Transcript Week 1 : Ethics, Business Ethics And Professional Ethics

PART II
ACCOUNTANCY PROFESSION
AND ETHICAL ISSUES
2015/7/18
1
TOPIC 7
&
TOPIC 8
ROLES AND RESPONSIBILITIES
OF PROFESSIONAL
ACCOUNTANT
2015/7/18
2
Understanding The Roles Of A
Professional Accountant
“Can we serve two clients with competing
interests at the same time?”

“Who really is our client?”
“Do I owe primary loyalty to my employer,
client, profession or the public?”
“Is accountancy a profession, an industry or both?
Are we professional accountants or just accounting
Employees?”
Should
have a clear understanding of the
roles, and the standards of behaviour
expected by various stakeholders
2015/7/18
3
Accountancy As A Profession
Structure of a profession:
Foundation: a recognized body of knowledge to serve the public
Protecting public interests via important services. e.g. auditing
Framework:
An educational process involving extensive intellectual training
An examination and licensing process
A sense of responsibility to society
Finish:
Represented by professional associations
Granted autonomy for self-regulation
Codes of ethics for compliance
Technical standards for guidelines
2015/7/18
4
Conflicts Of Interests
Conflicts of interests situations:
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Work constraints versus service quality
Violating confidentiality for personal benefits
Confidentiality to client/employer versus public’s right to
know
Trading off audit independence for better client
relationships
Personal relationships or financial involvement with clients
Providing non-audit services to audit clients
2015/7/18
5
Professional Accountants and Their
Fiduciary Duties

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A professional accountant owes fiduciary duties
to various stakeholders
Principal-agent relationship which exists:
 When services are extremely useful
 There is a significant difference in the level
of expertise
2015/7/18
6
Rising Public Expectations
Maintenance of public trust is fundamental to the role
 Protecting public interest
 Exercising due professional care - for self and subordinates
 Ensuring professional competence - at all times
 Maintaining confidentiality of information - even after the
assignment
 Maintaining independence - in fact and appearance
 Mindful of responsibilities to various stakeholders
 Adhere to professional standards – HKSA ethics statements
Compliance with expectations adds credibility to the profession
2015/7/18
7
Priority of Fiduciary Duty and
Loyalty of Professional Accountants

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Conflicts of interests as possible reasons
for violating fiduciary duties
Hierarchy of loyalties and fiduciary duties
 The public
 The accountancy profession
 Clients / employer
 Professionals themselves
2015/7/18
8
Fiduciary Duty and Confidentiality
Statement 1.204A requires that client/employer’s
information acquired in the course of professional
work should be kept confidential, it may only be
disclosed when:
 Consent from client
 Legal duty to disclose
 Personal rights to disclose
 To discharge of fiduciary duties, an accountant is
expected to place the client/employer first on
confidentiality

2015/7/18
9
Responsibilities To Clients
Fulfilling responsibilities in return for clients’ trust
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Seven responsibilities of a good/trustworthy professional:
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Honesty: acting in good faith
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Truthfulness: honesty and full disclosure

Competence : Mastery of knowledge and skills
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Diligence : Careful and prompt delivery of services
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Loyalty : Protection of client interests
 Difficulty in balancing loyalty to client and other responsibilities
 Independence of judgments
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Fairness : Equitable treatment of different clients
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Discretion : Privacy of client information (respect and consideration)
2015/7/18
10
Responsibilities To Employers
Employer-employee relationship is a fiduciary one
Similar to obligations of professionals to clients
 Chief exception : Fairness
 Loyalty as a major responsibility to employers
 A few important and difficult loyalty issues
Loyalty does not require faithfulness to employers no
matter what
Independence and objectivity of judgment
 Moonlighting
 Obeying employers’ unethical instructions
2015/7/18
11
Responsibilities To The Profession
 Obligation to assist the profession as a whole to
discharge social responsibilities
 Ways to discharge professional accountants’
responsibilities to the profession
 Involvement in social leadership
 Improvement of professional knowledge and skills
 Preserve and enhance the role of the profession in
protecting public interests
 Discharge of responsibilities requires the collective
efforts of all members
2015/7/18
12
Responsibilities To Third Parties
 People other than clients and employers
 “Service-users” : Mostly unknown
 Three fundamental obligations to them
 Be truthful – non-misleading information
 Non-maleficent – protecting from injuries
 Fair – no discriminations
 Truthfulness and fairness predominate
 Potential conflicts between role-related responsibilities
to clients or employers with universal responsibilities to
third parties >>>>> NEED TO RECONCILE
 Commonly adopted position by accounting professionals
2015/7/18
13
Ensuring Compliance
With These Responsibilities
 Admission to professional membership
 Limited to applicants with good moral character
 Continuing and Professional Development (CPD)
 Structured and unstructured activities
 Disciplining accounting professionals
 Self-regulating with the aid of ethics
statements
2015/7/18
14
Ethical Pressures for U.S. Accountants
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Growing reliance on non-audit incomes
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Facing pressure for a more liberal audit opinion
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Due to severe competition, fear to lose audit clients
Being forced to accept client representation
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Exert pressure to compromise audit quality
Pressure to trade-off auditor’s independence
Receiving pressure for creative accounting
Departure from general accepted accounting standards
2015/7/18
15
Ethical Issues Faced by H.K. Accountants
Non-practising members
Pressures from superiors to exaggerate corporate performance,
absorb their private expenses, inflate accounting data
Transfer pricing
Using employer’s confidential information for personal gain
Accepting advantages or bribes from customers or suppliers …
 Practising members
Fees problems, unethical solicitation of professional work
Personal relationships or financial involvement with clients
Clients’ proposals for manipulating financial information, tax
evasion or tax frauds
Using client’s confidential information for personal gain...

2015/7/18
16
The Roles and Responsibilities of A
Professional Accountant
“Can we serve two clients with competing
interests at the same time?”
“Who really is our client?”
“Do I owe primary loyalty to my employer,
client, profession or the public?”
“Is accountancy a profession, an industry or both?
Are we professional accountants or just accounting
employees?”
2015/7/18
17