Personal and Professional Ethics

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 Ethics
• Ethics is the science of morals in human
conduct - i.e. determining what is the right or
wrong course of action. 

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 Ethics
• Why business ethics is important

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Ethical Theories

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 Approaches to Ethics
• Relativism and absolutism both refer to the
ethical and moral belief systems in society.
– Absolutism vs. relativism

– Dogmatic vs. pragmatic

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 Approaches to Ethics
• Dogmatic vs. pragmatic
The idea of absolutism and relativism can be illustrated
with two similar concepts.
– A dogmatic approach takes the view that there is one truth
and this truth is to be imposed in all situations.
• The word is taken from the Greek dogma - or given truth.
• This viewpoint corresponds to absolutism.
– A pragmatic approach attempts to find the best route
through a specific moral situation without reference to any
absolutist belief.
• The approach is similar to relativism in attempting to find a solution
based on the given belief system of the individuals involved
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Approaches to Ethics

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 Deontological Approach

• Deontological approach
– This is a non-consequentialist theory
– The motivation or principle is important
– An action can only be deemed right or wrong
when the morals for taking that action are known

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 Teleological approach

• This is a consequentialist theory.

– Whether a decision is right or wrong depends on
the consequences or outcomes of that decision.
– As long as the outcome is right, then the action
itself is irrelevant.
• There are two perspectives from which the
outcome can be viewed:

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 Teleological approach

• Egoism
– Sometimes thought of as the view 'what is best for me?'.
An action is morally right if the decision maker freely
decides in order to pursue either their short-term desires
or longer-term interests.
– The egoist will also do what appears to be 'right' in society
because it makes them feel better.
– Egoism does not always work because actions on all
members of society cannot be determined.

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 Teleological approach

• Utilitarianism
– Sometimes taught as the idea of 'what is best for the
greatest number?'. An action is morally right if it results in
the greatest amount of good for the greatest number of
people affected by that action.
– It applies to society as a whole and not the individual.
– It is valuable in business decisions because it introduces
the concept of 'utility' - or the economic value of actions.
– It is highly subjective.

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 Kohlberg's cognitive moral development (CMD) theory

• Kohlberg developed a cognitive moral

development (CMD) theory to explain the
reasoning process behind moral judgments.
• This theory is viewing ethical decisions from
an individual's perspective.

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Kohlberg's cognitive moral development (CMD) theory

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Ethical Decision Making

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 The American Accounting Association (AAA) model

• The seven question in the model are:

•  (1) Establishing the facts of the case.
– This step means that when the decision-making process starts, there is no ambiguity
about what is under consideration.
• (2) Identify the ethical issues in the case.
– This involves examining the facts of the case and asking what ethical issues are at
stake.
• (3) An identification of the norms, principles, and values related to the case.
– This involves placing the decision in its social, ethical, and, in some cases, professional
behaviour context. In this last context, professional codes of ethics or the social
expectations of the profession are taken to be the norms, principles, and values.
– For example, if stock market rules are involved in the decision, then these will be a
relevant factor to consider in this step.

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 The American Accounting Association (AAA) model

• (4) Each alternative course of action is identified.

– This involves stating each one, without consideration of the norms, principles,
and values identified in Step 3, in order to ensure that each outcome is
considered, however appropriate or inappropriate that outcome might be.
• (5) Matching norms, principles, and values to options
– The norms, principles, and values identified in Step 3 are overlaid on to the
options identified in Step 4. When this is done, it should be possible to see
which options accord with the norms and which do not.
• (6) The consequences of the outcomes are considered.
– Again, the purpose of the model is to make the implications of each outcome
unambiguous so that the final decision is made in full knowledge and
recognition of each one.
• (7) The decision is taken.

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 Tucker's 5-question model

• Tucker provides a 5-question model against which

ethical decisions can be tested. It is therefore used
after the AAA model shown above to ensure that
the decision reached is 'correct'. Is the decision:
– Profitable?
– Legal?
– Fair?
– Right?
– Sustainable or environmentally sound?

