Theory Policy of expected pp.

55
Construction Module 1 behaviour
Body of Code of
Systematic knowledge ethics APES110:
Research

Theory + Education
Practice + CPD Process Ethos & value, norms &
culture symbols
pp.27
Well-being of
society Attributes of
a
Pursuit of Professional
Ideal of service
excellence Professional Ability to diagnose
community Judgement + solve
service pp.55

Responsible for
Ability to Autonomy & Governing achieving attributes
regulate itself Independence Body
Maintain attributes

Module 1 CPA displinary Action (pp.38) incl. Penalities

Type & Role of accountant Complaint → MPC any case → Yes → PCO → report to MPC ↓ recommendation
ICM prepares case & MPC refer case to referred to CEO (determine if a
Public Sector present at hearing ↓ ICM Disciplinary tribunal case), ← if yes
pp.40: Big 4 END
Second-tier
Public Practice firm
SMP # of employee
Type of Assets
Accountant Large Qualitative Turnover
Business
pp.42 SME p.43
Accountant in Public sector Quantitative Concentration of
Business
ownership
NFP

Module 1
FRC Government now co-regulates the accounting profession
Accounting standards are externally created
Backing by law
Non-compliance may have legal penalties
code of APES 110: ensures consistent behaviour
p.53 conduct
FRC monitors
Factors that Reduces the profession's autonomy but gives comfort to the
auditor
restore community
independence
creditability
Sarbanes-Oxley Act 20:0:2
Enhanced COSO 20:0:4
regulation
CLERP 9
International Many countries adopted same accounting & auditing
consistency standards

Module 2
Based on people SHOULD DO rather Ethical NORMATIVE Theory Page.100
than what they actually DO.

Teleogical Theory pp.84 Deontological pp. 88

(Consequential) Theory (Duty based)
p.86
Egoism Utilitarianism Justice (fairness & Virtue (p.90:) Rights
equality)
Ethical Egoism Legal Human (natural)
Right to life,
Restricted Contra
Procedural justice Distribution justice freedom, truth,
Egoism ctual privacy & FOS

Equality Principle Merit Principle Utilitarianism Theory Approach: pp.86

Weakness: Need principle Step 1: identify the issue
* conflicting rights & obligation Step 2: identify all possible solution
* Prioritise among different rights Step 3: identify cost & benefits
Solution: consider most essential to human dignity Step 4: weight cost & benefit of each option
Step 5: Choose option resulting in greater # benefit to greatest people
 Module 2
APES 5 Fundamental Principles Conceptual framework approach (pg. 99)
Integrity Threat to
(s.110:) pg.95 fundamental
principles → NO ↓
Objectivity Significant? Education
(A) Identify
Threat to (s.120:) pg. 95 Yes ↓ No further action CPD
fundamental Professional
principles (pg. Implement Professional
competence Institutional standards& regulatory
10:0:) safeguards
(s.130:) pg.96 monitoring
Confidentiality ↑ Implement
↓ Corporate governance
(s.140:) pg.96 Safeguard
(B) Evaluate Professional is threat mitigated
Significance of Competent staff &
Behaviour to an acceptable Yes → ↑ Work Situations
threat leadership
(s.150:) pg.97 level
identified
No ↓ Encouraging
Decline/discontinue service, client or employer communication
(C) Apply safeguard to eliminate/reduce threat to an acceptable level corporate oversight

APES Code of conduct: Public Practice APES Code of conduct: Member in Business
225 NOCLAR pp.105 pp.136
210: Professional Appointment 310: Conflicts of interest
220: Conflicts of interest 320: Preparation & reporting of information
230: Second opinions 330: Acting with sufficient expertise
240: Fees and other types of remuneration 340: Financial Interests
250: Marketing professional services 350: Inducements
260: Gifts and hospitality 360: Responding to non-compliance with law
270: Custody of client assets & regulation
280: Objectivity – all services

