Question 1 At a recent conference on corporate social responsibility, one speaker (Prof.

Cheung) argued that professional codes of ethics for accountants were not as useful as some have claimed "They assume professional accountants to be rules driven, when in fact most professionals are more driven by principals that guide and underpin all aspects of professional behavior including professional ethics" When quizzed from the audience, about his views on the usefulness of professional codes of ethics Prof. Cheung suggested that the cost of writing, implementing, desseminating and monitoring ethical codes outweight their usefulness. He said that as long as professional accountants personally observe the highest values of probity and integrity then there is no need for detailed codes of ethics. A.) Critically evaluate Prof. Cheung's views on codes of professional ethics. Use examples of ethical codes, where appropriate, to illustrate your answer. B.) With reference to Prof. Cheung's comments, explain what is meant by integrity and assess its importance as an underlying principal in corporate governance. C.) Explain and contrast a deontological with a consequentialist based approach to business ethics.

Answers: A.)Agree: Prof. Cheung adapts a sceptical stance with regard to codes of ethics. There are arguments both supporting and challenging his views. Professional code of ethics have a number of limitation, some of which Prof. Cheung referred to. Because they contain descriptions of situations that accountants might encounter, they can convey a false impression that professional ethics can be reduced to a set of rules contained in a code. This would be a mistaken impression, as the need for personal integrity is also emphasised. Ethical codes do not and cannot capture all ethical circumstances and dilemmas that a professional accountant will encounter in his or her career and this reinforces the need for accountants to understand the underlying ethical principals of probity, integrity, openness, transparency and fairness. Although codes such as IFAC's are intended to apply to an international audience, some may argue that regional variations in cultural, social and ethical norms mean that such codes cannot capture important differences in some parts of the world. The moral right can be prescribed in every situation. Finally, professional codes of ethics are not technically enforceable in any legal manner although sanctions exists for gross breach of the code in some jurisdictions. Individual observants of ethical codes is effectively voluntary in most circumstances. Against:There are a number of arguments for codes of professional ethics that challenge Prof. Cheung's views. Firstly professional codes of ethics signal the importance, to accountants, of ethics in the public interest in the professional accounting environment. They are reminded, unambiguously and in black and white. For example, that as with other professions, accounting exists to serve the public good and public support for the profession is likely to exist only as long as the public interest is supported over and above competing interest. The major international codes such as IFAC underpinned national and regional cultures with internationally expected standards and the codes insist, supersedes any national ethical nuances. The basic intent of the code, should always be respected. The code prescribes minimum standards of behavior expected in given situations and gives specific examples of potentially problematic areas in accounting practice. In such situations, the codes make the preferred course of action unambiguous.

B.) Integrity is generally understood to describe a person of high moral virtue. A person of integrity is one who observes a steadfast adherence to a strict moral or ethical code not withstanding any other pressure on him or her to act otherwise. In professional life, integrity describes the personal ethical position of the highest standards of professionalism and probity. It is an underlying and underpinning principal of corporate governance and it is required that all those representing shareholder interest in agency relationships both possess and exercise absolute integrity at all times. To fail to do so is a breach of the agency trust relationship. Integrity is important in corporate governance for several reasons. Codes of ethics do not capture all ethical situations and the importance of the virtue of the actor rather than the ethics of the actions is therefore emphasised. Any profession relies upon a public perception of competence and integrity and in disregard accounting can perhaps be compared with medicine. Finally, integrity underpins the relationships that an accountant has with his or her

clients, auditors and other colleagues. Trust is vital in the normal conduct of these relationships and integrity underpins this.

