Module 1: Introduction to Professional Values, Ethics, and
Attitude relationships
• Why is there a renewed interest in ethics in pop culture?
- In relation to our profession, there was the emergence
of accounting scandal, every now & then
- Ethics has always been a concern
ETHICS
WHAT IS ETHICS?
- It is a branch of philosophy, together with the major
branches such as epistemology, metaethics, etc.
HOW IT BECOMES A BRANCH OF PHILOSOPHY?
- Ethics as a general concept, involves defining,
developing, defending, and recommending concepts by
what we mean by right & wrong behavior
- A body/branch of inquiry
• Ethos: Greek for custom or character
• Moralis: Latin for custom
Both root words talk about our customs, character,
and to as how we behave as individuals; in conformity
with what we think is right & to avoid what is wrong
• PERSONAL ETHICS: ethics as your personal notion of what
is right from wrong
APPROACHES
NORMATIVE ETHICS
• Norm – refers to what should be right or wrong conduct;
what should happen
• Talks about what good action should we take
• Considered as the rules
1. Outcome – it is most likely what we do; data driven
2. Agent/Person – focuses on the characters & virtues that
you want to prioritize; may involve employee morale
3. Relationships that the agent has – the duty to others based
on the relationship; emotional
METHAETHICS (What is meant by “good”?)
• METHA: means by something of the higher order
• Thought about as the 2nd order as it deals with such
• Considered as the foundations & definition of the rule
set
➢ Metadata – the data about data; deeper meaning
• Has been since the time of the Greeks
• Socrates: not about choosing right or wrong; it’s about
choosing what is good or bad
Euthyphro dilemma – a dilemma by what do you
mean by good; application of metaethics
- is the Pius loved by the Gods because it is
Pius or, is it Pius because it is loved by the
Gods?
- Is a thing good being a higher being tells us
it is good (relational) or is the thing really
good by itself, that’s why it is loved by a
higher being (inherent)?
APPLIED ETHICS (How to resolve controversial issues?)
• Application in business
• Focuses on controversial issues and where we apply
normative rules and other theories
• In relation to computer ethics
Particularly on Artificial Intelligence
- Do you really program a bot to decipher the
order of safety?
• In relation to accounting
Issues on sustainability
- Is it ethical use contractual work?
• Other examples: bioethics, accounting ethics, computer
ethics, business ethics
ETHICAL THEORIES
UTILITARIANISM:
• UTIL = use
• Ethical benchmark = most benefit, most number
• A teleological approach: focuses on the telos
(outcome), which is the benefit for the most number of
people aka outcome
2 Versions of Utilitarianism:
 1. Act – it examines the specific action itself rather • Plato: Nichomean Ethics
than the general rules governing the action, to Cardinal Virtues
assess whether it will result to the greatest utility What is ethical is that decision which is in line with
- Applying utilitarianism to an act on a case-to-case your personal virtues (that also adheres to the
basis; inspects the act itself Cardinal virtues
2. Rule – claims that we must choose the actions that o Wisdom
conforms to the general rule, that would have the - Aka prudence
best consequences - The charioteer/controller of the all other
• Positive side: follow a straightforward approach and virtues
based on the outcome o Courage
• Downside: it’s more often than not, it is more difficult o Temperance
to apply and difficult to quantify benefits; can be - Trying to temper/weigh what is the
problematic especially in a business setting appropriate action for a particular decision
- objectivtity
o Justice
DEONTOLOGY - How you relate to the other person, especially
to the common good
• Focuses on the duty/obligation of the moral agent and
• For virtue theorists, there is least emphasis on learning
the rights of the counter-party
the rules. They focus more on importance of developing
• Deon = Greek for duty/obligation
good habits of character
• Principles-based / for the common good
• Ethical benchmark = in line with the duty/obligation
• May depend on what particular item you’re looking at How to determine whether a field of study or a particular
Example: choosing between the FIFO & Weighted discipline is a profession?
Average policy on costing

2 Versions of Deontology:

1) Act – it focuses more on the actions done

- The application based on one situation to
another/case-to-case basis rather than a general
rule
2) Rule – focus on the rules & regulations you encounter
- Example: Categorical Imperative by Immanuel Hallmarks of a Profession:
Kant – “act only according to that maxim/rule,
1) Mastery
whereby you can, at the same time, will, that it
2) Adherence to a common code of ethics – a must for a
should become a universal law (everyone will
profession to be recognized
follow)
3) Accountability to the general public/society – this is
VIRTUE ETHICS also where we distinguish self-interest from public
interest
• Focuses on moral agent themselves
- Particularly on what virtues does that person
Metaphors of the Accounting Profession
treasure
• Ethical benchmark = in line with good
character/personal virtues

• Metaphors – devices used to understand certain
complex realities; to capture our conceptual
system/schema of the accounting profession
• These metaphors are not exclusive; they are both
equally cognizant & go hand-in-hand as you pursue the
accounting profession in the future
“One reason to keep account is a moral one” –
through keeping the books of accounts, we record
and want to know how much we owe to whom
Wanting to keep track/take account of our duty to
the other party
There are communitarian undertones to this view;
adherence to generally accepted accounting
principles
Combination of our deontological views and
communitarian approach towards the practice of
accounting
• Pava, 2010
Views ethics as a foundation of accounting, not
just by viewing it as an afterthought

1. Master Metaphor (As Applied Finance View) • This is where we apply the concept of self-interest vs
public interest (giving more weight to public interest)
- most of the accountants of the field would implicitly
subscribe to this
- not normally discussed, but has implicit/indirect
evidences in practice
- Application of the rules of finance and economics
• Notions of materiality
• Ball and Brown, 1968
• Beaver, 1968
• Lev, 1992
• Contextualizing when, where, and how do we integrate
Accounting disclosures, just like any other
professional ethics in our professional lives as accountants
business activity, is driven by a cost-benefit
analysis & other technical skills Based on the international education standards, normally an
- This is where we view accounting as cost-benefits accountant this lifecycle:
analysis, incremental analysis
1. Study
- An Act Utilitarian approach
The fine line between study & passing: Initial Professional
2. Accounting as Applied Ethics Development
- APA: Aspiring Professional Accountants
- doing accounting to maintain the integrity of
2. Pass the licensure examination
ethics
The fine line between passing & practice: Continuing
* Requirements of Ethics: Professional Development
- CPA: Certified Professional Accountants
i. Critical thinking
3. Practice
ii. Knowledge of the Moral Codes
When would professional development come in as an
iii. Action/Will
accountant?
• Bowie, 1991
- It starts by the time you take and prepare for your
• Dolfsma, 2005
bachelor’s degree
Resembles a deontological approach towards the
profession and a communitarian at that
• One of the hallmarks of a profession is a mastery of a highly
technical skill
- Accounting at that, is an ever-evolving field of study
What should be an accountant good at?
1) Technical Skills
- Covered by IES 2 (International Education Standards)
- Where we should be good with the PFRS (e.g.,
techniques in accounting, theories in information
systems)
- Acts as the brain
2) Professional Competence
- Are normally referred to as “soft skills”
- Communication skills (verbal, oral, written) People
skills (involves management), Bargaining Skills,
Negotiation, etc.
- Acts as the hands
3) Professional Values, Ethics, and Attitude
- Ties up your technical skills & professional
competence
- Is tied up collectively in the heart & in the soul
- As supported by Pava & Dolfsma, PVEA is actually the
foundation of your professional life that will integrate
your technical skills and professional competence
• Where is ethics in our practice as accountants?
1. Whether it is initial or continuing, there must be
professional values, ethics, and attitude (PVEA)
2. PVEA will serve as the foundation of our practice,
personal, and professional lives
ACCOUNTANTS AND ETHICS
• International Education Standards 4
- Refers to your initial development as aspiring
professional accountants in PVEA
3 Major Competence Areas of IES 4:
1. Professional Skepticism and Professional judgement
• Prof. Skepticism – a combination of a questioning mind and
a critical assessment of a critical/subject matter
• Prof. Judgement: the application of your training,
knowledge, and experience in the context of making
decisions in accounting & auditing
• Learning outcomes:
- Apply a questioning mindset critically to assess
financial information and other relevant data
- Identify and evaluate reasonable alternatives to reach
well-reasoned conclusions based on all relevant facts
and circumstances (also in relation so professional
judgement)
2. Ethical Principles
• Learning outcomes:
- Explain the nature of ethics
- Explain the advantages & disadvantages of rules-
based and principles-based approaches to ethics
- Identify ethical issues and determine when ethical
principles apply
- Analyze alternative courses of action and determine
the ethical consequences of these
- Apply the fundamental ethical principles of integrity,
objectivity, professional competence and due care,
confidentiality, and professional behavior to ethical
dilemmas and determine an appropriate approach
- Apply relevant ethical requirements to professional
behavior in compliance with standards
3. Commitment to the public interest
- the spirit of public service
1. Organization
2. Public Interest – spirit of public interest
3. Learning – to solve problems
4. Applicable code of ethics
• Learning outcomes:
- Explain the role of ethics within the profession and in
relation to the concept of social responsibility
- Explain the role of ethics in relation to business and
good governance
- Analyze the interrelationship of ethics and law,
including the relationship between laws, regulations,
and the public interest
- Analyze the consequences of unethical behavior to
the individual, the profession, and the public
 All of them, after finishing your undergraduate program, will • Creative quotient
required/expected to have an Intermediate proficiency level - Ability to use existing knowledge in new situations;
The ability to do these learning outcomes, partnered generating new ideas
with the moderate level of ambiguity, complexity, and • Digital quotient
uncertainty - Knowledge of emerging digital platforms and
Factoring your ability to do these learning outcomes as technologies
you perform your duties and responsibilities ➢ Black chain
o A common misconception about accountants is ➢ Artificial Intelligence
that they are expected to have foundational ➢ Cryptocurrency
proficiency level of those learning outcomes • Emotional Intelligence quotient
- Ability to identify & harness those emotions, whether
These are the requirements for aspiring Professional personal emotions or emotions of others (soft-skills);
accountants. But when become a professional accountant, helps the creation of high-performing teams
the proficiency level will now transition from intermediate to • Vision quotient
ADVANCE (very high level of ambiguity, complexity, and - Ability to anticipate future trends by extrapolation
uncertainty) - Important in trying to look at the future direction of
the term
• Experience quotient
ACCA: Drivers of Change and Future Skills
- Ability to understand our clients/customers; to
• Presents a framework for the skills required for provide them with the desired outcome and to manage
professional accountants their expectations