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Stages of Ethical Decision Making

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 Professional and corporate ethics

• Members of professional bodies, such as qualified

accountants, often have codes of ethics to guide them when
ethical dilemmas arise. Several codes of ethics have been
developed which are broadly similar.
• 'Profession’

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 Professionalism

• Members are seen to be acting professionally, or

literally having professionalism.
– Professionalism may also be interpreted more as a state
of mind, while the profession provides the rules that
members of that profession must follow.
– Professional behavior imposes an obligation on members
to comply with relevant laws and regulations and avoid
any action that may bring discredit to the profession.
– Professional behavior will mean complying with the
ethical standards laid down by the professional body.

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Profession & Professionalism

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 The Public Interest

• The distinguishing mark of a profession is the

acceptance of a responsibility to the public.
• The public interest can be defined as that
which supports the good of society as a whole
(as opposed to what serves the interests of
individual members of society or of specific
sectional interest groups).

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 Corporate Ethics

• Corporate ethics relates to the application of

ethical values to business behavior.
• It encompasses many areas ranging from board
strategies to how companies negotiate with their
suppliers.
– It goes beyond legal requirements and is to some
extent therefore discretionary.
– Many companies provide details of their ethical
approach in a corporate and social responsibility (CSR)
report.
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 Corporate and Professional Codes
• The presence of a code may assist in resolving
an ethical dilemma.

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Effectiveness of Corporate and Professional Codes

• Participation from all groups as the code is

formed (to encourage 'buy in')
• Disciplinary actions for breach of the code
• Publicity of breaches and actions taken, as this is
effective in promoting others to follow the code
• Communication and support from top-down to
ensure that the code is embedded into company
culture.

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Professional Codes of Ethics

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 Professional Codes of Ethics

•  The following are usually included:

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The ICASL: CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS CONTENTS

• The Code of Ethics for Professional Accountants of

the IFAC Ethics Committee, published by the
International Federation of Accountants (IFAC) in
June 2005 and revision of Section 290 in July 2006
and is used with permission of IFAC.
• Thus, the current code is based on the International
Ethics Standards Board for Accountants (IESBA) , an
affiliated body of IFAC.

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The ICASL: CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS CONTENTS

• Part A establishes the fundamental principles of

professional ethics for professional accountants and
provides a conceptual framework for applying those
principles.
• Parts B and C illustrate how the conceptual
framework is to be applied in specific situations.
• Part B applies to professional accountants in public
practice Part C applies to professional accountants in
business

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The ICASL: CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS CONTENTS

• Fundamental Principles
• (a) Integrity
A professional accountant should be straightforward
and honest in all professional and business
relationships.
• (b) Objectivity
A professional accountant should not allow bias,
conflict of interest or undue influence of others to
override professional or business judgments.

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The ICASL: CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS CONTENTS

• Fundamental Principles
• (c) Professional Competence and Due Care
A professional accountant has a continuing duty to
maintain professional knowledge and skill at the level
required to ensure that a client or employer receives
competent professional service based on current
developments in practice, legislation and techniques. A
professional accountant should act diligently and in
accordance with applicable technical and professional
standards when providing professional services

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The ICASL: CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS CONTENTS

• Fundamental Principles
• (d) Confidentiality
A professional accountant should respect the
confidentiality of information acquired as a result of
professional and business relationships and should not
disclose any such information to third parties without
proper and specific authority unless there is a legal or
professional right or duty to disclose. Confidential
information acquired as a result of professional and
business relationships should not be used for the personal
advantage of the professional accountant or third parties.
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The ICASL: CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS CONTENTS

• Fundamental Principles
• (e) Professional Behavior
A professional accountant should comply with
relevant laws and regulations and should avoid any
action that discredits the profession.

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The ICASL: CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS CONTENTS

• Threats on Compliance
Compliance with the fundamental principles may potentially
be threatened by a broad range of circumstances. Many
threats fall into the following categories:
– (a) Self-interest;
– (b) Self-review;
– (c) Advocacy;
– (d) Familiarity; and
– (e) Intimidation.

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The ICASL: CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS CONTENTS

• Resolution of Ethical Conflicts

A professional accountant may be required to resolve a
conflict in the application of fundamental principles.
• Process:
– (a) Relevant facts;
– (b) Ethical issues involved;
– (c) Fundamental principles related to the matter in question;
– (d) Established internal procedures; and
– (e) Alternative courses of action.
– Action

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