Professional ethics for accountants: Approaches to the ...

[Pages:32]IFAC Education Committee Meeting October 2005 ? Kuala Lumpur, Malaysia

Appendix 11:

Agenda Item 4.2

IEG 10 Issued November 1992 Revised and reissued September 2005

Professional ethics for accountants:

Approaches to the development and maintenance of professional values, ethics and attitudes in accounting education programs

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IFAC Education Committee Meeting October 2005 ? Kuala Lumpur, Malaysia

Agenda Item 4.2

PREFACE 3

SCOPE OF THE GUIDELINE............................................................................................ 3

ACKNOWLEDGEMENT ................................................................................................. 4

THE ENVIRONMENT 5

GOALS OF ETHICS EDUCATION 6

THE ETHICS EDUCATION FRAMEWORK AND THE LEARNING

CONTINUUM

7

APPLYING THE ETHICS EDUCATION FRAMEWORK 8

STAGE 1. A SEPARATE REQUIRED COURSE OR MODULE ON FOUNDATION ETHICS ...... 10

STAGE 2. INTEGRATING ETHICS EDUCATION ............................................................. 10

STAGE 3. A FINISHING COURSE IN PRE-QUALIFYING PROGRAMS................................ 10

COMBINING STAGES 1, 2 AND 3 IN PRE-QUALIFYING EDUCATION PROGRAMS ............ 11

STAGE 4. CONTINUOUS PROFESSIONAL ETHICAL TRAINING AT POST-QUALIFYING

LEVEL........................................................................................................................ 13

CONTENT OF ETHICS EDUCATION IN PRE-QUALIFYING AND POST-

QUALIFYING PROGRAMS 14

DELIVERING ETHICS EDUCATION 23

CHALLENGES IN ETHICS EDUCATION AND RECOMMENDATIONS 26

FIXED ETHICAL ATTITUDES ....................................................................................... 26

AVOIDING INDOCTRINATION..................................................................................... 26

ETHICISTS OR BUSINESS EDUCATORS?....................................................................... 26

DEALING WITH AMBIGUITY ....................................................................................... 27

ENHANCING RESOURCES ........................................................................................... 28

ACADEMIC LEGITIMACY TO ETHICS RESEARCH ......................................................... 28

CURRICULUM SPACE ................................................................................................. 28

FORMAL ASSESSMENT............................................................................................... 29

Appendix 1: The IFAC Ethics Education Framework.........................................30

Appendix 2: Commonly used Ethical Decision-Making models ........................31

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IFAC Education Committee Meeting October 2005 ? Kuala Lumpur, Malaysia

PREFACE

Agenda Item 4.2

1. This Guideline sets forth the detailed recommendations of IFAC, for the establishment and operation by member bodies with respect to the development and maintenance of professional values and ethics in accounting education for pre-qualification and post-qualification programs.

2. This Guideline is a revision of International Education Guideline 10 (IEG 10), issued in November 1992.

3. The revised version of IEG 10 provides guidance to member bodies on how to put in place a program of developing and maintaining professional values, ethics, and attitudes in pre-qualifying and post-qualifying programs.

4. The Education Committee of IFAC commissioned a major research project entitled, `Approaches to the development and maintenance of professional values, ethics, and attitudes in accounting education programs'. The project sought consultation from a wide range of personnel drawn from member bodies, accounting firms, corporations and academics, to arrive at a well researched flexible framework of ethics education consistent with IES 4 Professional Values, Ethics and Attitudes. The flexible framework forms the basis of this IEG.

5. The Education Committee recognizes that member bodies are at different stages in the development of their education programs. Some member bodies may already have addressed a number or all of the issues considered in this Guideline. Other member bodies may have yet to consider such issues. All member bodies should review their existing arrangements and consider, where necessary, how to move towards the implementation of IES 4.

6. The Committee is conscious of the wide diversity of culture, language, and educational, legal, and social systems in the countries of the member bodies and of the variety of functions performed by accountants. Therefore, it is for each individual member body to determine the detailed requirements of the prequalification and post-qualification education and development programs and to form their own strategy in the implementation design. However, IFAC have established an international Code Of Ethics For Professional Accountants which all member bodies must follow as the minimum standard of expected behaviour for individual accountants. The conceptual framework adopted by the IFAC Code of Ethics for Professional Accountants forms the basis of the approach of the Ethics Education Framework recommended by the researchers.

