Stanley E. Jenne, Ph.D., CPA, CFE Ethics Stanley E. Jenne, Ph.D., CPA, CFE 11/30/2016

Today’s Presentation Codes of Ethics Consider three approaches to ethics An approach to resolving ethical dilemmas Hypothetical scenarios 11/30/2016

Ethics – Hallmark of Professions Professions are held to a high standard Largely self-governing Expected to serve the public interest Auditing is considered a profession Many certifications are available Most sponsoring organizations have a code of ethics 11/30/2016

Auditor Ethical Expectations Integrity Objectivity Independent mental attitude Professional competence Confidentiality 11/30/2016

Three Approaches to Ethics Categorical Imperative Utilitarian Principle Generalization Argument 11/30/2016

Categorical Imperative Attributed to Immanuel Kant Moral requirements are based on rational standards All people should act in accordance with moral laws Moral laws do not consider the outcome of one’s actions http://plato.stanford.edu/entries/kant-moral/ 11/30/2016

Kant Quote “May you live your life as if the maxim of your actions were to become universal law.” http://www.brainyquote.com/quotes/authors/i/immanuel_kant.html 11/30/2016

Utilitarian Principle Decisions should consider the consequences The morally correct course of action is the one that results in the most good Utilitarianism maximizes the good of all concerned as opposed to self-maximizing egoism Everyone’s happiness or welfare counts http://plato.stanford.edu/entries/utilitarianism-history/ 11/30/2016

Generalization Argument Asks the questions What if everyone acted the way I wish to act? Would it produce the best outcome for society? Similar to Rule Utilitarianism 11/30/2016

Cases Robin Hood Steal from the rich and give to the poor. Motor Home Purchasing motor home in another state to avoid sales tax. 11/30/2016

Ethics and the Law The law provides a standard to judge right from wrong. Laws generally set minimal standards. Ethical considerations typically go beyond legal requirements. 11/30/2016

If only the choices were this clear! Ethics deals with moral duties. Ethical dilemmas exist when moral duties conflict. How do we resolve ethical choices? 11/30/2016

Sources of Guidance The law Employer policies & Code of Conduct Codes of Professional Ethics Other relevant professional codes Colleagues 11/30/2016

Approach From CFE Self-study Determine the facts at issue. Identify the alternative courses of action. Evaluate the ethical problem. Select a course of action. 11/30/2016 Ethical Theory for Fraud Examiners: ACFE.com

Ethics Case #1 Skimming scheme Not the reason for your fraud investigation Jane skimmed receipts to make mortgage payments while husband was ill. Home was saved, husband returned to work Jane already had begun repaying the theft 11/30/2016

Ethics Case #2 Internal auditors under cover Assuming a false identity Fabricating cover stories 11/30/2016

AICPA Code of Ethics Revision Effective December 2014 Clarifies which rules apply to different types of engagements. Includes a conceptual framework 11/30/2016

Steps of the AICPA Conceptual Framework Identify Threats Step 2 Evaluate Threats Step 3 Identify Safeguards No Threats Proceed Threats not Significant Proceed Existing New Threats Not Acceptable Level…Stop Step 4 Evaluate Safeguards Threats at Acceptable Proceed http://aicpa.org/codeofconduct//ethics.aspx

Conclusion Ethical conduct is important in fraud examination Correct choices are not always clear Philosophers and professional organizations give guidance Don’t go it alone – seek help 11/30/2016