PROFESSIONAL

ETHICS
Chapter One:
Professional Ethics Overview

Dr Duc Hong Thi Phan

ducpth@uel.edu.vn
Faculty of Accounting & Auditing,
University of Economics and Law, Vietnam National University of HCMC

What does ethics mean to you?

Responses from previous years students:

Ethics has to do with what my feelings tell
me is right or wrong
Ethics has to do with my beliefs
Being ethical is doing what the law requires
Ethics consists of the standards of behaviour
our society accepts.

What are ethics

Ethics are a set of moral principles that

guide behaviour
Individuals have ethical values and beliefs
about what constitutes right and wrong
behaviour.
Ethical values often reflects those of the
individuals family, culture, and educational
environment they are brought up in.

Question
Does the person is behaving ethically?

Airline pilot case

An airline pilot who decides to risk an
emergency landing in severe bad weather for
a passenger who is gravely ill and will die if
not treated very soon.

Question
Does the person is behaving ethically?

Lottery winner
A lottery winner who decides to keep all the
winnings for themselves and not to share it
with their family

Accounting as a profession

What is profession?
High level of competence and skills in a given area
Specialised training and maintained by continuing
professional development
Focus on intellectual or administrative skills rather
than mechanical or physical actions

Accounting as a profession (2)

What is professional?
A person who has significant level of training
Shows a high level of competence and skills
Behaves in an ethical and appropriate manner

Interaction between Accountancy

and Society

Source: Kaplan (2012)

Perception of profession

There are positive and negative perceptions

of the profession
The market control view
The traditional or functional view

Profession Market control view

Greed replaces the service ideal

Self-serving monopoly and unwarranted
wealth is the outcome

Service ideal - attributes

Three perspectives of the service ideal

The well-being of society
The pursuit of excellence
Community service

Professionalisation
Market control view
Professions seek and achieve monopoly
power in their field of activity.
Monopolies create power and wealth for the
few and exclude others
Traditional view of service ideal does not
exist as proven by repeated misconduct

Public interest vs. self-interest

Some accountants have demonstrated

excessive self-interest at the expense of
others
However
For many others, the service ideal is strong
and effectively shows that professions are
genuinely valuable for society

Public interest or self interest?

Need to consider the motivations and

intentions of the accounting profession.
Enlightened self-interest: where a person
acts for others or in the public interest but
has an underlying motive to benefit
themselves.

Four Es of accounting profession

Education
Ethics
Expertise
Entrepreneurship

1.2. Interaction with society

Roles and relationships of accountants
Employees within corporate entities
Employees or principals within accounting firms
Employees of regulatory bodies (government
agencies)
Accounting within small and medium enterprises

Accounting environment
All accountants are bound by ethical rules
and must understand the range of pressures
that can arise from the many complex
relationships that could eventuate.

Accounting work environments

Public practice
Accounting firms
Small practices and sole practitioners (CPA)

Private sector
Large business
SME

Public sector
State government
Local government

Exercise 1: Professional judgment

Discuss the professional accounting

capabilities that are likely to be required in
order that appropriate professional
judgment

1.3. Legal frameworks, regulations and

standards
for business Vietnam and international
Vietnam: Decision 87/2005/QD-BTC Chun mc o c
ngh nghip kim ton vin
International
Accounting Professional and Ethical Standards Board (APESB)
The International Federation of Accountants (IFAC)

IFAC

The International Federation of Accountants

(IFAC) is an international body representing
all the major accountancy bodies across the
world.
Its mission is to develop the high
standards of professional accountants and
enhance the quality of services they
provide.

Accountant and ethics

As an accountant, your values and attitudes

flow through everything you do
professionally.
They contribute to the trust the wider
community puts in the profession and the
perception it has on it.

Businesses and ethics

Ethics in business
The application of ethical values to
business behaviour

3 elements of businesses ethics

Element Explanation
I

Ethics concern an individuals professional responsibility to act.

DO

Ethics concern the real world practical actions an individual can take.
It is important to consider how an individual acts and not always what
they do.

BEST

Ethics concern choices between different courses of action. These may

involve taking a course of action which is less unpalatable than
another.

Key reasons for accountants to

behave ethically
Ethical issues may be a matter of law and
regulation and accountants are expected to
apply them.
An accountants ethical behaviour serves to
protect the public interest

Approaches to accountancy ethics

The Professional Oversight Board for

Accountancy (POB)
Registration and monitoring
Training and education
Continuous professional development (CPD)
Conduct and discipline

Approaches to accountancy ethics

(cont)
Issuing audit standards
Issuing advice on the application of audit
standards and assistance with dealing
emerging issues
Developing publics understanding of the
roles and responsibilities of auditorsm

7 Principles of public life

1.
2.
3.
4.
5.
6.
7.

Selflessness
Integrity
Objectivity
Accountability
Openness
Honesty
Leadership

7 Principles of public life

1. Selflessness
Individual should act solely in the public
interest and not for personal gain or that of
friends and family.

