICAL REASONING
Professional Ethics
For
Accountants
ETHICAL REASONING
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ENRON
WORLDCOM INC
LIVENT
HOLLINGER INC
ARTHUR ANDERSON
ACCOUNTANTS
• KPMG (US) “Tax Shelters”
ETHICAL REASONING
“Power tends to corrupt and
absolute power tends to corrupt
absolutely”
Lord Acton
ETHICAL REASONING
“Ethics, by definition, is simply
the study of morals – good vs.
bad, right vs. wrong. Plain and
simple.”
- Goodman 2004
ETHICAL REASONING
• Ethics is about right and wrong.
An ethical dilemma/problem is
defined as a situation where an
individual must choose between
competing ethical obligations
that flow from personally or
professionally held ethical
principles. There are three
types of dilemmas:
ETHICAL REASONING
1. You are unsure of the
right thing to do.
2. Two or more of your values
may be in conflict, e.g. honesty
vs. compassion.
3. Harm may be caused, no
matter what you do.
ETHICAL REASONING
1. Should the accountant tell the truth to
the bank, irrespective of the
consequences?
2.
Does it really matter if the accountant
massages the figures, perhaps factoring
in notional income arising from projected
new sales that will be made once the
new plant is operational? After all, the
projected cash flows are the really
important thing to consider.
ETHICAL REASONING
3. Does the accountant have a duty to do
everything possible to ensure the
preservation of jobs at the factory?
4. Is the self – interest of the accountant a
justifiable concern?
5. How should the accountant tackle the
matter of loyalty to the CEO.
ETHICAL REASONING
• Latest on the carpet, the
austere, unfathomable
accountant is being shown up
as a master of
misrepresentation, a cordon
bleu at cooking the books. With
his/her fall, the idea of “the
professional man/woman” is
near to being swallowed up in
contempt. (Bazun 1978:61)
THE CONTINUUM OF
COMPROMISE (Slippery
Slope)
1. A Perceived Sense of Victimization
• Over – invest in and over – identify
with their professional role.
• Will develop a sense of singular
identity based on their job, with an
increased sense of victimization.
• The “Job” becomes their life.
• By itself, feeling like a victim is by
no means equivalent to being
ethically compromised.
THE CONTINUUM OF
COMPROMISE
• However, feeling like a victim (whether
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real or imagined) is the first stop on the
continuum.
Many people are unconscious of the fact
that nearly everything we do has an ethical
dimension.
Overlooked on a promotion.
Did not get a salary increase.
No Christmas bonus – Office politics.
No recognition for your work or projects.
Company is getting richer and you are not .
THE CONTINUUM OF
COMPROMISE
2. ACTS OF OMISSION
• When someone feels victimized, in their
own mind they can rationalize and justify
behaviours they may not normally engage
in.
• “Acts of Omission” occur when someone is
able to rationalize and justify in their mind
not doing things they are responsible for
doing.
• In their mind, a person can feel quite
justified in not doing things that, from their
perspective, appear to “even the score”.
THE CONTINUUM OF
COMPROMISE
• Acts of omission can include
selective non productivity.
• The perceived sense of being
victimized can allow a person to
rationalize and justify other acts of
omission, such as not reporting
another co – worker’s inappropriate
behaviour (sometimes regardless of
how extreme or criminal the
behaviour may be).
THE CONTINUUM OF
COMPROMISE
3. ACTS OF COMMISSIONADMINISTRATIVE
• Instead of just omitting duties and
responsibilities, a person starts to
commit administrative violations, by
breaking small company rules, that
seem inconsequential or which
stand in the way of “real accounting
issues.”
THE CONTINUUM OF
COMPROMISE
4. ACTS OF COMMISSION CRIMINAL
• In the final stage of compromise a person
engages in and rationalizes behaviour that
just a few years before could not be
imagined.
• At first, acts of criminal commission may
appear benign and not terribly different
from acts of administrative commission.
• Theft and misappropriation of funds
become unreal in the persons mind. The
risks are far beyond reprimands. A person
now faces being fired and criminal
sanctions if they are caught.
THE CONTINUUM OF
COMPROMISE
5. ENTITLEMENT VERSUS
ACCOUNTABILITY.
• A person can develop a sense of
entitlement by having a mind-set that
suggest accountants “stick together” so
“we deserve special treatment”.
• Entitlement allows an accountant to
operate with the belief that many of the
accountant’s code of ethics don’t apply to
them.
• The only way to change this sense of
entitlement is to foster an environment of
organizational and personal accountability.
THE CONTINUUM OF
COMPROMISE
6. LOYALTY VERSUS INTEGRITY
• The firm belief that
“Accountants do not snitch on
other accountants”.
TOP TEN QUESTIONS
1. Could the decision become
habit forming? If so, don’t do it.
2. Is it legal? If it isn’t don’t do it.
3. Is it safe? If it isn’t don’t do it.
4. Is it the right thing to do? If it
isn’t don’t do it.
5. Will it stand the test of public
scrutiny? If it won’t don’t do it.
TOP TEN QUESTIONS
6. If something terrible were to happen,
could I defend my actions? If you couldn’t
don’t do it.
7. Is it just, balanced, and fair? If it isn’t don’t
do it.
8. How will it make me feel about myself? If
it’s lousy, don’t do it.
9. Does this choice lead to the greatest good
for the greatest number? If it doesn’t, don’t
do it.
10. Would I do this in front of my Mommy?
CRITICAL THINKING
1. Consider the facts of the
situation.
2. Consider the principles that
apply to the situation.
3. Recognize and identify the
ethical issue.
4. Gather all available
information.
CRITICAL THINKING
5. Choose the best option that
considers rules, consequences, care
for others, and values.
6. If you are unsure, talk to those you
trust, to your friends, or your
supervisor and authorities.
7. Decide on the best solution and do
it.
8. Be ready to defend your decision.
CAPRA