1、Professional Ethics,Chapter 3,Learning Objective 1,Distinguish ethical from unethical behavior in personal and professional contexts.,What are Ethics?,Ethics can be defined broadly as a set of moral principles or values.,Each of us has such a set of values.,We may or may not have considered them exp
2、licitly.,Need for Ethics,Ethical behavior is necessary for a society to function in an orderly manner.,The need for ethics in society is sufficiently important that many commonly held ethical values are incorporated into laws.,Why People Act Unethically,The persons ethical standards are different fr
3、om those of society as a whole.,The person chooses to act selfishly.,In many instances, both reasons exist.,Prescribed Ethical Principles,Trustworthiness,Respect,Fairness,Responsibility,Caring,Citizenship,A Persons Ethical Standards Differ from General Society,Embezzlers,Con artists,Shoplifters,Most
4、 people who commit such acts feel no remorse when they are apprehended because their ethical standards differ from those of society as a whole.,A Person Chooses to Act Selfishly Example,Person A finds a briefcase containing important papers and $1,000.,He tosses the briefcase and keeps the money.,He
5、 brags to his friends about his good fortune.,This action probably differs from most of society.,A Person Chooses to Act Selfishly Example,Person B faces the same situation but responds differently.,He keeps the money but leaves the briefcase.,He tells nobody and spends the money.,He has violated hi
6、s own ethical standards and chose to act selfishly.,Learning Objective 2,Resolve ethical dilemmas using an ethical framework.,Ethical Dilemmas,An ethical dilemma is a situation a person faces in which a decision must be made about appropriate behavior.,Rationalizing Unethical Behavior,Everybody does
7、 it.,If its legal, its ethical.,Likelihood of discovery and consequences,Resolving Ethical Dilemmas,1. Obtain the relevant facts.,2. Identify the ethical issues from the facts.,3. Determine who is affected.,Resolving Ethical Dilemmas,4. Identify the alternatives available to the person who must reso
8、lve the dilemma.,5. Identify the likely consequence of each alternative.,6. Decide the appropriate action.,Ethical Dilemma,A staff person has been informed thathe will work hours without recording them as hours worked.,Firm policy prohibits this practice.,Another staff person has stated thatthis is
9、common practice in the firm.,Ethical Dilemma,Is it ethical for the staff person to work hours and not record them as hours worked in this situation?,Who is affected?,How are they affected?,What alternatives does the staff person have?,Learning Objective 3,Explain the importance of ethical conduct fo
10、r the accounting profession.,Special Need for Ethical Conduct in Professions,Our society has attached a special meaning to the term professional.,A professional is expected to conduct himself or herself at a higher level than most other members of society.,CPAs Encouraged to Conduct Themselves at a
11、High Level,CPAs Encouraged to Conduct Themselves at a High Level,Conduct of CPA firm personnel,SEC,Peer review,Quality control,CPAs Encouraged to Conduct Themselves at a High Level,Conduct of CPA firm personnel,Legal liability,Division of CPA firms,Code of Professional Conduct,Learning Objective 4,D
12、escribe the purpose and content of the AICPA Code of Professional Conduct.,Code of Professional Conduct,Code of Professional Conduct,Interpretation of the rules of conduct,Interpretation of the rules of conduct by the AICPA Division of Professional Ethics,They are not enforceable, but a practitioner
13、 must justify departure.,Code of Professional Conduct,Ethical rulings,Published explanations and answers to questions about the rules of conduct submitted to the AICPA by practitioners and others interested in ethical requirements,They are not enforceable, but a practitioner must justify departure.,
14、Ethical Principles,Ethical Principles,3. Integrity,Members should perform all responsibilities with integrity to maintain public confidence.,Ethical Principles,5. Due Care,Members should observe the professions standards and strive to improve competence.,Standards of Conduct,Learning Objective 5,Des
15、cribe factors that influence auditor independence.,Independence,Independence means taking an unbiased viewpoint in performing audit tests.,Independence in fact,Independence in appearance,Revision of SEC Auditor Independence Requirements,Revision of SEC Auditor Independence Requirements,Approval of a
16、uditors by stockholders,Engagement and payment of audit fees by management,Learning Objective 6,Apply the AICPA Code rules and interpretations on independence and explain their importance.,Independence,Financial Interests,Interpretations of Rule 101 prohibit covered members from owning any direct in
17、vestments in audit clients.,Direct financial interest,Indirect financial interest,Material or immaterial,Related Financial Interests Issues,Former practitioners,Normal lending procedures,Financial interest and employment of immediate and close family,Joint investor or investee relationship with clie
18、nt,Director, officer, management, or employee of a company,Related Financial Interests Issues,A lawsuit or intent to start a lawsuit between a CPA firm and its client is a violation of Rule 101 for the current audit.,The interpretations permit a CPA firm to do both bookkeeping and auditing for the s
19、ame client.,The SEC prohibits performing bookkeeping and auditing services by the same CPA firm.,Related Financial Interests Issues,Internal auditing and extended audit services,Unpaid fees,Learning Objective 7,Understand the requirements of other rules under the AICPA Code.,Rules of Conduct,101 Ind
20、ependence,102 Integrity and objectivity,201 General standards,202 Compliance with standards,203 Accounting principles,301 Confidential client information,Rules of Conduct,302 Contingent fees,501 Acts discreditable,502 Advertising and other forms of solicitation,503 Commissions and referral fees,505 Form of organization and name,Learning Objective 8,Describe the enforcement mechanisms for the rules of conduct.,Enforcement,Action by AICPA Professional Ethics Division,Action by a State Board of Accountancy,End of Chapter 3,
