ACCOUNTANCY PROFESSION AND ETHICAL ISSUES PART II ACCOUNTANCY PROFESSION AND ETHICAL ISSUES 2018/11/18

ROLES AND RESPONSIBILITIES OF PROFESSIONAL ACCOUNTANT TOPIC 7 & TOPIC 8 ROLES AND RESPONSIBILITIES OF PROFESSIONAL ACCOUNTANT 2018/11/18

Understanding The Roles Of A Professional Accountant 2018/11/18 Understanding The Roles Of A Professional Accountant “Can we serve two clients with competing interests at the same time?” Should have a clear understanding of the roles, and the standards of behaviour expected by various stakeholders “Who really is our client?” “Do I owe primary loyalty to my employer, client, profession or the public?” “Is accountancy a profession, an industry or both? Are we professional accountants or just accounting Employees?” 2018/11/18 Week 1

Accountancy As A Profession 2018/11/18 Accountancy As A Profession Structure of a profession: Foundation: a recognized body of knowledge to serve the public Protecting public interests via important services. e.g. auditing Framework: An educational process involving extensive intellectual training An examination and licensing process A sense of responsibility to society Finish: Represented by professional associations Granted autonomy for self-regulation Codes of ethics for compliance Technical standards for guidelines 2018/11/18 Week 1

Conflicts Of Interests 2018/11/18 Conflicts Of Interests Conflicts of interests situations: Work constraints versus service quality Violating confidentiality for personal benefits Confidentiality to client/employer versus public’s right to know Trading off audit independence for better client relationships Personal relationships or financial involvement with clients Providing non-audit services to audit clients 2018/11/18 Week 1

Professional Accountants and Their Fiduciary Duties 2018/11/18 Professional Accountants and Their Fiduciary Duties A professional accountant owes fiduciary duties to various stakeholders Principal-agent relationship which exists: When services are extremely useful There is a significant difference in the level of expertise 2018/11/18 Week 1

Rising Public Expectations 2018/11/18 Rising Public Expectations Maintenance of public trust is fundamental to the role Protecting public interest Exercising due professional care - for self and subordinates Ensuring professional competence - at all times Maintaining confidentiality of information - even after the assignment Maintaining independence - in fact and appearance Mindful of responsibilities to various stakeholders Adhere to professional standards – HKSA ethics statements Compliance with expectations adds credibility to the profession 2018/11/18 Week 1

Priority of Fiduciary Duty and Loyalty of Professional Accountants 2018/11/18 Priority of Fiduciary Duty and Loyalty of Professional Accountants Conflicts of interests as possible reasons for violating fiduciary duties Hierarchy of loyalties and fiduciary duties The public The accountancy profession Clients / employer Professionals themselves 2018/11/18 Week 1

Fiduciary Duty and Confidentiality 2018/11/18 Fiduciary Duty and Confidentiality Statement 1.204A requires that client/employer’s information acquired in the course of professional work should be kept confidential, it may only be disclosed when: Consent from client Legal duty to disclose Personal rights to disclose To discharge of fiduciary duties, an accountant is expected to place the client/employer first on confidentiality 2018/11/18 Week 1

Responsibilities To Clients 2018/11/18 Responsibilities To Clients Fulfilling responsibilities in return for clients’ trust Seven responsibilities of a good/trustworthy professional: Honesty: acting in good faith Truthfulness: honesty and full disclosure Competence : Mastery of knowledge and skills Diligence : Careful and prompt delivery of services Loyalty : Protection of client interests Difficulty in balancing loyalty to client and other responsibilities Independence of judgments Fairness : Equitable treatment of different clients Discretion : Privacy of client information (respect and consideration) 2018/11/18 Week 1

Responsibilities To Employers 2018/11/18 Responsibilities To Employers Employer-employee relationship is a fiduciary one Similar to obligations of professionals to clients Chief exception : Fairness Loyalty as a major responsibility to employers A few important and difficult loyalty issues Loyalty does not require faithfulness to employers no matter what Independence and objectivity of judgment Moonlighting Obeying employers’ unethical instructions 2018/11/18 Week 1

Responsibilities To The Profession 2018/11/18 Responsibilities To The Profession Obligation to assist the profession as a whole to discharge social responsibilities Ways to discharge professional accountants’ responsibilities to the profession Involvement in social leadership Improvement of professional knowledge and skills Preserve and enhance the role of the profession in protecting public interests Discharge of responsibilities requires the collective efforts of all members 2018/11/18 Week 1

Responsibilities To Third Parties 2018/11/18 Responsibilities To Third Parties People other than clients and employers “Service-users” : Mostly unknown Three fundamental obligations to them Be truthful – non-misleading information Non-maleficent – protecting from injuries Fair – no discriminations Truthfulness and fairness predominate Potential conflicts between role-related responsibilities to clients or employers with universal responsibilities to third parties >>>>> NEED TO RECONCILE Commonly adopted position by accounting professionals 2018/11/18 Week 1

Ensuring Compliance With These Responsibilities 2018/11/18 Ensuring Compliance With These Responsibilities Admission to professional membership Limited to applicants with good moral character Continuing and Professional Development (CPD) Structured and unstructured activities Disciplining accounting professionals Self-regulating with the aid of ethics statements 2018/11/18 Week 1

Ethical Pressures for U.S. Accountants 2018/11/18 Ethical Pressures for U.S. Accountants Growing reliance on non-audit incomes Exert pressure to compromise audit quality Facing pressure for a more liberal audit opinion Due to severe competition, fear to lose audit clients Being forced to accept client representation Pressure to trade-off auditor’s independence Receiving pressure for creative accounting Departure from general accepted accounting standards 2018/11/18 Week 1

Ethical Issues Faced by H.K. Accountants 2018/11/18 Ethical Issues Faced by H.K. Accountants Non-practising members Pressures from superiors to exaggerate corporate performance, absorb their private expenses, inflate accounting data Transfer pricing Using employer’s confidential information for personal gain Accepting advantages or bribes from customers or suppliers … Practising members Fees problems, unethical solicitation of professional work Personal relationships or financial involvement with clients Clients’ proposals for manipulating financial information, tax evasion or tax frauds Using client’s confidential information for personal gain... 2018/11/18 Week 1

The Roles and Responsibilities of A Professional Accountant 2018/11/18 The Roles and Responsibilities of A Professional Accountant “Can we serve two clients with competing interests at the same time?” “Who really is our client?” “Do I owe primary loyalty to my employer, client, profession or the public?” “Is accountancy a profession, an industry or both? Are we professional accountants or just accounting employees?” 2018/11/18 Week 1