ISSUES IN BUSINESS AND ACCOUNTING

- These issues are considered systematic because they

The Professional Quotients Framework
- A combination of several quotients
The different quotients:
• Technical and ethical competencies
- displays how techniques and ethics will go hand-in-
hand (always partnered together/as one)
- your knowledge of the standards partnered with your
ethical principles
• Intelligence quotient
- Apply to thinking & reasoning skills
- Technical skills
permeate the levels (micro, meso, macro) of decision making
in business
• Sustainable Development and Growth & the role played by
accountants
- Sustainability came about when organizational
stakeholders started to demand more from
organizations more than the financial & economic
returns
- The current model of sustainability now encompasses
the profit, performance related to people, and
planning
• Ethics of Digital Finance
• Self versus Public Interest
• Bright versus Gray Lines
• Enhanced Governance Mechanisms
SUSTAINABILITY AND THE ACCOUNTANT:
Professional Development Outcomes - Extending the definition to worldview: it is a
way of living in an interdependent world through
- Appreciate sustainability as a business paradigm and
value creation, environmental protection, and
a worldview
improving our stakeholder’s affairs
- Recognize the role of accountants in the sustainability
agenda
• Corporate sustainability agenda should pursue the
- Develop a working consciousness about sustainability
triple-bottom line**
as worldview
- This is where **Elkington operationalized the
notion of a triple-bottom line framework
• Based on the short overview of Bitcoin:
- Using the sustainability framework, we must
- What sustainability gives us is a fuller view of our
come to understand that there are other bottom
collective experiences as humans living in this planet
lines, such as people & planet
• Due to us being accustomed to
DEFINING SUSTAINABILITY: one-bottom line aspect- profit
- Triple-bottom line as the operationalization of
*(Savits, A.W. & Weber, K. (2006) The Triple Bottom Line: How Today’s
Best-Run Companies Are Achieving Social, and Environmental Success – sustainability
and How You Can Too) - Extending the definition to worldview: it is a
**(Elkington, J. (1997) Cannibals with Forks: The Triples Bottom Line of 21 st way of living in an interdependent world through
Century Business)
value creation, environmental protection, and
• A way of doing business in an interdependent world*…
improving the life of the people around us
- Sustainability from a microbusiness perspective
- From that notion, sustainability is not a silo of
framework (siloed approach) (it doesn’t treat one Challenges posed by the Sustainability Worldview &
aspect individually) it looks at business as an Sustainability Agenda
organic entity with interdependencies
*(Laininen, E. (2009) Transforming Our Worldview Towards a Sustainable
- Extending the definition to worldview: Future)
sustainability is a way of living in an **(Walker, K., Yu, X., & Zhang, Z. (2020) All for one or all for three:
Empirical evidence of paradox theory in the triple-bottom line)
interdependent world. Definitely, whether we look
at people, or businesses, our actions, are
predicated towards some more actions. Our
actions can actually trigger some more actions in • Entails a great amount of unlearning on personal and

our environment, whether indirectly or directly. cultural levels*

Is a way of doing a thing in an interdependent - Laininen: Sustainability as the greatest challenges

manner, meaning there is this consciousness in that the collective world faces right now

interdependent-ness - Where we unpack our daily experiences of that &

situate ourselves as a member of a larger society,

• …through profit creation, environmental protection, (Yabut, 2021)

and improving stakeholder’s affairs* - Correlating with one of the gurus of leadership:

- Based on how we do business We can think of sustainability not as a technical

- The anti-thesis and is contrary to what has been challenge, but as an adoptive challenge (where

the prevailing business model in the past, people are part of the problem, which takes up a

whereas the business of business is just “to do lot of enculturing & deculturing

business”
• Entails transformational learning in organizations*
 - For us to appreciate the sustainability challenges, it’s
not enough to educate people
• Not just by the head, but it has to be something
that has affective aspects
- Transformational Learning: about enacting change in
our society whether small-scale or large-scale changes
- More related to the people & planet bottom-lines
Through these metaphors, we are able to further understand
sustainability; how both metaphors would support the three-
bottom lines which is the operationalization of sustainability

• Triple-Bottom Line Framework as a paradox** ROLES OF ACCOUNTANTS:

- Paradox: a logically contradicting conjecture that runs
• Accountants as Preparers of Sustainability Reports
contrary towards our normal understanding of things
• Accountants as Assurers of Sustainability Reports
- Triple-bottom line for business organizations is liked a
three-legged stool/chair (wherein if you cut one leg, Words of advice: Before you can appreciate the role of an accountant in the
sustainability agenda, you must be able to first and foremost be able to
the chair will & cannot stand)
genuinely appreciate the role of the human person in the sustainability agenda.
• Repercussion: If business organizations would Only in that particular appreciation/way will we be able to fully understand our
want to pursue the Triple-Bottom Line framework, professional role as an accountant in the sustainability agenda.
they should at least pursue the three of them
Words of caution: Sustainability reports are just a subject matter of information.
within the considerable amount of time These are the forms of sustainability. The substance is the sustainability agenda
You cannot pursue only one bottom-line, you should itself. Sustainability reports should be able to capture as much as possible the
phenomenon aka sustainability.
pursue all three of them at the same time
Sustainability is not a silo; you cannot treat them
differently and individually from one another
Sustainability, whether it’s a worldview or a business
paradigm, is a challenge which entails a lot of learning,
both on a personal and a cultural level
• With the aim of transforming our visions of the
world, at that~

ACCOUNTING METAPHORS:

