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

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

3. Understanding The Roles Of A Professional Accountant
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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

4. Accountancy As A Profession
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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
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Week 1

5. Conflicts Of Interests
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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

6. 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

7. Rising Public Expectations
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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

8. 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

9. 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

10. 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)
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Week 1

11. Responsibilities To Employers
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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

12. 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
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Week 1

13. Responsibilities To Third Parties
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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

14. Ensuring Compliance With These Responsibilities
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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
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Week 1

15. 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

16. 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

17. 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