AAA Model: Ethical Decision Making pp.138

1. What are the facts?

e.g. John is asked to create inaccurate report
2. What are the ethical issues? (identify primary stakeholder + ethical issues)
E.g. John self interest (keepjob) VS John act with integrity, objectivity etc. Pressured by manager
3. What are the norms, principles and values?
Norm: Must be profesional & act in public intere
Key principle APES110: Integrity (110), Objectivity (120) etc.
4. What are the alternatives?
- Continue as instructed
- refuse to comply & report accurate info - Approach mangers, board members etc.
5. What is the best option, consistent with the norms, principles and values identified in 3?
- report correct figure to avoid breach of code.. bcz it is in public interest
6. What are the consequences?
- John face siginifacnt pressure/intimidation
- lose job/status/promotion - Organisation face consequences as result of poor than expacted
7. What is the decision? Must come to conclusion
e.g. John refuse to comply and resign if required to do so.

Philosohpical Model Ethical Decision Making pp.136

example answer is in page 149.
1. Are benefits greater than harms to oneself? (ethical egoism)
2. Are the benefits greater than harms to others? (utilitarianism)
3. Are the rights of stakeholders considered and respected? (rights theory)
4. Are the benefits and burdens justly distributed? (justice theory)
- MAKE RECOMMENDATION
Module 3
Governance
pp.175 pp.174
Agency Theory - Self interest Stewardship Theory
- in position of power - Primary interest to principle
- access to info - Secondary to employee, supplier etc. pp.214 pp.215
To address Remuneration Performance
goal → Committee management & reward USA AUS
congruence
Audit financial & internal COSO, Ramsay
Committee control in order SOX CLERP
Internal Control ASX Principles
Monitoring Incurred by Principlee.g. annual report, external audit
pp.176 pp.213
UK
Agency Cost Bonding cost Incurred by Agent e.g. Bonus only if good performance
Collpases
Residual cost* Incurred by Principlee.g. underperformance, risk avoidence, Remuneration
- time horizon - empire building -excessive benefits
If Bonding Cost ↑ = ↓ lower residual cost * there will always be some residual cost
If Residual Cost ↓ = ↑ higher monitoring cost
Non-goal congruence b/w Agent & Principle = Residual Loss

pp.181

Module 3
Properly run Balance b/w overly restrictive decision making
entities unfettered risk taking
pp.173 pp.184
In the best Out-
ward Holding
Importance of interest of Instils confidence Strategy Formation
Lookin accountable
governance shareholders
g
Function of the
Optimal Board
performance Local Economies
International economies Inward Monitoring & Policy Making
Looking reviewing
Past & Present Focused Future Focused

Module 3 Independent = Non-executive Independent directors

UK FRC Code: Principle pp. 262-263
5 Main Principles (pp.259) Board Members Half ~ exception exists
least Chairman Independent~ must ~~Independence criteria pp.263
3 # be
Small companies atleast 2 members Memebr Independent indend
Memebr any epent

Audit Committee (pp.264) Remuneration Committee ** can Risk Management Committee

Chairman Independent* * not Chairman Independent** Chairman Independent**
be
corp.
Memebr Independent Memebr Independent corp. Memebr Independent
chair chair
Memebr Independent Memebr Independent Memebr independent
one member must be financial expert All members be independent Page 264.
All members be independent No ED involved. (Page 265)

ASX Code: Principle pp. 226-233

8 Principles & 29 Recommendation Board Members Half ~ exception exists
pp.225 least Chairman Independent~ must ~~Independence criteria pp.229
3 # Member be
Independent indend
Member any epent Nomination Committee similar to others (pp.228)

Audit Committee~ (pp.230) Remuneration Committee Risk Management Committee

Chairman Independent Chairman Independent Chairman Independent
Member Independent Member Independent Member Independent
Member any Member any Member any
~Audit Committee complusory Top500 Majority members be independent Majority members be independent
Majority members be independent Page 232. Page 231-232.
ALL Sub-Committee meet annually & individual attendance recorded (ASX)
Module 3
pp.234 pp.236 pp.193
Safe Harbour Protection for directors acting properly in
Rule business judgement rule
- Act in good faith in the best interest of corp
- Not affected by conflict of interest
- appropriately informed
- making decision that a reasonable person
would make in the same position