*(Pava, M. (2020) Teaching Accounting Ethics a Thought Experiment

ISO 4500 – Lead Implementor
[working paper])
• Accounting as Applied Finance
- Focuses on one-bottom line = PROFIT THE 5 ISSUES THAT IS SHAPING HOW WE DO BUSINESS &
- Application of the rules of finance and economics ACCOUNTING IN AN ETHICAL WAY IN THE FUTURE
• Notions of materiality
- Talks about that particular aspect of sustainability
• Sustainable Development and Growth & the role played by
(profit):
accountants
• As accountants, if we only focus on the profit side, it
blind sights us. It doesn’t give us the very full picture or
the context that we are trying to understand
• It sounds incomplete as it is mostly based on
quantitative analysis
• There is a need to factor in qualitative factors as well

• Accounting as Applied Ethics (please refer to the previous notes

above)

- Environment (3Ps)
• Ethics of Digital Finance
- The question of regulation, of which it is actually
anchored to a larger question:
• To ensuring digital finance trends would serve the
legitimate needs of human beings
- Technological trends, such as updates/upgrades, are
actually amoral, but it depends on how people will use
these trends
- Cryptocurrency is not immoral, but it is the criminal
use it
• Dilemma of Self versus Public Interest
- Strong effectivity of organization controls (COSO)
- This can be taken individually and collectively
• Collective: “Self “/ The Profession’s Interest vs. the
Public Interest
o Unintended Oligopoly is the application of issue #3
(the current issue): do we break the big accounting
firms or do we let them stand
o When we become, professionals, business leaders at
that, even public servants, we are actually subjecting
our self-interest secondary to the interest of the
general public (subjecting our personal happiness to
prioritize the common good)
o Another issue to be discussed: Why are we selecting
government/business leaders who are prone to
prioritizing their self-interest against public interest?
• Bright versus Gray Lines
- Downside of having a rules-based system: Having this
- system is not very compatible with a free-market (a market
governed by principles)
- The regulations/rules how we apply accounting became
gray
- Bright lines: the regulations are very clear & strict
- Gray lines: it opens the application of some regulations to
certain interpretations
• Although gray lines, in line with the principles-
based/financial reporting standards, is actually
meant to enhance the quality of financial reporting
• However, the main issue here is how do we prevent
some accountants & auditors in abusing gray lines
• Enhanced Governance Mechanisms • Module 1.1 & Module 1.2 – being an ethical accountant starts first
with being an ethical person

• Reflective practice is
anchored on an educational
philosophy called
PROGRESSIVISM

- These are the issues brought upon by other issues

- US Sarbanes-Oxley Act of 2002: a resulting legal regulation
because of the Enron Scandal. It actually solidifies what we
mean by good corporate governance, what mechanisms
PROGRESSIVISM
that we need to put in place to ensure good corporate, or
something that would at least be responsive to what
happened during the Enron Scandal.
• SOX 302- officers would need to attest that the information
given
• SOX 404 – management assessment; test the high-level controls
- In the Philippines, we only have soft regulations (an
issuance by the SEC)
• GME Stock in the US: a stock with very low fundamental
(small profit & low growth potential)
• Some traders actually pumped the GME stock price to the
point that its current stock price is actually way beyond its
fundamental
• Main question: Do we need to regulate those type of
activities? Do we have enough governance
mechanisms to answer those issues?
REFLECTIVE PRACTICE: (Module 1.4)
• Integration of Module 1.1 (General Introduction to Ethics), Module
1.2 (The Professional Part), Module 1.3 (Ethical Issues in
Accounting & Business)
- A professional philosophy of another professional
philosophy: PRAGMATISM
- Talks about the progress of the human being
• Progress centered on experience
- It came about because of EMPIRICISM
• The belief that we can also acquire knowledge
from experience, rather than pure idealism or
rationalism; that we can also approach reality
through our senses
- Centrality of experience and the utility of any
educational activity
- Inductive and we can borrow this inductive thought
(how we learn from these experiences and how do we
make sense of the experience)
- A practical educational philosophy: putting the center
of our experiences as a vehicle for us to progress as
human beings
- We learn because learning from life experiences will
create a certain structure that will call for more
learning
- We learn on experience right there and then
- Experiential learning

Why do we need to be
reflective practitioners?
 2. ANALYTICAL LEVEL (So what?)
- Align the experience with theory
1) The need to state the theory/course contents that
• WICKED PROBLEMS: refer to the complex and multifaceted you want to apply
situations 2) Explain in detail
- EXAMPLE: 3) The need to discuss/you have to marry your
• How do I deal with a problematic client? experience & artifacts with your theory
• Ethical issues: Do I receive gifts from my clients? How
do I receive intimidation from my team members?
3. REFLEXIVE LEVEL (Now what?)
• These are wicked problems because they entail a
- Description & how will these things affect your
deeper level of analysis. These problems complex; most
decision-making, whether current or future
likely these are not only accounting problems. They will
have ethical & behavioral underpinnings - The gist, analysis, how would you apply something, and
• Necessitates reflection (Iterative reflection) because further argument about the topics
they are so complex, so multifaceted, that no one
textbook can enlighten you.
APPLICATION:
• TAMED PROBLEMS: can be solved by technical knowledge
- EXAMPLE:
• How do we account for cash & cash equivalents? It’s a
tamed problem because it can already be solved by an
accounting standard

HOW DO WE APPLY?

