The role of a professional accountant

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The Role of a Professional Accountant    Why is understanding it critical? Scandals Rededication Public expectations of:  All professionals      Professional accountants Fiduciary relationships Implications for services offered Judgements and values Sources of ethical guidelines Understanding the Role Answers Questions        Who really is our client: the company, the management, current shareholders, future shareholders, the public? Do I owe primary loyalty to my employer, client, boss, profession, myself, or the public? Am I a professional accountant bound by professional standards, or just an employee? Is professional accounting a profession or a business - can it be both? When should I not offer a service? Can I serve two clients with competing interests? Is there any occasion when breaking the profession's guideline against revealing confidences is warranted? Lang Michener Affair  Are expectations for professional standards above non-professionals?  Lawyers actions not up to expectations, or obligation to clients, prof., law society, public?  Is self-regulation effective?  Is an honest mistake “of no consequence?” Dilemma of an Accountant  Pressure for a “clean opinion”  Problem is not material  No one read or cared about those statements anyway  Removal of working papers  Action??? Public Expectations of a Profession  Essential Features: Extensive training Provision of important services to society Training and skills largely intellectual in character     Typical Features:     Generally licensed or certified Represented by organizations, associations, institutes Autonomy Foundation of Ethical Values:   (Bayles) (Behrman) Significantly delineated by and founded on ethical considerations rather than techniques or tools FIDUCIARY RELATIONSHIPS Features, Duties, Rights & Values Of the Accounting Profession… Table 4.2  Features  Duties essential to a fiduciary relationship  Rights permitted by most jurisdictions  Values necessary to discharge duties and maintain rights Features and Duties Features:      Provision of important fiduciary services to society Extensive knowledge and skill are required Training and skills required are largely intellectual Overseen by self-regulating membership organisations Accountable to governmental authority Duties essential to a fiduciary relationship:      Continuing attention to the needs of clients and other stakeholders Development & maintenance of required knowledge & skills Maintenance of the trust inherent in a fiduciary relationship by behaviour exhibiting responsible values Maintenance of an acceptable personal reputation Maintenance of a credible reputation as a profession Rights Permitted, Values Necessary Rights permitted in most jurisdictions:      Ability to hold oneself out as a designated professional to render important fiduciary services Ability to set entrance standards and examine candidates Self-regulation and discipline based on codes of conduct** Participation in the development of accounting & audit practice Access to some or all fields of accounting & audit endeavour Values necessary to discharge duties & maintain rights:       Honesty & Integrity (i.e truth & the whole truth) Objectivity - based on independent judgement Desire to exercise due care Competence Confidentiality Commitment to place the needs of the public, the client, the profession, and the employer or firm before the professional's own self-interest Important Implications   Dominance of ethical values vs technical competence Priority of duty  Public     Profession Client/employer Professional Confidentiality: strict vs assisted Important Implications  For Services offered  Critical value-added  Standards for behaviour Importance of Values To Value-added & Development of Judgement Kohlberg’s Six Stages of Moral Reasoning Preconventional Conventional Principled Self-interest Motivation Fear of punishment & authorities Self-gratification Conformity Motivation Approval from others Adherence to moral codes, law & order Interests of others Concern for others, broad social welfare Concern for moral or ethical principles Sources of Ethical Guidance  Codes of conduct  Laws & jurisprudence  When codes & laws don’t count Legal Liability Developments       Personal liability: history, rationale, partnership Joint & several liability……deep pockets sued Self-insurance plus $50-150 mil external ins Burden getting too high……how to limit? Lawsuit trend - Victoria Mtge - GAAP but misleading Limited Liability Partnerships (LLP,LLC, PSLLC)  1994 New York State Law protects innocent partners from personal liability for the negligence and malpractice of other partners, not from commercial losses, or from their own misdeeds, or from losing their invested capital [...]...Importance of Values To Value-added & Development of Judgement Kohlberg’s Six Stages of Moral Reasoning Preconventional 1 2 Conventional 3 4 Principled 5 6 Self-interest Motivation Fear of punishment & authorities Self-gratification Conformity Motivation Approval from others Adherence to moral codes, law & order Interests of others Concern for others, broad social welfare Concern for moral or ethical... Sources of Ethical Guidance  Codes of conduct  Laws & jurisprudence  When codes & laws don’t count Legal Liability Developments       Personal liability: history, rationale, partnership Joint & several liability……deep pockets sued Self-insurance plus $50-150 mil external ins Burden getting too high……how to limit? Lawsuit trend - Victoria Mtge - GAAP but misleading Limited Liability Partnerships... Victoria Mtge - GAAP but misleading Limited Liability Partnerships (LLP,LLC, PSLLC)  1994 New York State Law protects innocent partners from personal liability for the negligence and malpractice of other partners, not from commercial losses, or from their own misdeeds, or from losing their invested capital
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