7 Principles of public life

2. Integrity
Individuals should avoid actions which would
place them under financial or other
obligations whereby the person holding their
obligation could influence their public duties.

7 Principles of public life

3. Objectivity
All choices, especially those regarding
awarding contracts, rewarding or providing
benefits to others and making public
appointments must be made purely on merit.

7 Principles of public life

4. Accountability
Individuals are responsible for their own
actions and are accountable to others. They
must subject themselves to whatever scruitiny
comes with their office.

7 Principles of public life

5. Openness
Individuals must be open about their
decisions and actions. Information regarding
the reasons for their decisions must be freely
available. Restrictions on information are
only permitted when it is in the wider public
interest.

7 Principles of public life

6. Honesty
Where individuals have private interests
which relate to their public ones, they should
declare them and seek to resolve any conflict
to protect the public interest.

7 Principles of public life

7. Leadership
Individuals must promote and respect the
other six principles through leadership and
example.

Seven principles of public life

Which of the following are included in the

seven principles of public life?
a.Selflessness
b.Boldness
c.Honesty
d.Obedience
e.Leadership

Seven principles of public life

filling the missing words
The principle of _________ means that
individuals should act solely in the public
interest and not for personal gain.
To meet the principle of ________ individuals
should declare private interests that relate to
their public ones.

Seven principles of public life

filling the missing words (2)
By ensuring information regarding the
reasons for their decisions are freely
available means that individuals meet the
principle of ____________.
____________ involves the promotion and
respect of the six other principles.

Accountability

How can accountants demonstrates

accountability?
A.By questioning work given to them
B.By taking responsibility for a mistake
C.By ensuring their work is free from error
D.By replying to an email on behalf of an
unavailable colleagues

Objectivity
Which statement describes the principle of
objectivity?
A.By following this principle, an accountant minimises the risk of
passing on incorrect information.
B.Following this principle requires an accountant to keep their
mind free from bias.
C.Following this principle requires an accountant to stay
technically up to date.
D.Following this principle requires scepticism and close attention
to detail when reviewing information.

Confidentiality

Under which circumstance might an

accountant have to disclose confidential
information give to them?
A.When requested by a regulator
B.When requested by a lawyer
C.When requested by a fellow employee or client
D.When requested by an employer

Scepticism

Which three of the following allow accountants to

demonstrate the professional quality of scepticism?
i.By keeping their mind free from distractions
ii.By seeking supporting evidence before accepting
information is accurate
iii.By investigating why information was given to them
iv.By reviewing the work of a junior before accepting it as
correct
v.By being straightforward and honest at all times

Integrity

Which three of the following explain why the

principle of integrity is important?
1.To prevent passing on misinformation
2.To prevent bias affecting an accountants work
3.To enhance the credibility of an accountants work
4.To protect the security of information

Responsibility
Which of the following statements best describes
corporate responsibility?
A.The company must appear ethically in all its marketing materials
B.The company must put the needs of the community, its
shareholders and employees at the heart of all its decisions
C.The company develops policies on issues such as how to support
the local community and charities to ensure it plays a positive role
in its local area
D.The company must develop relationships with its stakeholders
so it can learn from them and meet their needs in a more efficient
and environmentally friendly way.

Code of conduct

Professional bodies have duty to protect the

public interest.
To ensure members acts in the ethical
manner, most professional bodies have
developed codes of conduct to guide
behaviour.

Code of ethics

Set of standards governing by the conduct

of members of a certain profession, by
specifying expected standards for
competence, professional behaviour and
integrity (CIMA Official terminology)

Codes of ethics

Two theoretical approaches:

Compliance-based (or Rules-based)
Ethics-based (or Framework-based)

Compliance-based approach

Advantages

Disadvantages

Rules are specific to each

circumstances

Long and lengthy rulebooks

Encourages consistent
application of rules

Members cannot learn every

rule

Rule breaches are clearly

identifiable

Can be seen to reduce

members to robots, just
following a set of rules

Ethic-based approach

Advantages

Disadvantages

Encourage proactive
members, issues have to
addressed rather than
passively following the law

Interpretation of rules can

lead to lengthy, complex and
disciplinary hearings

Treats members as
professionals and enables
them to make their own
decisions

Potential for inconsistent

application of rules

Ethic-based approach (2)

Advantages

Disadvantages

Best-suited to deal with

Ambiguous rules may
complex situations and
confuse members
evolving environments where
it is difficult to think up rules
for every possible case
Makes it harder for members
to search for ways round the
rules

General guidelines may

become detailed rules over
time

Differences in approaches

Characteristics

Compliance-based Ethics-based

Enforceability
Choices

Mandatory
Obedience/
disobedience

Discretionary
Judgement

Standards
Motivation

Explicit
Fear-driven

Implicit
Values-driven

Approach
Objective
Measure

Law-based
Detection
Rules

Principles-based
Prevention
Principles (values)

Codes of conduct for organisations

Three elements to creating an effective ethical

program:
1.Active leadership
2.Buy-in
3.Training

Codes of conduct for organisations

1. Active leadership
Senior board member should be appointed as
Ethical Champion whose initial role is to
persuade all other senior executives to lead
by example.