Rolfe and Colleagues and Borton’s Model of Critical

Reflection

3 Levels of Reflective Practice:

Module 2.1: Kohlberg’s Theory of Moral Development/
Cognitive Moral Development

Introductory Video: The Heinz Dilemma -

https://www.youtube.com/watch?v=1_2qEOxSTsM

1. DESCRIPTIVE LEVEL (What?)

- Asked to describe the artifact in appropriate detail
(what, when, where, why)
• Experience – reflecting on actuality as you Kohlberg’s Cognitive Moral Development Theory
experience it; reflection through active
experimentation at the current time • WHAT: This is a developmental theory which pertains to
• Text moral reasoning
 - There stages being presented in this theory. Naturally
as Kohlberg would propose, human beings would
progress to one level to another level (from one stage
or another stage) as he/she goes throughout their
development as a human being/person
- Kohlberg also proposes that the stages are sequential
& hierarchal
• ABOUT WHAT: About moral reasoning that an individual
would have to undergo to achieve a decision (the final end)
• To tell you frankly, the focus of this model is not “what”
decisions to make but rather “how” decisions are made.
➢ This is normally called descriptive ethics (how
decisions are made) as opposed to normative ethics
(what decisions to make)
o Although those “hows” are also linked to
your normative theories
• The point is, the moral agent arrives at a decision and the
reasons why the moral agent arrived at that decision
• Kohlberg argues that higher order moral reasoning is not
available to those individuals in the lower level
- Example: The reasoning of those at Level 3 are not
available to those at Level 1
• Favorite topics in ACCA
Kohlberg’s Theory of Moral Development (Levels)
• The 3 General Levels: (Your ability to reason ethically based
on convention/collection of people)
1) PRECONVENTIONAL - selfie
- The focus of your decision is the “self”/egoistic
- How to decide which entails referring to “yourself”
➢ The pain you receive, the benefit you receive
satisfy your own needs, the convenience, what
removes you from a very dangerous situation
2) CONVENTIONAL – anchored on a large number of people
- You are now able to transition from self-interest into
other’s interest
- The focus of your decision are “others”
➢ Factoring in the needs of the society, the existing
laws, and your need to belong
3) POSTCONVENTIONAL – solar systems to represent
- Most advanced
- Beyond convention, beyond people
- Also known as Principled Morality
- The focus of your decision are your time-tested
“principles”; something beyond ourselves & society
➢ Deontological, virtue ethics, and normally, rule
utilitarian
- Now your ability to decide not based on yourself or
people, but based on principles that would normally
transcend self-interest & the need of the society at
large
- Kohlberg would say that very few people will
transcend to postconventional, particularly to Stage
6 (taking note that there are two stages per level)
➢ As this is hierarchal, those at the higher stages
(stage 5,67), particularly at postconventional/end-
conventional are believed to be morally better
o You are able to exercise Justice & Right
Theory; being able to do justice and factor in
the rights of others
Level 1: Stage 1 of Kohlberg’s CMD (L1 S1)
- The focus of analysis is still the immediate self (short-run)
- We decide because we want to obey rules and avoid
punishment
➢ Obedient to rules
➢ Avoidance of punishment
Level 1: Stage 2 of Kohlberg’s CMD (L1 S2)
- The focus of analysis is still the strategic self (long-run)
- We are motivated to satisfy our personal needs
- People in this stage also realize that things
within this stage can be instrumental for the
satisfaction of their personal needs;
instrumental relativist
- Rewards
- The “what is in it for me” stage
➢ Being motivated by our intrinsic needs
Level 2: Stage 3 of Kohlberg’s CMD (L2 S3)
- Analyzing things/viewing things as compared to yourself to
the others
- The focus of analysis is the immediate circle/group
- You decide on things ➢ Putting into example is Eliza Hamilton
because you want to
subscribe to the “Good
Level 3: Stage 6 of Kohlberg’s CMD (L3 S6)
boy/Nice girl” notion;
- POSTIVE SIDE: We are driven - The final level/final stage of Kohlberg’s CMD
by fairness to others by - Kohlberg was actually still studying this stage until he met
factoring in our Immediate his demise in 1987 Jean Valjean
circle - Very few people will transcend
- Interpersonal accord and - Your guiding compass is not the
conformity self, not the others, not only the
➢ By doing so, we even look at their perception of what it law with exception, but rather
means to be universal ethical principles/
principled conscience stage
- There are these set of principles
Level 2: Stage 4 of Kohlberg’s CMD (L2 S4)
that exist such as Justice, Equity,
- The focus of analysis is the society at large and what better and Rights that you will use as
way to protect the interest of the society at large (duty to your point of analysis for your
social order), than by adhering to the morality of law decision making
- In decision-making, you factor in society as a whole ➢ Deontological, Immanuel Kant’s Categorical
- Also called as the Law and Order Imperative, virtue ethics
➢ There is significant evidence • Some would say that the summary/focus of Kohlberg’s
that accountants are normally CMD, particularly this stage, is Justice and Rights
at Level 2: Stage 4 (protecting
the tax laws & accounting Gilligan’s Ethics of Care
standards) • Carol Gilligan is interested in stages of moral development
➢ Putting into example is Javert and the ethics of care is a critical response to the work of
of Les Misérables: he her mentor, Lawrence Kohlberg
continually believes/focuses in - States that “emotion matters, and duties, rights and
the morality of the law obligations are just one way of thinking about ethics”
• A family of beliefs about the way values should be
manifested in character and in behavior
Level 3: Stage 5 of Kohlberg’s CMD (L3 S5)
• Unified by shared concerns and commitments and by the
- The focus of analysis are the values & universal principles rejection of the traditional philosophical view that ethics
- Anchored in Social Contract can be adequately represented by rules & principles
➢ Some would say that L3 S5 • Lawrence Kohlberg, a behavioral physiologist, tested out
focuses on the spirit of the law child subjects using the Heinz Dilemma
which normally anchored on ➢ The question: should a man steal a certain drug to
societal values save the life of his wife?
- We factor in our own ➢ He asked young men to describe their moral reasoning
interpretations of societal values
➢ Some would say that the law is
respected but subject to
exceptions
 processes, and Kohlberg developed a staged theory of ➢ However, these claims are not crucial to care ethics. It
moral development patterned after Piaget is enough to demonstrate the importance of values
o Kohlberg noted that boys cited relevant principles that belong to the ethic of care by showing how they
to solve Heinz Dilemma and girls approach moral play a role in the moral life of individuals & society
dilemmas from a morally lower developmental
stage
o Thus, Kohlberg concluded that boys reason more Gilligan’s Reinterpretation
effectively than girls,
❖ Women have traditionally been taught a different kind
o And that young western males tend to morally
of moral outlook that emphasizes solidarity,
develop to a higher & higher level of moral
community, and caring about one’s special
reasoning, from absolute self-interest to
relationships
realization of rights, and justice for everyone
❖ The “care view” of morality has been ignored or
equally
trivialized because women were traditionally in
o Reaching the conclusion that females are
positions of limited power and influence
incapable of moral reasoning
❖ It would instead say that we can and should put
• In a different voice, Gilligan noted that Kohlberg’s sample
interests of those who are close to us above the
almost entirely consisted of young western European men,
interest of complete strangers
and based his interpretation of results on one kind of
❖ Ethics of care contrasts with more well-known ethical
moral reasoning: ENLIGHTENMENT LIBERALISM
views, such as utilitarianism and deontology or Kantian
➢ Which states that man is rational, liberal, equal,
ethics. The traditional outlook is what feminist critics
unencumbered, autonomous, and rights-fairing
call a “justice view” of morality
individual
❖ A morality of care rests on the understanding of
• Her own research suggests that women tend to struggle
relationships as a response to another in their terms
with moral dilemmas on a different way (That the little
voice that they hear is different from what men hear)
Care ethics can be seen as a philosophical enterprise of
• Carol Gilligan notes that Kohlberg’s results indicate male
ethics (acts so as to promote the good of others
bias. There is no reason to assume the stereotypical male
➢ If this is so, this is not necessarily an alternative to the
method of reasoning is superior to the stereotypical female
moral theory
method of reasoning
• Carol Gilligan noted that women:
✓ Value social relationships than individual freedom ETHIC OF CARE vs. ETHIC OF JUSTICE
✓ Emphasize connection more than detachment
✓ Consider social responsibility and obligation
before individual rights
✓ Emphasize the particular before universal
✓ Consider lived experiences to be a more
important guide to future behavior than
philosophical abstractions (reason through an
- Gilligan does not consider this a perfect correlation
ethic of care as opposed to ethics of justice)
between the genders
• Socialized view of morality/the justice view of morality is
- Ideally, moral agents should employ both approaches in
male-centered
moral decision making
• Gilligan’s claims about the differences between the moral
- There is no room for both and a need for both, and Gilligan
reasoning of women & men do not stand up to the
recognizes this
challenge of more recent data
- It basically means that rules are inappropriate &
unnecessary where certain human relationships are
concerned
Care ethics denies that abstract principles can capture
everything relevant in making moral decisions
➢ Means of understanding the complexities of particular
situations of which have occurred
➢ We need a deep & detailed understanding of people;
their interests and feeling.
➢ Only with this is possible to sensitively respond to
their problem
- In considering both care & justice, INTELLIGENCE AND
EMPATHY is required
a. INTELLIGENCE - to grasp relationships and details
about the people, circumstances, and the problem
b. EMPATHY – to understand the concerns and
feelings of the people involved (must identify with
them)
➢ Realizing what they consider to be at that
stake, ascertain their worries & concerns
- The point is to find a way out of the conflict that takes
into account the concerns and feelings of all of those
involved
IS ETHIC OF CARE A FEMINIST ETHICS?
• The ethics of care was developed as part of a feminist
movement
• Some modern feminists have criticized care-based
ethics for reinforcing traditional stereotypes of a “good
woman”
• Nevertheless, the ethics of care illustrates that there
may be gender differences in moral reasoning
• The ethics of care meshes with out belief that different
rules of conduct apply in our personal and public lives
SUMMARY:
✓ Kohlberg suggested that women simply could not
engage in moral reasoning, because in his experiments,
they were attentive to what he believed to be irrelevant
factors, like context and relationships, and did not
REST’S FOUR COMPONENT OF MODEL OF ETHICAL DECISION
frequently cite relevant principles
✓ Gilligan reinterpreted these results in light of gender
studies and feminist ethics and concluded that women
typically do reason in a morally acceptable manner,
simply that they find different kinds of factors to be
relevant
✓ The ethics of care is an ethics promoted by Gilligan and
Nel Noddings, who believe that we behave morally
inasmuch as we care for those with whom we have
personal relationships
- They assert that emotive factors are relevant factors.
Making the emotive admissible to moral deliberation
interferes with our desire to be objective but satisfies
our understanding that we have different moral roles
concerning people close to us
✓ Ethics of care is further criticized by contemporary
feminists on the grounds that it reinforces
stereotypically female roles.
➢ According to Gilligan, this is inappropriate & mistaken
because it excludes the very values that are most
relevant to moral situations and most relevant to the
people involved
➢ We must make an effort to develop individuals who
respond appropriately to moral situations or recognize
the importance of personal relationships, respect
others, and accept responsibility
MAKING
 The four component model of morality was developed by
James Rest in 1983 and further developed and applied by
Rest and Darcia Narvaez in 1995 and by Muriel Bebeau in
2006.
REST’S MODEL
➢ It addresses the ways that moral behavior occurs, and
allows for conceptualization of successful moral
functioning and the capacities it requires.
● The model is not linear and its components are
interactive. Furthermore, Rest notes in contrast to
other models of moral function the four component
model of morality assumes co-occurrence in all areas of
moral functioning of cognition and effect. Thus, moral
behavior is not the result of separate processes rather
each of the four components involves both affective
and cognitive processes.
Ethical Decision Making: A Dual Process Approach
● Ethical thinking activates both cognitive and emotional
areas of the brain.
● The dual process perspective is based on the premise
that both logic and emotion are essential to making
good ethical choices.
● As neuroscientist have discovered, we can’t make good
ethical choices without employing our feelings
Business ethics educators Charles Powers and David Vogel
identified six factors or elements that underline moral
reasoning and behavior that are particularly relevant in
organizational settings, these factors include:
1) Moral Imagination
2) Moral Identification and Ordering
3) Moral Evaluation
4) Tolerating Moral Disagreement and Ambiguity
5) Integrate Managerial Competence with Moral
Competence
6) Moral Obligation
James Rest of the University of Minnesota developed the
most widely used model of moral behavior
- He started with the end product—the moral action—and
then determined the steps that produce such behavior.
- He concluded that ethical action is the result of four
