Chapter 16
Professionalism, Ethics, and
Career Planning
Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Outline
• Learning objectives
• Professionalism
• Ethics
• Cases
16-2
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 have always been
important in the
accounting profession.
• Ethics issues in
accounting
But, the profession
placed renewed
emphasis on them after
the corporate scandals
of the late 20th century.
• Schools of ethical
thought
• Ethical decision-making
model
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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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Ethics
Table 16.1
Ethics issues in accounting
Area
Ethical questions
Is it ethical to boost revenue at the end of the
year by shipping unordered goods to
Revenue recognition
customers, telling them that they can send
them back after the new fiscal year starts?
Is it ethical to use accounting policies (such
as depreciation methods) to ensure that
Earnings smoothing
earnings do not fluctuate much from one
year to the next?
Is it ethical to raise / lower an estimated
Asset valuation
discount rate to change the price of an
acquired asset?
How much discretion should managers have
Fair value accounting 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
Ethical egoism
Utilitarianism
Deontology
Virtues
Principles
People have an ethical obligation to
behave in their own self-interest.
Ethical actions are those that result
in the greatest good for the greatest
number.
Individuals have rights; ethical norms
are “universal truths” that consider
those rights.
Ethical behavior is a natural product
of being fundamentally ethical and
virtuous.
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Ethics
Langenderfer &
Rockness (1989)
proposed a
practical, wellrespected model for
making ethical
decisions in
accounting.
1. 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.
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Ethics
Langenderfer &
Rockness (1989)
proposed a
practical, wellrespected model for
making ethical
decisions in
accounting.
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.
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Cases
Here are a few
cases that involved
ethics issues in
accounting contexts.
• Charles Ponzi
• Adelphia
Communications
Corporation
• Enron / Arthur Andersen
• Bernie Madoff
• Olympus Camera
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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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