Summary CPA Australia Ethics and Governance Study Notes (High Distinction)
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Course
CPA Australia
Institution
CPA Australia
These updated study notes represent the author's materials that were used to blast through the CPA Australia Professional Exams. In these notes, the author shares the secret to maximise study efficiency and achieve top results via a targeted approach to exam studying. The notes are a concise, exam ...
Module Objectives
● 1.1 describe the nature and attributes of a profession
● 1.2 explain the co-regulatory processes of the accounting profession
● 1.3 differentiate the roles, relationships and activities of accountants
● 1.4 evaluate the challenges faced by the accounting profession in the global context
● 1.5 explain the importance of soft and technical skills required of accountants
Part A : Accountants as members of a profession
● Accountants have to distinguish between the public interest and self-interest
○ They will only retain its integrity and authority by serving the wider public interest
● Accountants serve the public interest by:
○ Creating and distributing information the conveys a clear and accurate picture of an entity’s financial
performance, financial position and other relevant issues
○ Providing objective, accurate, and appropriate financial and accounting related advice that is free from bias and
based on expertise
● Responsible decision making
○ Principles
■ Governance
● Decision must be within the governance framework of the entity an accountant works within
■ Accountability
● Conducting accounting work and reaching decisions must be completed within a framework
of accountability
■ Ethics
● Based on a commitment to integrity and honesty in the pursuit of professional purposes and
client interest
● Enlightened self-interest
○ It is possible to be committed to the public interest and yet possesses a degree of self-interest
○ Doing well by doing good
● Ideals of accounting professionalism
○ Education
○ Ethics
○ Expertise
○ Entrepreneurship
■ Too much of entrepreneurship may result in de-professionalism as pursuit of commercial
opportunities moves an accountant away from integrity, objectivity and professional behaviour
● Self-regulated
○ Professions that are given permission to provide service to the public will have a substantial degree of
independence or autonomy
○ They will have a greater level of authority to set their own rules and regulations and have less detailed
government regulation
● Two contrasting view of the accounting profession
○ Traditional view (could be described as the ideal view of the accounting profession)
■ Accounting profession are focused on serving society and acts in for the public interest
○ Market control view
■ Accounting profession are self-interested and less concerned with broader public interest
■ Acted to create a monopoly in order to ensure only certain people can work in this area
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,● Profession
○ Based on high level of competence and skills in a given area
○ Focuses on intellectual or administrative skills rather than mechanical or physical actions
○ Defined by critical nature of their work and the esoteric knowledge to perform it to a high standard
○ Often leads to greater status and wealth for its members
○ Service ideal, view that professions should both serve society and do so in part by ensuring they act in the
public interest. Profession promises these in exchange of the benefits from society (pg 9)
■ Promises ■ Benefits
● Knowledge ● Privileges
● Skills ● Self-regulation
● Expertise ● Associational control
● Competencies ● Autonomy
● Values ● Power
● Norms ● Exclusive rights
● Behaviour ● Occupational control
● Public interest ● Control over market
● Professional judgement ● Reputation
● Activities ● Social status
● Economic reward
● Attributes of a profession
○ Systematic Body of theory and knowledge
■ Theory construction supported by systematic research
■ International Federation of Accountants (IFAC) has issued international educations standards that
outline the core competencies all aspiring accountants must satisfy in order to be recognised as a
member of the profession and of a professional body
○ Education process for its member
■ Theory + Practice + Continued professional development
○ Ideal of service to the community
■ Wellbeing of society
● Accountants contribute to wellbeing of society by preparing and attesting information that
ensures the efficient and orderly functioning of business, not-for-profit and government
enterprises
● Accountants provide information that facilitates better decision making
■ The pursuit of excellence
● Accountant accepts responsibility for maintaining and updating their knowledge and skills,
and applying their skills and competence with due professional care in the best interest of
society
■ Community service
● Many accountants offer their time and skills free of charge to the community (Pro bono)
● An accountant is held to the same level of responsibility for all their work, whether it is paid
or unpaid
○ High degree of Autonomy and independence
■ Ability to regulate itself (self-regulatory)