psychological sub processes which includes:
○ Moral Sensitivity (Recognition)
○ Moral Judgment
○ Moral Focus (Motivation)
○ Moral Commitment
- This model is not a linear, time down-sequence. There
may be complicated interactions between the various
components.
➢ For example, a person’s way of defining what is
morally right (component 2) may affect the person's
interpretation of the situation (component 1) the
model should be thought of as depicting a logical
order for the development of a moral behavior to
occur
Moral Sensitivity (Recognition)
- Focuses on the ability to identify and discern problematic
situations with ethical dimensions
● It is the first step in ethical decision making because we
can’t solve the moral problem unless we first know that
one exists.
● Empathy and perspectives skills are essential to this
component of moral action
○ Paying attention to our emotions can be an important
clue that we are faced with an ethical dilemma
○ Sympathy and compassion or other suffering
emotions
○ Gratitude and elevation or other praising or positive
emotions that open us up to new opportunities and
relationships
● We may even deceive ourselves into thinking that we are
acting morally when we are clearly not, a process called
ethical fading.
○ anger, disgust and contempt or other condemning
emotions
 ○ shame, embarrassment, and guilt or self-conscious
emotions that encourage us to obey the rules and
uphold the social order
● We can take steps to enhance our ethical sensitivity
In interpreting moral situations individuals should answer
three questions:
1) What courses of actions are possible?
2) Who (including yourself) would be affected by each
course of action?
3) How would the involved parties regard such effects on
the welfare and interests?
Moral Judgment
The next component, moral judgment, requires the person to
move beyond recognizing the ethical dimensions present in a
given situation to explore which line of action is morally
justified.
● Moral judgment has generated more research than the
other components of Rest’s model.
- Harvard psychologist, Lawrence Kohlberg, argued that
individuals progress through a series of moral stages
just as they do physical ones
- Kohlberg identified three levels of moral development
each divided in 2 stages
● Rest developed the defining issues test (DIT) to measure
moral development.
- Hundreds of studies using the DIT revealed at moral
reasoning generally increases with age and education
● Principled leaders can boost the moral judgment of a group
by encouraging members to adopt more sophisticated
ethical schemas.
- The purpose of this component is deciding which one
of these courses of action is morally right
The question to pose at this point is:
● How do people define what is right and wrong?
- the work of Kohlberg, Gilligan and Kitchener can
assist in answering this question
● Models of cognitive development provide important
insights into the process of ethical decision making.
1. Contextual variables play an important role in shaping
ethical behavior
2. Education fosters moral reasoning and
3. A broader perspective is better. Consider the needs and
viewpoints of others outside your immediate group or
organization.
Ethical blind spots of moral judgment includes:
1. Overestimating our ethicality
2. Forgiving our own unethical behavior
3. In-group favoritism
4. Implicit prejudice
5. Judging based on outcomes, not the process
➢ Taking moral judgment seem to come naturally to people it
almost seems that humans are either genetically built to
make moral judgments or quickly conditioned by social
experience to make them
People’s intuitions are drastically different regarding what is
right and wrong and individuals have great certainty about
their moral convictions
- sometimes individuals want to do the right thing but
their integrity can be overpowered
- others never intend to follow an ethical course of action
but engage in moral hypocrisy instead
Moral Focus (Motivation)
● Psychologists report that self interest and hypocrisy
undermine moral motivation
○ both self interest and hypocrisy encourage
leaders to set their moral principles aside
○ People are more likely to give ethical values
top priority when rewards through raises,
promotions, public recognition, and other
means for doing so.
● emotions also play a part in moral motivation
○ sympathy, disgust, guilt and other moral
emotions prompt us to take action
○ positive emotion such as joy and happiness
make people more optimistic and more
 likely to live out their moral choices and to
help others
○ moral values are not the only values that
people have — people value advancement
in a career, money, power and many things
beside fairness and morality
■ these other values can conflict with
moral values, it is not unusual for
non-moral values to be so strong
and attractive that a person will
choose a course of action that
preempts or compromises the
moral ideal
● The difference between what individuals think ought
to be done and what they actually do can be
significant.
○ Given that two person are aware of various
possible courses of action in a situation
each leading to a different kind of outcome
or goal, why would one ever choose the
moral alternative especially if it involves
sacrificing some personal value or suffering
some hardship?
Moral Commitment
Moral character and competence acknowledges that
sensitivity, judgment, and prioritization of moral values
must lead to moral character and competence or moral
behavior will fail
• According to Nucci and Narvaez, a nervous moral character
and competence is
➢ “Having the strength of your convictions, having
courage, persisting, overcoming, distractions and
obstacles, having implementing skills and having ego
strength”
○ Executing the plan of action takes character
○ Executing and implementing a plan of action
involves determining a sequence of concrete
actions
■ working around obstacles and unexpected
difficulties
■ overcoming fatigue and frustration
■ resisting distractions and allurements and
■ keeping side of the eventual goal
● It has also been found that having a positive affective state
any focusing on the expectation of success can determine
the amount of effort that will be expended and how long it
will be sustained in the face of adversity
○ Assertiveness, perseverance, resoluteness,
competence, courage, and character are attributes
that lead to success
○ The positive character traits include courage,
prudence, integrity, humility, reverence, optimism,
and compassion
● In addition to virtues other personal characteristics
contribute to moral action
- those with a strong will or internal locus of control and
lastly
● Successful implementation also requires competence
The interaction among the four components can have a
decided impact on morals behavior
➢ If an overlap exists between two potentially moral
situation
• Being concerned about one moral situation can cause
insensitivity to another one which begins before the
first is completed
• sometimes the attention and effort needed to carry
out one task are so great that the subject can attend
to little else
• As the cost of moral action comes to be recognized a
person made a store to feelings of obligation, denying
personal responsibility or reappraising the situation,
so as to make alternative actions more appropriate
• As people realize the implications of component 2
and 3 processes, they may defensively re-appraise
their interpretation of the situation so, they can still
feel honorable but at less cost to themselves
VOCATION OF A BUSINESS LEADER PART 1
Who wrote the VOCATION OF THE BUSINESS LEADER (VBL)?
➢ This was written by the Pontifical Council for Justice and
Peace in coordination or in partnership with John A. Ryan
 Institute for Catholic Social Thought of the Center for
Catholic Studies of the University of St. Thomas.
The VBL is a product of a series of reflection
- Done by church leaders, business executives and
academicians
✓ What made them come together? The market failures is the
very context.
VBL: Context of the series of reflections in an attempt to help
address the global challenges that have adversely affected
people and communities
● In paragraph one of the VBL, it says
“Unfortunately, this century has also brought business
scandals and serious economic disturbances and an
erosion of trust in business organizations and in free
market institutions. For business leaders this is a time
that calls for witness of faith, the confidence of hope
and the practice of love.”
The document emphasizes the crucial role of businesses and
governments in promoting social justice and the common good
Role of Businesses and Governments in Promoting the Common
Good
● In paragraph 2 it says
“When businesses and markets as a whole are
functioning properly and are regulated in an effective
manner by governments, they make an irreplaceable
contributions to the material and even the spiritual
well-being of humankind. When business activity is
carried out justly and effectively, customers receive
goods and services at fair prices, employees engage in
good work and earn a livelihood for themselves and
their families, and investors earn a reasonable return
on their investment. Communities will see their
common resources put to good use and the overall
common good is increased.
● Common good essentially requires social justice
Social justice has several components:
1. Commutative Justice - this is a justice that happens at the
level of the individual exchanges. For example, the just
wage for services rendered or a fair price for products and
services
2. Legal Justice - this pertains to the payment of proper taxes
as our contributions to finance, basic social services. So,
tax evasion kills or destroys legal justice
3. Distributive Justice - pertains to the crucial role of
government in flowing back our tax contributions to society
in the form of social services (housing, basic education,
health care, food security, infrastructure peace and order,
and other basic social services). Meaning to say that
corruption in government is killing distributive justice
4. Ecological Justice - which consists in caring for the natural
environment, and recognizing its limitations to support our
developmental undertakings. Destruction of the
environment kills ecological justice.
All of these four components make social justice so, social
justice happens only when all four components are present
in societies and communities
The absence of just one component would mean the
obliteration or annihilation or destruction of social justice
common good is never possible without social justice
The Business Stakeholders
● The conduct of businesses greatly affects the well-
being of people and their families and communities.
Hence, responsible business is very crucial in bringing
about social justice as well as the common good.
Practical Ethical Principles for Business
“Respect for human dignity and the common good are
foundational principles which should inform the way we organize
labor and capital employed and the processes of innovation, in a
market system.” (VBL par. 38)
Because enterprises affect persons and persons are in
communities, the VBL emphasizes respect for human dignity and
the common good as the foundational principles which should
 inform the way we organize labor and capital employed as well
as the processes of innovation in a market system.
“The deep and abiding purposes of individual businesses and
commercial systems is to address real human needs.”
Three interdependent activities which businesses should take
up: (G.W.W)
1. Businesses should address genuine human needs through
the creation, development and production of goods and
services (GOOD GOODS)
2. Businesses should organize good and productive work
(GOOD WORK)
3. Businesses should reuse resources to create and to share
wealth and prosperity in sustainable ways (GOOD WEALTH)
1. GOOD GOODS
● Businesses should produce goods and services that should
meet authentic human needs such as life-saving medical
services, education, health care, affordable housing, but
also goods and services that genuinely contribute to
human development and fulfillment. Good entrepreneur
gives first thought to service then second to gain second
● Meet the needs of the vulnerable members in society such
as the poor, the elderly, the handicapped and life.
➢ Developments in the field of the bottom of the
pyramid products and services such as micro
enterprises, micro credit, social enterprises, and
social investment funds will help lift people from
extreme poverty and this could spark their own
creativity and entrepreneurship, contributing to their
own development.
2. GOOD WORK
● Good and effective, efficient and engaging
- It means that the enterprise must organize work in
order for business processes to be effective, efficient
and engaging
● Autonomous
- In organizing work, a certain autonomy must also be
given to the workers or an enterprises employees
- The people should be given at appropriate levels, a
certain level of autonomy to be able to participate in
the creative process and contribute to the mission of
the organization
● Collaborative
- Work must also be organized in a way that it becomes a
venue for collaboration because essentially work would
bring people together
● Fosters dignified work
- Lastly, work must foster human dignity. Work is central
to a person's calling to development and dignity of
labor is very important. Work has multiple dimensions
and the most obvious is the economic dimension of
work because it is through work that the person earns
and is able to provide for his and his family's needs
3. GOOD WEALTH (VBL par. 51, 52, 53)
● Good stewardship
- Good stewards are creative and productive with the
resources placed in their care. They do not merely
take from the creation's abundance. They use their
talents and skills to produce more from what has
been given to them.
● Sustainable: Company. Natural Environment
- The enterprise must make profit to sustain the
business but not at the expense of the common good.
It should not create poverty for other members of
society and it should not destroy the environment
● Justly distributed third is the creation of good wealth
- A profitable enterprise by creating wealth and
promoting shared prosperity through wages, fair
exchange with suppliers, fair price of goods and
services to customers and paying the right taxes. This
promotes the common good and helps individuals
excel
Hence, from this standpoint an enterprise that practices the
ethical principles of business produces good goods, organizes
good work and creates good wealth.

