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Professional Ethics and Governance

Executive Summary

The report illustrates Caldwell, Burns and Burns Public Accountants is a company that assists its clients on tax matters. There are three main characters in this, Fiona Willis, an accountant working in the company, Hugo Marshall, a huge client of the company and Alex Caldwell, the CEO of the company. Because of lack of experience, Fiona messed up Hugo’s accounts due to which he had to suffer penalties from ATO. He now has an upper hand in this whole case because he knows a weak-point of Fiona and is determined to get her fired. On the other hand, Alex had always allowed Hugo to dominate the working of his firm for which Hugo had always taken undue advantage off. Being a consultant of this firm, my job is to help Alex get out of this mess through theories of professional ethics and governance, viz., deontology theory, egoism theory and utilitarianism. Also, with the help of AAA model and APES 110, we concluded that Alex can be saved from this situation.

Table of Contents

Introduction.

Part A: Applying theories of ethics.

Part B: Using an ethical decision-making model

Part C: Using APES110.

Conclusion.

References.

Introduction

Researcher Valdemar W. Setzer describes that“Ethics is not definable, is not implementable, because it is not conscious; it involves not only our thinking but also our feeling.” (Good reads, 2018). A world that runs on realism, there is a certain part of it that is guided by ethics. Before this world saw the evolution of laws, the fore-wheelers were customs, norms and ethics. The sayings that were embedded in the holy scripts, they were taken to be the main source of people’s acts. As per the changing times, the codification of laws in various countries have eased out the working of the professionals but still, there is a part of it that has to have a more subtle touch.

That is why professional ethics has evolved, because in the end no matter how much we have inclined towards digitalization, there is always going to be a need for interpersonal relations. Hence, the report discusses how the principles of ethics like integrity, objectivity, professional due care etc could make that same profession ethical and what possible threats and measures could be taken to be saved from that. Section 100-199 of the APES Code 110 is applied which talks about the principles, the threats and the relevant safeguard measures that members take to get rid of legal proceedings.

Part A: Applying Theories of Ethics

The only way out that is possible to help the firm is with the application of the theories. The theory of egoism has a lot of fronts. This report shall discuss the most two important of all- psychological egoism and ethical egoism. Psychological egoism is a trait when an individual’s welfare is the most crucial of all the interests, he knows. Such an individual has the weak will power and he cannot keep his interest above others. He indulges into helping others, but as long as his interest does not gets impede. One of the major objections to psychological egoism, as proposed by Joseph Butler, a British philosopher said, to get welfare, one must desire things other than my welfare. For instance, one desire welfare from playing hockey.

So, unless he does not desire welfare from playing hockey, he will not get welfare from playing. So, a psychologist egoist might say that how can playing hockey could be a desire for welfare for one, so it depends on ultimately what gives welfare to one individual. It could happen that helping others might give welfare to me, the welfare of self-regarding desire for power. (Stanford Encyclopedia of Philosophy, 2019). Ethical egoism, on the other hand, is when one individual does one act morally to satisfy his interest. Though a moralistic view is seen in an ethical egoist, still it differs from standard moral theories. An ethical egoist shall consider only those tasks that could give him the highest payoffs compared to others whose agenda is to only provide help to others.

An ethical egoist can never make large sacrifices because he never gives much importance to anything while the other rank it as either important or least important. (Raj & Roy, 2016). Judging by the given characteristics of this theory, Fiona Willis actions were more of that of a psychological egoist. When she got a job in the company, she kept crucial information hidden from its partner of having a conflict of interest. She kept her interest in gaining a considerable position in the firm by taking responsibility for a huge client of the firm but she failed to get that with that responsibility, there came accountability too. She could keep her interests above the firm’s interest and now she thought that Alex would back her against Hugo, he knows about her conflict of interest. 

The theory of Deontology encompasses what is right and wrong. Unlike consequentialism, it does not consider the after-effects of the right and wrong actions. Propounded by Immanuel Kant, this theory is the easiest of all professional theories. This is because, that which is ethical and non-ethical universally, is accepted. For instance, actions such as obeying your elders, not cheating, not stealing and more: it does not matter how good the consequences are, what is morally forbidden, is forbidden (Gaffikin, 2015). However, there is one problem with this type. Consider that a software engineer sees that a system has enabled the launch of a nuclear weapon. To disable that, he has to hack the system.