Scope of the guideline

7. International Education Standard (IES) 4, Professional Values, Ethics and Attitudes, prescribes the professional values, ethics, and attitudes professional accountants should acquire during their education program at the pre-qualifying and post-qualifying stages. It also provides the foundation for this IEG, as a basis upon which professional values, ethics and attitudes should be developed. The purpose of this Guideline is to provide guidance on how to

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IFAC Education Committee Meeting October 2005 ? Kuala Lumpur, Malaysia

Agenda Item 4.2

achieve good practice in developing professional values, ethics and attitudes in accordance with IES 4.

8. This IEG is to be read in conjunction with the International Education Standard (IES) 4 Professional Values, Ethics and Attitudes, the research report titled Approaches to the development and maintenance of professional values, ethics and attitudes in accounting education, and the Ethics Education Framework Toolkit. The research report, which contains detailed background literature and research findings, underpins this IEG.

9. For the purpose of this IEG, ethics education refers to the all processes of educational and developmental activities which are applicable to the enhancing and maintaining of professional values, ethics and attitudes. The term `ethics' is used to encompass professional values, ethics and attitudes for the purpose of this Guideline.

Acknowledgement

10. The Education Committee is grateful to the following researchers for drafting this Guideline: Professor Philomena Leung, Deakin University, Melbourne, Australia; Professor Barry J Cooper, RMIT University, Melbourne, Australia; Associate Professor Beverley Jackling, Deakin University, Melbourne, Australia; and Associate Professor Steven Dellaportas, University of Ballarat, Australia.

11. The Committee also acknowledges the work of the Working Group appointed to oversee the project: [INSERT NAMES].

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IFAC Education Committee Meeting October 2005 ? Kuala Lumpur, Malaysia

THE ENVIRONMENT

Agenda Item 4.2

12. The globalisation of accounting and financial reporting and the resultant competitive environment in which financial services are offered, has had a number of implications for the accounting profession and its perceived ethical standards. Professional accountants regularly find themselves in situations which threaten compliance with the fundamental principles of professionalism and ethics. Increasing reliance is now placed on the ethical integrity of the profession and its members, to ensure professional responsibilities are upheld and the public interest is safeguarded.

13. Therefore, a study of ethics in accounting begins with the simple observation that the actions of accountants impact on others or the public. Therefore, professional values, ethics and attitudes that identify professional accountants as members of a profession, involve a commitment to enhancing the interests of the community. This includes clients, lenders, governments, employers, employees, investors, the business and financial community, and others who rely on the work of professional accountants. In accounting, this commitment is generally referred to as `serving the public interest'.

14. Traditionally, the accounting profession maintains and enforces high ethical standards in a self-regulatory regime, such as issuing and enforcing codes of ethics. However, codes of ethics are only a partial solution to the perceived problem of ethical behaviour. Codes can only guide one's behaviour; ethical decisions ultimately rest with individuals' choices.

15. Enriching ethics in accounting education and improving the moral behaviour of its members is one method that enhances the ethics of the profession. Ethical or moral competency is now an accepted attribute of an accounting professional and the starting place for developing such attributes is accounting education.

16. Evidence of the direct curricula approach to ethics education first appeared during the 1970s and then gradually extended with time. While the trend is encouraging, the evidence also indicates that accounting ethics education is not covered in a significant way in most learning programs. With limited ethics coverage in the business and accounting learning programs, it is unlikely that accounting professionals will have sufficient relevant training in ethics. Therefore, it is the role of member bodies, corporate trainers and education providers to ensure professional accountants receive adequate ethics training.

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IFAC Education Committee Meeting October 2005 ? Kuala Lumpur, Malaysia

GOALS OF ETHICS EDUCATION

Agenda Item 4.2

17. Ethics education provides a learning structure in which ethical threats or issues may be identified and analysed, so that accountants possess the skills and competence to resolve ethical issues. Ultimately, accountants must be able to make a well informed decision and take appropriate responsible actions. Specific goals of ethics education includes: a. Enhance the knowledge of relevant standards and expectations of ethical and professional conduct. b. Develop a sense of professional responsibility with ethical sensitivity and an appreciation of ethical threats. c. Improve professional judgement with sharpened ethical decision-making skills. d. Develop a commitment to ethical behaviour.

Knowledge

18. Professional accountants must understand the relevant ethical and professional standards of accounting. Without core knowledge of ethical and professional principles, ethical outcomes are unlikely.