In paragraph 59 of the vocation of the business leader
● Ethical social principles, illumined for Christians by the
Gospel, provide direction for good business but the
navigation (of the business) falls to the seasoned and
intelligent judgments of virtuous business leaders who
can wisely manage the complexity and tensions arising
in particular cases.”
❖ To attain or achieve the delivery of good goods, the
organization of good work and the creation of good wealth
● is the vocation of the business leader
Obstacle of the Christian Business Leader
➢ Divided life: Faith vs. daily life (VBL par. 10)
○ Trying to respond to the call to holiness in one's life
as a christian is completely separated from one's life
as a professional or a businessman because at the
workplace different rules apply
○ The Second Vatican Council saw this split as one of
the more serious errors of our age
○ This split between faith and the daily business
practice can lead to imbalances and misplaced
devotion to worldly success
○ The many pressures business leaders face lead them
to forget the gospel call in their daily professional
activities, it may seduce them to believe that their
professional lives are incompatible with their
spiritual lives
○ It places excessive confidence in material resources
and or worldly success and when this happens,
business leaders risk valuing status and fame, over
lasting accomplishment, and consequently, risk losing
good judgment
○ Business leaders may even be tempted whether from
self-centeredness, pride, greed or anxiety to reduce
the purpose of this business solely to profit
maximization or growing market share or any other
solely economic good
- this is in paragraph 12 of the VBL
➢ The alternative path: faith-based “servant leadership”
○ This provides business leaders with a larger
perspective and helps them to balance the demands
of the business world with those of ethical social
principles and be a good christian or a good muslim
or a good buddhist in all facets of life whether
personal, family, spiritual, including professional and
business life
Faith based servant leadership: Balancing Act Follows 3 Stages
➢ Under the faith-based servant leadership the exploration of
situations and alternatives are explored under three
stages:
1) TO SEE
- It means to see the challenges and opportunities and
study and gather factual information
2) TO JUDGE
- In the light of the social principles of human dignity
and the common good where businesses should
produce and deliver good goods, organize good work,
and create good wealth
- One should evaluate the challenges and opportunities
and make a judgment
3) TO ACT
- Business leaders can put their aspirations into
practice when they pursue their vocation motivated
by much more than financial success
- When they integrate the gifts of spiritual life, the
virtues and ethical principles into their life and work
they may overcome the divided life and receive the
grace to foster the integral development of all
business stakeholders
- The church calls upon the business leader to receive
and to give entering into communion with others to
make the world a better place
Is faith-based leadership practicable?
● Mr. Frank
➢ An enterprise that delivers good goods, organizes good
work and creates good wealth becomes our medium
 for the promotion of the common good. It likewise ➢ See, judge, and act model
serves as our organized way of caring for our social - Act is related to motivation and character
body or our communities and because when
enterprises heed the call of the principles of ethical
Seeing, Judging, and Acting
business, they won't overlook responding to the needs
of the less privileged in society it can also very well ➢ Seeing: talks
become our organized exercise of the option for the about the issue, being sensitive
poor. All institutions, business enterprises, about the issue, and the nuances
governments, universities, even non-profit and context about the issue
organizations, have the potential to become our
medium for love of neighbor.