If he does so then he would be acting against his professional code of ethics. Now he has to see whether his ethics is more important or the lives of tens of thousands of people. So as per, hacking the system is wrong. It gives disregard to the consequence of the actions of any person. Determining the acts of Fiona Willis, as per this theory she did an unethical task. She should not have lied to her boss about having a conflict of interest. However, looking at the other side of this, Hugo Marshall wanted her to lie to ATO about the vehicle log books since her former colleagues did that too. As a result of this, she did not hide this fact and as a result, infuriated him. Judging by this report, she did not do anything unethical from the deontological point of view.

The theory of utilitarianism says that a right and wrong action is determined from its consequences. It's like consequentialism theory that judges the actions of an individual based on its outcomes. It says that an ethical choice shall always result in giving greater pleasure to a greater number of people (Stanford Encyclopedia of Philosophy, 2014). However, there is one limitation to this theory. One cannot know what actions of his would bring good or bad consequences. A momentary pleasure might get long-lasting pain to an individual. For instance, if there are four patients in a hospital of ready for transplantation and a healthy being have to choose among them whom to give his organs too.

As per this theory, the healthy man should help all four patients as providing the greatest pleasure to a greater number of people is its agenda. However, some might find this individually unethical that for one life, four lives get saved. So even though this theory is the most reason-based approach, it has some boundaries where one cannot surpass. Looking at Alex Caldwell actions, based on this theory, he could never have known the results of giving autonomy to Hugo Marshall of its company. However, what he could have done that understand that a firm is not run by its clients but by its employees.

Now and then, accountants were fired or they resigned when they handled Hugo’s account and he gave that ability to him to do so. Not only this, he demanded of him to falsify the data for his benefit solely and not for the company. Caldwell never considered this fact that what if his illegal work come under the radar of the legal administration, and then Hugo shall not back him but save his interests. Based on this theory, Caldwell failed to provide a greater good to a greater number of people (i.e., his employees). 

Part B: Using an Ethical Decision-Making Model

The AAA decision-making model talks about the steps that help an individual in making an ethical decision. (Goza, 2013).

Step 1- Facts of the case

Caldwell, Burns and Burns Public Accountants is a company that assists its clients on tax matters. There are three main characters in this, Fiona Willis, an accountant working in the company, Hugo Marshall, a huge client of the company and Alex Caldwell, the CEO of the company. Because of lack of experience, Fiona messed up Hugo’s accounts due to which he had to suffer penalties from ATO. He now has an upper hand in this whole case because he knows a weak-point of Fiona and is determined to get her fired. On the other hand, Alex had always allowed Hugo to dominate the working of his firm for which Hugo had always taken undue advantage off.

Step 2- What are the ethical issues in this case

So, the major issue is whether Fiona acts were more about her self-interests and that whether Alex acts were in the best interest of the firm or his client only.

Step 3: What are the norms, principles, and values related to the case?

A professional accountant has to the fundamental norms or ethics during her work, the CEO of the firm has the responsibility of the employees too and not just his clients and should know to what extent should he maintain relationships with his clients. 

Step 4: What are the alternative courses of action?

First, Fiona should tell Alex about her conflict of interest before Hugo does. Second Alex should understand that Hugo has been trying to bait him so he should stand by Fiona throughout the process. Thirdly, as much as Alex would hate it to do, he should let go Hugo after the current case is over, for future benefit. 

Step 5: What is the best course of action that is consistent with the norms, principles, and values identified in Step 3?

Fiona should tell Alex about her conflict of interest because that is the only threat she has from Hugo.

Step 6: What are the consequences of each possible course of action?

First, Fiona could get fired by Alex or maybe Alex understands the situation, since there is a common enemy, Hugo, and does not let Fiona go. He could focus on her training as she is a fresher and give her small accounts, for the meantime. Second, Hugo can sue Alex’s firm for repudiation of the contract between them, but looking at the longer run, it is a much better thing.

Step 7: What is the decision?

The ethical move in this scenario could be that Alex believes in his employees and do not fire them. He should devise some ways to get rid of Hugo as he is into the illegal business.

Part C: Using APES110

APES 110 code provides an overview to the people about the fundamental principles to its members, the possible threats and safeguards to protect themselves from such threats (APESB, 2018). This code consists of parts that guide the reader that which part applies to him. Part I comprises of section 100-199 for all its members. Part II consists of section 200-299 applicable to members in the business. Part III, section 300-399 for members in public practice and lastly there are independence standards in Part IVA and Part IVB. 

Section 110 gives a set of fundamental principles (APESB, 2018)-

  • Integrity- to be honest, and straight forward to all business and professional relationships.

  • Objectivity- not to compromise with ethics because of bias, conflict of interest, or undue influence of others.