Sensitivity

19. Ethical sensitivity is the ability to recognise an ethical threat or issue when it occurs and being aware of alternative courses of action leading to an ethical solution and how each alternative course of action affects the parties concerned. Enhancing ethical sensitivity through ethics education will enable accountants to more readily identify predicaments, which they must then resolve.

20. The ability to make ethical judgements and behave ethically, presupposes the accountant's ability to recognise an ethical issue when it arises. If professional accountants are ethically sensitive to the issues they face, then the decisionmaker is more likely to use ethical principles in resolving the dilemma.

Judgement

21. Professional accountants must expand their decision-making frameworks to include an increased emphasis on ethical values as differentiated from quantitative values. Core ethical values are an important part of ethical decision making. Choosing the right values requires ethics knowledge, an understanding of the consequences, and ethical sensitivity. Such knowledge and sensitivity can be taught and developed in ethics education programs.

Ethical behaviour

22. Accounting professionals must not only be adept with the technical aspects of their responsibilities but they must also be able to deal with situations where the facts are ambiguous or stakeholders' interests conflict. Therefore, accountants must not only recognise ethical issues but they must also be committed to take the action which is ethically sound.

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IFAC Education Committee Meeting October 2005 ? Kuala Lumpur, Malaysia

Agenda Item 4.2

23. Ethics training provides accountants with the confidence to deal with an ethical conflict. Without training on ethical decision-making and behaviour, accountants may easily succumb to the demands of their environment.

THE ETHICS EDUCATION FRAMEWORK AND THE LEARNING CONTINUUM

24. The IFAC Ethics Education Framework (EEF) proposed in this Guideline offers a flexible structural design for member bodies to develop and maintain a program of education on professional values, ethics and attitudes of accountants. The EEF is produced in Appendix 1. The IFAC Ethics Education Framework.

25. The EEF was developed from the results of a project that includes: an extensive literature review; surveys of member bodies, academics, ethics experts, practitioners and business executives; a number of focus group discussions and interviews held worldwide.

26. The EEF recognises that ethics education is a lifelong commitment which begins in the early stages of a pre-qualifying program and continues throughout one's career. Based on this lifelong commitment to learning and the objectives of ethics education, the EEF is a four-stage learning continuum. The stages are described as:

Stage 1 Ethics knowledge

Ethics education at this foundation stage instils in accountants fundamental knowledge on matters concerning professional values, ethics and attitudes. Ethics education at this stage focuses on the intellectual background which is necessary to ensure an accountant or accounting learner understand the basic environment which influences decisions, and the fundamental theories and principles of ethics, virtues, and individual moral development which govern one's actions. Ethics knowledge provides the social, ethical and emotional intelligence for the learner.

Stage 2 Ethical sensitivity

Stage 2 applies the basic ethical principles introduced in Stage 1 to the relevant functional areas (e.g. auditing and taxation) of accounting practice. The purpose of Stage 2 is to sensitise accountants and learners to the ethical dimensions of accounting practice to ensure they are capable of recognising ethical threats as they arise.

Stage 3 Ethical judgement

Stage 3 is an application stage where individuals learn how to integrate and apply ethics knowledge and sensitivity to derive at a reasoned and well informed decision. Stage 3 is designed to assist learners and accountants in deciding on ethical priorities and apply a well founded process in making ethical decisions.

Stage 4 Ethical behaviour

Ethical behaviour means acting on principles, not merely believing in them. Therefore, professional accountants have a responsibility not only to abstain

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IFAC Education Committee Meeting October 2005 ? Kuala Lumpur, Malaysia

Agenda Item 4.2

from action that may harm others, but in actively pursuing the right course of action. Stage 4 is concerned with how to behave ethically in situational or contextual environments such as the workplace.

APPLYING THE ETHICS EDUCATION FRAMEWORK

27. The purpose of this section is to explain how member bodies may apply the EEF in a flexible manner suitable to their own environment.

28. Ethics interventions may take one of two forms: the `discrete method' which addresses ethics in a separate course or module and the `pervasive method', in which ethics subject matter is integrated throughout several accounting courses or modules. An ideal program of ethics education should include both the separation (and discrete method) and the integration (or pervasive) methods of ethics education. The framework below is designed to utilise both approaches to ethics education in a broad based program incorporating pre and postqualifying programs.

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