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Chapter 16

Professionalism, Ethics, and

Career Planning

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Outline

• Learning objectives

• Professionalism

• Ethics

• Cases

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Learning objectives

1. List and discuss characteristics of a

professional.

2. Explain how those characteristics apply

to the accounting profession.

3. Define ethics.

4. Discuss various models/schools of ethical

decision making.

5. Explain how to resolve ethical dilemmas.

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Professionalism

• Definition (www.dictionary.com)

A vocation requiring knowledge of some

department of learning or science

• Characteristics of a professional

– Bell

– McDonald

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Professionalism

• Characteristics of a professional (Bell)– Communicates

effectively.

– Thinks rationally, logically, and coherently.

– Appropriately uses technical knowledge.

– Integrates knowledge from many disciplines.

– Exhibits ethical professional behavior.

– Recognizes the influence of political, social, economic, legal, and regulatory forces.

– Actively seeks additional knowledge.

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Professionalism

• Characteristics of a professional

(McDonald)

– Specialized knowledge base

– Complex skills

– Autonomy of practice

– Adherence to a code of ethical behavior

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Ethics• Definition of ethics

• Ethics issues in

accounting

• Schools of ethical

thought

• Ethical decision-making

model

Ethics have always been

important in the

accounting profession.

But, the profession

placed renewed

emphasis on them after

the corporate scandals

of the late 20th century.

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Ethics

• Definitions (Boss, 2014)

– Ethics is a set of standards that

• Differentiates right from wrong

• Is established by a particular group

• Is imposed on members of the group to regulate

behavior

– Ethics is a discipline that

• Studies values and guidelines for living

• Considers the justification for those values

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EthicsTable 16.1

Ethics issues in accounting

Area Ethical questions

Revenue recognition

Is it ethical to boost revenue at the end of the

year by shipping unordered goods to

customers, telling them that they can send

them back after the new fiscal year starts?

Earnings smoothing

Is it ethical to use accounting policies (such

as depreciation methods) to ensure that

earnings do not fluctuate much from one

year to the next?

Asset valuation

Is it ethical to raise / lower an estimated

discount rate to change the price of an

acquired asset?

Fair value accounting

How much discretion should managers have

in determining an asset’s fair value for

accounting purposes?

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Ethics

• Schools of ethical thought

– Almost no-one wakes up in the morning

thinking “I’ll behave unethically today.”

– But, people do have differing views on what

constitutes ethical behavior.

– One way to differentiate those views is

through schools of ethical thought.

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Ethics

Table 16.2

Schools of ethical thought

School Principles

Ethical egoismPeople have an ethical obligation to

behave in their own self-interest.

Utilitarianism

Ethical actions are those that result

in the greatest good for the greatest

number.

Deontology

Individuals have rights; ethical norms

are “universal truths” that consider

those rights.

Virtues

Ethical behavior is a natural product

of being fundamentally ethical and

virtuous.

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Ethics1. Identify the facts.

2. Identify the ethics issues and the stakeholders involved.

3. Define the norms, principles, and values related to the situation.

4. Identify the alternative courses of action.

5. Evaluate the consequences of each possible course of action.

Langenderfer &

Rockness (1989)

proposed a

practical, well-

respected model for

making ethical

decisions in

accounting.

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Ethics 6. Decide the best course of action consistent with the norms, principles, and values.

7. If appropriate, discuss the alternative with a trusted person to help gain greater perspective regarding the alternatives.

8. Reach a decision as to the appropriate course of action.

Langenderfer &

Rockness (1989)

proposed a

practical, well-

respected model for

making ethical

decisions in

accounting.

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Cases • Charles Ponzi

• Adelphia

Communications

Corporation

• Enron / Arthur Andersen

• Bernie Madoff

• Olympus Camera

Here are a few

cases that involved

ethics issues in

accounting contexts.

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Cases

• Charles Ponzi

– Early 20th century

– International postal reply coupons

– Used new investors’ money to pay off old

investors

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Cases

• Adelphia Communications Corporation

– Family-based business owned by the Rigas

brothers

– Deceptive accounting practices

– Personal loans from the company

– Comingled personal and business assets

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Cases

• Enron / Arthur Andersen

– Multiple accounting & auditing related issues

• Mark-to-market accounting

• Auditor independence

• Use of special purpose entities

• Off balance sheet debt

– Primary impetus for the Sarbanes-Oxley Act of 2002 (SOX)

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Cases

• Bernie Madoff

– Investment advisor with BMIS (Bernie Madoff

Investment Securities)

– Perpetrated multi-billion dollar Ponzi scheme

– Turned in by his sons

– Example of affinity fraud

– Pled guilty to 11 felonies in March 2009

– Projected release date in 2139

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Cases

• Olympus Camera

– Japan-based manufacturer of cameras and

other optical devices

– Michael Woodford, from Great Britain,

appointed president in April 2011

– M & A activity called into question in the press

in July 2011

– Dismissed as president in October 2011

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