Topic 6 - Role of Ethics: Accounting Policy Choice Flashcards
Why ethics matters? 4
- Ethics promotes excellence in practice.
- Maintain reputation of, and confidence in, the accounting profession
- IFAC demands higher levels of competence in ethics of accountants
- Ethics have the force of law for auditors in Australia.
What is ethics? and What is ethics according to Aristotle?
Ethics is concerned with what is good and right for human beings
Aristotle – ethics is about POWER and how power is exercised and shared in a community
Is ethics:
a) All relative to own morals; simply a matter of “all views are valid”
b) A community enterprise based on universal principles and rational debate
b) A community enterprise based on universal principles and rational debate
Is ethics:
a) About participation in a moral community & ownership of the community’s rules
b) Moralising or same as religious rules
a) About participation in a moral community & ownership of the community’s rules
Does ethics problem solve?
yes
Is ethics fixed or an educational process? explain
An educational process in which we develop insight into what constitutes responsible moral action
What are two approaches of looking at ethics?
- Right/Wrong Distinction
- Good/Bad Distinction
What are two approaches of looking at ethics?
- Right/Wrong Distinction
- Good/Bad Distinction
What does Right/Wrong Distinction look at/ mean? 4
- Relates to specified rules or laws
- something is either right or wrong – no other category possible
- Rules are objective, they are derived from an external source and so appear to offer a sense of ‘moral certainty’
- an authority justifies and defines ‘right’ or ‘wrong’
What does Good/Bad Distinction look at/ mean? 4
- relate to our value judgements about what promotes our well being
- are the ends of a continuum along which judgements might lie (allows for “shades of grey”)
- judgements appear subjective because they are derived from our own experience
- justification for ‘good’ or ‘bad’ judgements comes from experience, evidence, and facts
What are the main difference between - Right/Wrong Distinction and Good/Bad Distinction? 2
- R/W based on rules, G/B based on values
- R/W externally imposed, G/B internally through own experience
what are the 3 Fundamental ethical principles?
- The Principle of Beneficence – the duty to do good and avoid harm (the duty of the strong to protect the weak)
- The Principle of Justice – the duty of universal fairness or equity (treat like cases alike)
- The Principle of Respect for Persons – the duty to respect the rights and dignity of other people (the duty of honesty)
Explain how the 3 Fundamental ethical principles relate to power?
– Beneficence – the strong protect the weak
– Justice – the sharing of power
– Respect – empowering others
an Accountant acting as liquidator for failed company, what ethical behaviour would be required to make sure power of relationship isn’t abused?
Don’t have a fire sale, allow company to sell it’s assets for a higher value, i.e. 10yr liquidation period for unregistered land
accountant must also consider what benefits the creditors
an Accountant providing advice to new business, what ethical behaviour would be required to make sure power of relationship isn’t abused?
if bad investment decisions should exercise beneficence, to protect them from bad investment decisions, however should also consider respect, by informing them of the level of risk and allowing them to make their own decisions