Codes of conduct for organisations

2. Buy-in
All staff should understand ethical codes,
reflect the ethical principles of the codes in
their everyday activities .

Codes of conduct for organisations

3. Training
Training should be provided to ensure all
understand what is expected of them.
Helplines provides employees with advice
for dealing with ethical problems.

Why develop an ethical code?

Communication
Consistency of conduct
Risk reduction
Compliance with Corporate Governance
rules

Codes of ethics for accountants

IFACs ethics committee established codes of

ethics globally.
Part A General Application of the Code
Part B Professional Accountants in Public Practice
Part C Professional Accountants in Business

Ethical guidelines

Fundamental principles
Bedrocks of professional judgements,
decisions, reasoning, and practice
Know & apply daily
Framework or ethic-based approach
Serious consequences for failing to follow
ethical guidelines
Apply to all students and members

Fundamental ethic principles

1.
2.
3.
4.
5.

Integrity
Objectivity
Professional competence and due care
Confidentiality
Professional behaviour

Example of unethically action

1. Integrity
Handing over work to colleague that you
know contain errors

Example of unethically action

2. Objectivity
Allowing personal feelings about something
to cloud your judgement

Example of unethically action

3. Professional competence and due care

Taking on works that you are not qualified to
do

Example of unethically action

4. Confidentiality
Leaving sensitive or confidential information
where anyone can look at it

Example of unethically action

5. Professional behaviour
Cheating in professional exams

5 qualities of an accountant

1.
2.
3.
4.
5.

Reliability
Responsibility
Timeliness
Courtesy
Respect

Example of 5 qualities of an
accountant
1. Reliability
Accountants consistenty deliver on time what
is asked for

Example of 5 qualities of an
accountant
2. Responsibility
Accountants take ownership on their work
and be accountable for their actions and
decisions.

Example of 5 qualities of an
accountant
3. Timeliness
Accountants produce works within a specified
timeframe.
Accountants should be on time for work and
appointment.

Example of 5 qualities of an
accountant
4. Courtesy
Accountants conduct themselves with
courtesy, consideration, and general good
manners towards their clients, colleagues and
others.

Example of 5 qualities of an
accountant
5. Respect
Accountants develop constructive
relationships to their clients, colleagues and
others, and recognise their values and rights.

4 professional qualities expected of

an accountant
1.
2.
3.
4.

Independence
Professional scepticism
Accountability
Social responsibility

Example of situations reducing

independence
Accepting a valuable gift from an audit client that is
about to be reported on
Auditing a client which they were recently
employed by
Having a large amount of fee income (>15%)
reliant on one client
Knowing an audit client for a long period of time
socially
Having a domineering manager who is a friend of
an audit client

Question
Which of the professional qualities has the accountant in
the scenario below failed to display?

An accountant found substantial

misstatements during the audit of a major
client who provides their practice with 55% of
its total audit fee income. The relationship
between the practice and the client has been
strained recently and because of this the
accountant ignored the misstatements and
ensured the client stayed with the firm.

Personal development and

lifelong learning
Personal development
Development of personal qualities such as
communication skills, assertiveness, time
management and relationship building

Personal development and

lifelong learning (2)
Lifelong learning
Never stop learning and be open to new ideas,
decisions, skills or behaviours

Personal development and

lifelong learning (3)
What counts as development?
Study for professional or academic
qualifications
Reading professional publications
Research and project work
Attending the events organised by the
professional bodies

Chapter summary

Humans have developed a framework of rules to

regulate behaviour
Ethics are a set of moral principles that guide
behaviour
Individuals have ethical values and beliefs about
what constitutes right and wrong behaviour.
Ethical values often reflects those of the
individuals family, culture, and educational
environment they are brought up in.

Chapter summary (2)

Ethics are not the same thing as law or the

rules of religion
As an accountant, your values and attitudes
flow through everything you do
professionally. They contribute to the trust
the wider community puts in the profession
and the perception it has of it.

Chapter summary (3)

Professional bodies (such as ACCA, CIMA,

CPA Australia) have a duty to protect the
public interest by developing codes of
conduct to guide the members behaviour
Professional bodies ethical guidelines give
fundamental principles that members should
follow in their professional lives

Chapter summary (5)

The personal qualities that an accountant

should demonstrate are:

Reliability
Responsibility
Timeliness
Courtesy
Respect

Chapter summary (6)

The professional qualities an accountant

should demonstrate are:

Independence
Scepticism
Accountability
Social responsibility

Chapter summary (7)

Personal development is the development of

personal qualities such as communication,
assertiveness, time management, and
relationship building
Lifelong learning is the concept that an
individual never stops learning and should be
open to new ideas, decisions, skills or
behaviours

References

MoF, Decisions 87/2005/Q-BTC Professional

ethics standards for public auditors
CIMA C5 Fundamentals of ethics, corporate
governance and business law Chapter 17
ACCA P1 Chapter 12
CPA Australia Ethics and Governance Module 1
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