Module 3
Share in profits
pp.217 1 Effective governance framework Basic Right Transfer/sell shares
2 Shareholder rights and equality to be inform New Shares
OECD
3 Institutional investors & stock markets to participate Changing Articles
Principles
4 Role of stakeholders in governance Merger
5 Disclosure and transparency Additional duties Date, Venue, Agenda
6 Board’s responsibilities

Module 4 Managing Director = CEO + board member

CEO only = Not MD as not a board member

pp.286 De-staggering All board members appointment expire,

Board Appointment & re-appointment is required every year
around 3 years Staggering 1/3 one third of board member required
election exempion exist for MD to resign every year for re-election

Happen from director's part/will. Shareholder informed

Board Departure through ASX

Board Removal 5% share holding, or Can call extra-

pp.287 100 small shareholder act together ordinary meeting

Individual director removed ← Gain 50% support

pp.288
2 two-strikes Rule to 25% Eligible* Vote - Year 1 (no KPM) Vote 'NO' to
spill the whole board 25% Eligible* Vote - Year 2 (no KPM) remuneration report
pp.288
MD is safe from spill MD is safe. MD & 2 old board Gain 50% support of
member to remain for continuity of ← eligible* vote & vote
the board in favour of spill
*KMP not elegible to
vote ↓
Must elect new board within 90
days or 3 months. ALL shareholder
are eligible to vote (incl. KMP)

Module 4
pp.309
Criminal Case Focus on punishment > Civil Case Focus on Redress Anti-Competition Conduct (pp.315)
Beyond reasonable doubt Balance of probability Competition & Consumer ACT 2010
- Fines - Damages pp.318 - Agreement or understanding
- Jail sentences - Injunction & other court order Cartel Conduct - Between competitors
- Both Fine & jail - Pecuniary penalities Criteria: - Specifically prohibited or has an
*Agency of state Authoriy can only * Anyone can bring legal action impact on competition
prosecute pp.319
If criminal Action Price Fixing Output restrictions
Succeed Fails Bid-rigging Allocating customers, Supplier or territories
Cannot commence civil action bcz can commence
waste of resources. Case already civil action Unilateral restriction on supply (exclusive dealing) criteria pp.321
proofed.
Resale Price maintenance Criteria pp.322
Cartel Provision (Civil + Criminal) - Has supplier set min price? - enforced this minimum price?
- Individual $500,000
- Coporation $10 million
- Large Corporation $xxx million or (10% group turnover)

Module 4
Australia: Section 18, Consumer Law 2010 (Cwlth)
Misleading and Hong Kong: S. 7 Trade Descriptions Ordinance (Cap. 362) (1981)
deceptive conduct Malaysia: section 9, Consumer Protection Act (1999) Section 1042A
Japan: The Consumer Protection Basic Act (1968) Corporation ACT ↓ Not generall available
Prohibited Advertising False claims Insider Information Material Impact
pp.332 Business activity Prices / product features pp.345
Misleading Insider Trading Possess the info. Know it is insider info.
and Deceptive Questions Truthful impression? Not just the ‘truth’
S.18 Impact on Less informed people Use the Information Act on the information
- Identify issue Is it fair/deceitful? Subjective ‘puffery’ is OK Section 1043 ↑ Share (tip) the info.
- List the law (link) Corporation ACT
- Apply to case facts Cases Hornsby case (1978)
- clear conclusion Apple Case (2012)

Whistle Blower - Avoid breaking the law

Protection - Enhance business operation
pp.326
↓

Employee, Officer or Protection Retailation, harm, threat, discrimation,

contractor of corp. against → suspension etc.
↓
Report reasonable No proof
suspicion to required
↓
- ASIC Must not publish initial
- external Auditor → suspicions
- Director, secretary Must not be ↓
anonymous Wistle blower is
- Special person
authorised by corp. Protected