  • Professional competence and due care- maintain professional competence or skills required to ensure that the client receives competent professional activity, to act diligently with the technical standards

  • Confidentiality- anything acquired as a result of professional and business relationships.

  • Professional Behavior-follow the rules and regulations and should not do anything illegal.

Subsections 111-115, gives a detailed analysis of what does each of these principles mean and that what should members do to achieve those principles (APESB, 2018).

 As per R111.2, integrity means that members should not indulge into reports, returns and more, knowing them to be false or misleading, reckless information, hide or omit any information that might be unethical to do (APESB, 2018).

As per R112.2, objectivity means that a member should not indulge in such professional activity that influences his professional judgement regarding any activity (APESB, 2018).

As per R113.2, professional competence and due care mean that those working under professional capacity under a member, it's his responsibility to see that he as adequate training and supervision to do that task (APESB, 2018).

So, going through these fundamental principles, it is evident that Alex did not comply with any of these principles. He did not do his work with integrity as he kept on falsifying data for Hugo knowing the fact that whatever work is he assigning his firm is shady. He let him take undue advantage of his behaviour by letting Hugo make the calls for his company. Knowing that Fiona was a fresher he handed her such huge accounts, also knowing the uncouth behaviour of Hugo. So, he never did a thing that conformed to the ethical principles of a profession. He worked recklessly and that has clouded him from all the fronts.

R120.6 A3 consists of the kind of threats that could come along with these fundamental principles (APESB, 2018). They are-

  • Self-interest threat- like any financial or other could cloud the member’s judgement

  • Self-review threat- like a member shall not understand the results of any judgement made like activity performed by the member, or by any other individual working in the firm etc.

  • Advocacy threat- meaning something that might happen that might affect the objectivity of the member

  • Familiarity threat-like having a long relationship with a client that a member gets too sensitive towards him and his work.

  • Intimidation threat- like having undue influence over the member that he forgets to behave objectively. 

As per R120.7 A1, all these threats have to be seen by the member, but before that, he has to check whether these threats are at an acceptable level. This means that the member should be reasonable and take a third-party opinion before questioning his ethics (APESB, 2018). Therefore, what affected Alex the most was the familiarity and intimidation threat. He kind of pressured himself under the hands of Hugo thinking about the business he gave to his firm and that is why he was doing whatever he said. As a result, he did not get that he was turning his employees against him by firing them. It wasn’t the result Hugo cared about; it was the ownership of Alex’s firm.

R120.10 deals with the mechanism of how to deal with the threats (APESB, 2018). If the member finds that the threats are not at the acceptable level, then he should-

  • Eliminate the situations, the relationships or interest that are creating the threat

  • Applying safeguards to change them into an acceptable form

  • Ending that professional activity.

So, the only way out Alex has to get out of this situation is to end his relationship with Hugo and focus of maintaining a more habitable relationship with his employees. 

Conclusion

Fiona and Alex did not act professionally as they should have and therefore, they got trapped by the opportunist, Hugo Marshall. Fiona, being too self-interested in her welfare that she forgot that her first liability is towards her company. Her self-interest should be the last thing to give attention too. Alex too should have realized this that the main assets of his company are his employees and not his clients. Striking a balance between the two is of uttermost importance for any CEO. Actions that are done ethically would never entrap anyone but would give them a sense of pride and justness. Had Fiona not lied about her marriage, had Alex not given Hugo the steering of his company, things would have taken a different shape. Nevertheless, with the help of APES code 110, they can rectify their problem more amicably without much of more damage done. 

References

APESB. (2018). APES 110 code of ethics for professional accountants (including independence standard).

Gaffikin, M. (2015). Accounting theory and practice: The ethical dimension. International Journal of Business and Social Research, 7(04), 1-22.

Good reads. (2018). Work ethic quotes. Retrieved from https://www.goodreads.com/quotes/tag/work-ethic

Goza, R. (2013). The ethics of record destruction. Journal of Management Policy and Practice, 14(6), 107-115.

Raj, S. K. & Roy, S. (2016). Accounting theory: An ethical perspective of real life scenarios. International Journal of Business and Social Research, 6(10), 47-55.

Stanford Encyclopedia of Philosophy. (2014). The history of utilitarianism. Retrieved from https://plato.stanford.edu/entries/utilitarianism-history/

Stanford Encyclopedia of Philosophy. (2019). Egoism. Retrieved from https://plato.stanford.edu/entries/egoism/

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Business Ethics Assignment Help

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