ETHICAL DECISION-MAKING MODEL

Ethics is the operationalization of morals

1. What is the issue and its nuances?

a. What are the facts of the issue?
b. Who are the people primarily and secondarily affected
by the issue?
i. Stakeholders
c. What are the preliminary pertinent accounting,
auditing, and business issues?
i. Is this about sustainability as a business issue?
ii. Is this about accounting ethics?
iii. Is this about auditing value for example
professional skepticism?
CMD MODELS - talks about how do we progress, how do we
d. What is the ethical dilemma?
develop morally, how do we transform morally/ethically
➢ Kohlberg’s Model (3 levels and 6 stages)
➢ Gilligan’s Ethic of Care - response to Kohlberg’s model 2. What are the options and their impact?
a. What are the options/alternatives?
Rest’s Model - ethical dilemmas are not yes/no statements
➢ Some would say that we are what we repeatedly do - ethical dilemmas are a result of competing values—
so what are your options for that particular issue
Normative Guides and,
➢ Deontology b. How will these options/alternatives impact the
➢ Utilitarianism stakeholders?

VBL
3. How will you resolve the issue?
➢ How we promote our vocation as business leader as
a. Which is the most alternative course of action?
accountants
b. How will you execute your selected course of action?
 c. Which values did you give weight to? Why? normative ethical theories, the code of ethics,
i. If you give way to certain values, you are in the IFRS, ISA, and Legal Frameworks
process of subjecting the other values secondary
to the primary values so, why did you do that? 3. ACT: Strategize a well-reasoned action
ii. The best ethical decisions are those backups with - Prepare a well reasoned action plan
the best reasons 3.1. Select the most appropriate course of action
of
Detailed Script 3.1.1. Do not pass the buck.
1. SEE: Being Sensitive to the Issue and its Nuances - Your action should be
1.1. Gather the facts (Mintz & Morris, 2013; something active not
Angeles, 2020) passive
- be very careful in gathering the facts 3.1.2. One needs to strike a balance in this
- don’t add what is not patently area
obvious 3.2. Prepare a plan detailing how you will execute
- don’t make several assumptions the decision. You might be asked to write a
- gather the facts as they are memo or an email detailing your course of
1.2. Identify the stakeholders and their stakes action.
(obligations and rights)(Mintz & Morris, 2013; 3.3. Reflect on your decision. Which values did you
Angeles, 2020) give more weight to? Which ones did you
1.3. Identify the preliminary issues and guidance trade off? Why?
concerning (Mintz & Morris, 2013):
1.3.1. Accounting and Auditing (e.g., code Teaching Case: Charge to Experience
Malaya, a new associate in an accounting firm, learned that they are
of ethics, financial reporting assigned to a group performing professional services (financial statements
standards, auditing standards) audit, management consulting, and information systems audit) to clients in
the retail industry. Malaya's direct supervisor is Matapang. Both Malaya and
1.3.2. Business (e.g., strategy and Matapang report to the engagement manager, Amihan. Finally, the group is
operations) under the overall guidance of the audit partner, Mahusay. Malaya was
impressed by the welcome remarks delivered for the new hires by Mahusay.
- is there a corresponding business Mahusay emphasized the need to serve the needs of the clients and the
other stakeholders with integrity. After attending a planning meeting for Hari
issue
and Subsidiaries, Malaya was instructed by Matapang to charge the day to
- if you have a tentative guide client code 9840. When Malaya was preparing the time report, they noticed
that client code 9840 pertains to another client, Datu Company. When asked
1.4. Articulate the ethical dilemma based on facts,
about the matter, Matapang said that it is a usual practice that professionals
stakes, and preliminary issues (Angeles, charge their time to other clients, especially that the code for Hari and
Subsidiaries is already over charged for the month. It is just a usual business
2020) practice to spread out the engagement costs, Matapang explained. Overall,
this practice benefits both the firm and the clients since the firm can retain
long-term clients while balancing the related costs. At any rate, regardless of
2. JUDGE: Evaluation with a clear motivation the time charges, the same amount of fees will be billed to the clients.
2.1. Identify the alternatives (two extremes and a
➢ persona: Malaya
middle ground) (Mintz & Morris, 2013:
Angeles, 2020)
SEEING
2.2. Weigh the alternatives based on their impact
1.1. Facts of the Case
on the stakeholders guided by the standards
in the profession and in general such as ● Malaya was asked by Matapang to charge the former's
hours to another client.
 ● The said practice is considered a normal business - what would result from the action/inaction— what are the
practice in the organization. resulting differences?
● The practice aims to spread out costs across clients - action/inaction would result to either procedural integrity
and maintain market share. (whether facilitated or inhibited) or the stability
● The practice does not affect the clients since the audit operations
fees billed to them is still the same (i.e., practice only
affects internal reporting).
JUDGING
2. Alternatives and Weight
1.2 Stakeholders
Alternative Impact to Positive Negative
● Primary: Malaya, Engagement Team, Accounting Firm Stakeholders
● Secondary: The clients
A1: Charge Malaya Will be viewed as Will sacrifice personal
to another a team player and integrity and honesty.
1.2 Stakeholders; 1.3. Preliminary Issues
client per obedient.
instructions Inaccurate reporting of
Primary Stakes Preliminary Issues . costs
Stakeholders Will balance costs
across clients
Engagement Inaccurate reporting of
Malaya Integrity (Personal Accounting (Ethics): Integrity — Team costs.
Honesty) being straightforward and
honest with one's dealings Will balance costs Might impact ethical
across clients climate
Engagement Team Stability Smooth Strategic: Maintaining market ➢ Because that
Operations share despite low fees Accounting
practice is prevalent
• Malaya, Firm
in the firm, the
Matapang, Operational: Economies of professionals inside
Amihan and scale the firm might have
Mahusay the notion that a
purely utilitarian
rule for most
decisions is
Accounting Firm Integrity Strategic: Charge appropriate
acceptable
(Procedural fees to the client while
• whole firm with Honesty of maintaining market share
the other partners Internal A2: Charge Malaya Will preserve Will disobey superior
Reporting) Operational: FR of internal to the personal integrity and might be
reporting system correct reprimanded
➢ Accuracy of client code.
internal Client account will be
reporting Accurate reporting overcharged.
Engagement of costs
Team

Client account will be

Ethical climate overcharged.
might be
1.4 The Dilemma enhanced
Accounting
Firm
• Personal and Procedural Integrity Versus Stability of
Operations