● The degree to which this autonomy continues depends on the consistent demonstration of
professional and ethical standards by members of the profession and by the profession
generally
■ Co-regulatory
● A complex set of regulatory structures and practices have been developed around the public
accounting profession
○ These attempt to define the technical and ethical responsibilities that accountants
owe to their employers, clients, third parties and the public
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, ○ Code of ethics for its members
■ Code of ethics 5 fundamental principles: integrity, Objectivity, Professional competence and due care,
Professional behaviour, confidentiality
● Any behaviour that contravenes the code is considered unprofessional
○ Unique culture or ethos
■ Values, norm and symbols
■ To succeed in their chosen profession, a new member needs to learn about the culture and ethos of
the profession and to become part of the culture and ethos
○ Application of professional judgement
■ Ability to diagnose and ability to solve unstructured values-based problems of the kind that arise in
professional practice
■ Becker argues that this is the single most important attribute that differentiates professionals from
non-professionals
○ Existence Governing body
■ Responsible for achieving and maintaining attributes
● 3 professional bodies
○ Certified Practising Accountant (CPA) Australia
○ Chartered Accountants Australia and New Zealand (CAANZ)
○ Institute of Public Accountants (IPA)
● Co-regulation structure
○ Government
■ Australian FRC
● AASB (Accounting standards)
● AUASB (Auditing standards)
○ Accounting profession (CPA + CAANZ + IPA)
■ APESB (APES Standards)
● Auditing standards
○ AUASB reports to FRC
○ AUASB have the force of law under Corporations Act, therefore registered auditors have a legal duty to comply
with auditing standards issued by the AUASB
● APESB
○ Independent body that sets the professional standards for accountants
○ In order to increase public confidence, it is important to open the professional standard-setting process to
greater public scrutiny
■ Any appearance of self-interest should be removed and it should be written by an independent board
○ Comprises of:
■ Technical board
● 8 members (2 from CPA)
● Comprises representatives from the public sector, corporate sector, audit profession,
academia and the general public
■ Secretariat
○ Fulfil its role by
■ Reviewing the professional and ethical standards on a yearly cycle
■ Reviewing the implementation of new and amended professional and ethical standards within six
months of issue
■ Referring matters to the secretariat for research, direction and amendment
■ Seeking comment on exposure drafts for proposed standards from the public, professional bodies and
their members
■ Monitoring the effectiveness of professional and ethical standards
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, ● Quality assurance process
○ Enhances the integrity of the information provided by accountants
○ Activities include
■ Standard-setting
● FRC oversight responsibility for the AASB and AUASB
■ Conformity with standards
● Members involved in the preparation, presentation or audit of the financial report must
comply with APES 205 (Conformity with accounting standards) and APES 210 (Conformity
with auditing and assurance standards)
■ Practice reviews
● To hold a certificate of public practice, members must demonstrate compliance of annually
providing a signed assurance with the established quality control requirements are being met
and by undergoing a practice review
■ Accounting firm regulation
● In order to facilitate accounting firms in meeting their standards of procedures of quality
control and independence, APES 320 (Quality control for firms)
● APES 320 (Quality control for firms) include policies and procedures regarding
○ Leadership responsibilities for quality within the firm
○ Ethical requirements
○ Acceptance and continuance of client relationships and specific engagements
○ Human resources
○ Engagement performance
○ Monitoring
● Complaints
○ CPA has a formal process of complaints
○ Process
■ Try to resolve the matter directly with CPA Australia member
■ If unsuccessful lodge a written complaint, which will be review by MPC
■ If relevant, MPC will open a file to address the issue
■ The complaint will be allocated to a professional Conduct Officer (PCO)
■ PRO will contact the member and will ask them to provide an explanation
■ A report will be given to MPC after the investigation by PCO to enable them to give a recommendation
to the CEO of CPA Australia
■ CEO must determine whether there is a case to answer
■ MPC will notify the member and complainant that there is a case to answer and will refer the case to
an investigating case manager (ICM)
■ ICM will prepare written particulars of the case and present at a hearing
■ The decision will be made and advised to the member and complainant after the hearing
● Major accountants work environment
○ Public practice
■ Big four
■ Second tier
■ Small practices
○ Business sector
■ Large business
■ SME
○ Public sector
○ Not for profit sector
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