- faithful representation for procedural integrity

- faithful representation of the amounts
ACTING
- the dilemma is the result of the moral agent actions or
Which is the more important value?
inactions
• Deontology: In guiding your answer in that question which
is the more important value -> we can go to what would the
categorically imperative say. This might be construed as an
issue related to truth telling.
• Utilitarianism: What would utilitarianism say? What would
benefit the most number of people in the long run?
• Virtue ethics: What is in line with the character of a good
person?
Argue based on the dilemma:
➢ Which particular alternative will support the more
important value? Why do you say that is the more
important value?
● What are the obstacles that you will face? How will you
face them? Which value did you uphold? Is there no middle
ground?
- sometimes the middle ground is a win-win solution
INTERNATIONAL CODE OF ETHICS FOR PROFESSIONAL
ACCOUNTANTS
Part 1: Complying with the Code, Fundamental Principles, and
Conceptual Framework
The CODE sets out fundamental principles of ethics for
professional accountants reflecting the profession’s
recognition of its public interest responsibly
The principles outlined in this code establishes the
standard of behavior expected of a professional
accountant
Provides a conceptual framework that professional
accountants are to apply in order to identify, evaluate, and
address targets/threats to the compliance with the
fundamental principles
Sets out the requirement in application materials and
various topics
Complying with the Code
➢ A professional accountant shall comply with the
International Code of Ethics for Professional Accountants
(“Code”)
❖ Breaches of the Code
➢ A breach of any provisions of the Code requires the
determination of the significance of the breach and
impact on the accountant’s ability to comply with the
fundamental principles
➢ The accountant should also:
• Take whatever actions that might be available
to address the consequences of the breach
satisfactorily; and
• Determine whether to report the breach to the
relevant parties (e.g., those affected by the
breach, a professional or regulatory body,
oversight authority)
Fundamental Principles
✓ INTEGRITY
• Straightforward and honest in all professional and
business relationships
o Association with Certain Information
➢ A professional accountant shall not knowingly be
associated with reports, returns, communications,
or other information where the accountant believes
that the information:
- Contains materially false or misleading
statements;
- Contains statement of information provided
recklessly; or
- Omits or obscures required information where
such omission or obscurity would be
misleading
✓ OBJECTIVITY
• Not to compromise professional or business judgments
because of any bias, conflict of interest, or undue
influence of others (in all activities done by the
accountant)
✓ PROFESSIONAL COMPETENCE AND DUE CARE
 • Attain and maintain professional knowledge and skill
at the level required based on current technical
professional standards and relevant legislation; and
- The responsibility to maintain the skill and to
ensure the client or employing organization
receives competent professional service
• Act diligently and in accordance with applicable
technical and professional standards
o Training, Supervision, and Limitations
➢ A professional accountant shall take reasonable
steps to ensure that those working in a
professional capacity under the accountant’s
authority have appropriate training and
supervision
- Those people training under the accountant’s
authority will be the responsibility of the
accountant
➢ A professional accountant shall make clients, the
employing organization, or other users of
accountant’s professional services or activities,
aware of the limitations inherent in the services
or activities
- Any work must be outline and the limitations
must be described (Statement of Work for
every engagement)
✓ CONFIDENTIALITY
• Respect and confidentiality of information acquired as
a result of professional and business relationships
o Responsibilities of the Accountant
- Be alert to the possibility of inadvertent
disclosure, including social environment, and
particularly to a close business associate or an
immediate or a close family member;
- Maintain confidentiality of information disclosed
by a prospective client or employing organization;
- Maintain confidentiality of information within the
firm or employing organization;
- Not disclose confidential information acquired as
a result of professional and business
relationships outside the firm or employing
organization without proper and specific
authority, unless there is a legal of professional
duty or right to disclose;
- Exceptions: Given consent, legally obligated
to do so, and his professional duty/right to
disclose
- Not use confidential information (inside
information) acquired for the personal advantage
or for the advantage of a third party
- Not use or disclose any confidential information
even after that relationship has ended
- Take reasonable steps to ensure that personnel
under the accountant’s control, and individuals
from whom advice and assistance are obtained,
respective the accountant’s duty of
confidentiality
o Exception on Disclosing Confidential Information
- Disclosure is required by law
- Disclosure is permitted by law and is authorized
by the client or the employing organization
- There is a professional duty or right to disclose,
when not prohibited by law
✓ PROFESSIONAL BEHAVIOR
• Comply with the relevant laws and regulations and
avoid any conduct that the professional knows or
should know might discredit the profession
o Marketing and Professional Activities
➢ A professional accountant shall not bring the
profession into disrepute
- Not allowed to make it a competition with
other accountants
➢ A professional accountant shall be honest and
truthful and shall not make:
- Exaggerated claims for the services offered by;
or the qualifications or experiences of the
accountant; or
- Disparaging references or unsubstantiated
comparisons to the work of others
Conceptual Framework
Application of the Conceptual Framework

❖ Helps professional accountants to identify threats to
compliance with the fundamental principles, evaluate
these threats, and address the threats by eliminating or
reducing them to an acceptable level
Exercise of Professional Judgement
• Application of relevant training, professional
knowledge, skill and experience commensurate with
the facts and circumstances
• Make informed decisions about the courses of actions
available, and to determine whether such decisions are
appropriate in the circumstances
Understanding of Known Facts and Circumstances
• An understanding of known facts and circumstances is
a prerequisite to the proper application of the
conceptual framework
• Determining the actions necessary to obtain this
understanding and coming to a conclusion about
whether the fundamental whether the fundamental
principles have been complied with
o The accountant must not rely on every document or
information provided to him; need to be on guard
o In engaging with the client, you should’ve studied that
certain client If there is an inconsistency between the
known facts and circumstances delivered by the client
or the engagement & to your expectations, there may
be something wrong
Reasonable and Informed Third-Party Test
➢ A consideration about whether the same conclusions
would likely be reached by another party
➢ Such considerations are made from the perspective of
a reasonable and informed third-party, who weighs all
the relevant facts and circumstances that the
accountant knows, or could reasonable be expected to
know, at the time the conclusions are made
CONCEPTUAL FRAMEWORK
• The conceptual framework specifies an approach for a
professional accountant to:
✓ Identify threats
✓ Evaluate the threats
✓ Address the threats
Identifying the Different Threats
❖ Self-interest Threat
- A threat that a financial or other interests will
inappropriately influence a professional
accountant’s judgment or behavior/may influence
to perform a breach of the Code
❖ Self-review Threat
- Not appropriately evaluating the results of a
previous judgment made or an activity performed
by the same accountant or by another individual
within the accountant’s firm/employing
organization, on which the accountant will rely
when forming a judgment as part of performing a
current activity
❖ Advocacy Threat
- Will promote a client’s or the employing
organization’s possession to the point that the
accountant’s objectivity is compromised
❖ Familiarity Threat
- Due to a long or close relationship with the
client or employing organization, the
professional accountant will be too sympathetic
to their interests or too accepting of their work
❖ Intimidation Threat
- A threat that the accountant will be deferred
from acting objectively because of actual or
perceived pressures, including attempts or
exercise of undue influence over the accountant
➢ Prevented from complying with the code
because of intimidation or actual or
perceived pressures
o In identifying the threats, there is a need to understand the
facts and circumstances to might compromise compliance
with the fundamental principles
Evaluating Threats • Use the reasonable and informed third-party test

• When the threat is identified, the accountant shall evaluate

whether such a threat is at an acceptable level Considerations for Audits, Reviews, and Other Assurance
Engagements
Acceptable Level
INDEPENDENCE
- This is the level at which a professional accountant
o No bias and objective in doing work
using the reasonable and informed third-party test
➢ Independence of the Mind
would likely conclude that the accountant complies
- The state of mind that permits expression of a
with the fundamental principles
conclusion without being affected by influences that
compromise professional judgment thereby allowing
Consideration of New Information or Changes in Facts and an individual to act with integrity, and exercise
Circumstances objectivity and professional skepticism
➢ Independence in Appearance
Re-evaluating and Addressing the Threat
- The avoidance of facts and circumstances that are so
- If the professional becomes aware of new information
significant that a reasonable and informed third-party
or changes in facts and circumstances that might
would be likely to conclude that a firm’s or an audit or
impact whether a threat has been eliminated or
assurance team member’s integrity, objectivity or
reduced to an acceptable level, the accountant shall re-
professional skepticism has been compromised
evaluate and address that threat accordingly

PROFESSIONAL SKEPTICISM
➢ Under auditing review and other assurance standards,
professional accountants in public practice are
required to exercise professional skepticism when
planning and performing audits, reviews, and other
assurance engagements
➢ Professional skepticism and the 5 fundamental
principles that are described previously are inter-
SAFEGUARDS: are actions individually or in combination that the
related concepts
professional accountant takes that effectively reduce threats to
compliance with the fundamental principles to an acceptable
level

Consideration of Significant Judgments Made and Over-all

Conclusions Reached

➢ The professional accountant shall form an overall

conclusion about whether the actions that the
accountant takes, or intends to take, to address the
threats created will eliminate those threats or reduce
them to an acceptable level
➢ In forming the overall conclusion, the accountant shall:
• Review any significant judgments made or
conclusions reached; and