C.)The Deotological perspective can be broadly understood in terms of the means being more important than the ends. It is broadly based on Kantian ethics. The rightness of an action is judged by its intrinsic virtue and thus morality is seen as absolute and not situational. An action is right if it would, by its general adaption, be of nett benefit to society. Lying for example is deemed to be ethically wrong because lying, is adapted in all situations would lead to the deterioration. Consequentialist: this perspective based on utilitarian or egoist ethics meaning that the rightness of an action is judged by the quality of the outcome. From this perspective, the quality of the outcome refers to the individual (what is best for me). Utilitarianism measure the quality of outcome in terms of the greatest happiness for the greatest number (what is best for the majority). Consequentialist ethics are therefore situational and contingent and not absolute.

Question 2 Study the following 3 hypothetical cases and give solutions using the utilitarian solution method. A.) The discrimination case. Suppose a large multinational company wants to establish a potentially high profitable account with a foreign company. This foreign company's officials are biased against female business executives and make it clear that they do not want to deal with them. The U.S corporation's top managers deliberately exclude their women executives from business or social meetings with these officials, thereby abetting their discriminatory behaviour. Can the management of the U.S Multinational Corporation claim coercion on the grounds that it would likely loose the account if it ignores it's customer's cultural sensitivities?

B.) The nuclear plant case. Suppose an individual employed by a company that manufactures nuclear weapons decides that what his company is doing is morally wrong. It is probably unlikely that the company will shut its operations because of his moral scrupals. Is he obliged to stop co-operating in what he considers a moral evil and resign? What if he cannot make as much money elsewhere? Is the threat to his financial security strong enough to justify his staying on the job for a few more years?

C.) The insurance case. Mr. Black, an adjuster hired by several auto companies to examine reported losses of electronic equipments says that he is becoming increasingly nervous about being directed to approve claims without first inspecting the vehicles. He is asked to verify the theft of tape decks and car phones but realises after his inspection, that the vehicles never had the lost equipments. When he balts at some of the more flagrant, Mr. Black begins to loose business when his whistle blowing becomes known he is black-balled. Can an adjuster in the same situation claim coercion if he goes ahead with the approvals and subsequently argues that he is not morally responsible for the fraudulent claims since he is acting on the request of the insurers.

Answers: A.) From the utilitarian standpoint, a decision by the top management to come down solely on the side of profit might be criticised as a failure to include all reasonably foreseeable consequences in its calculations. To calculate the negative effects of excluding women from the said business dealing, it would have to ask a number of questions. 1.) Would the affront to these women cause women cause them serious psychological damage? 2.) What would it cause to recruit and train replacement for those women who might resign as a result of gender discrimination. 3.) What would happen if this action becomes public. 4.) Would the company's reputation be damaged to such an extent that it might loose existing and future customers as well as future investors. 5.) Would it be able to continue to attract high quality employees. 6.) What would potential lawsuits claiming discrimination cost. 7.) What would the effect be on social justice generally on the effort to promote equal opportunity in the market place.

The process outlined so far looks like nothing more than what would be required for a sound business decision. However, it is important to remember that moral decision is the issue here. That is to say, we have to determine what the morally right action is. It may be argued that from the utilitarian viewpoint, a right moral decision is likely to be a good business decision. However, it may well be that what appears to be a good business decision is not necessarily morally right, even for utilitarians who must always determine what is good for everyone and what contributes to happiness on the whole.

B.) The employee's dilemma is whether he should continue in his present job which he deems immoral or give it up, along with the high salary and other employment benefits which he might not earn in some other occupation. First of all, this individual has to decide how far he should project the consequences of his actions, that is how immediate or directly they actually contribute to the production and use of nuclear weapons. The moral significance of his actions will likely increase the more direct the consequence are tied to the actual production of the weapon. All the utilitarian has to do is that the intention of using these weapons against the civilian population by itself is not morally significant but they have to decide whether or not the predicted consequences of his action contribute to the good on the whole.

C.) The adjuster is asked by insurance companies to make false claims against a special state sponsored automobile insurance fund. What consequences should he weight on the whole in deciding whether or not he should entertain the request. What would happen if he goes to file for a false case What would happen if he refuses to file the false case and report the case to the government agencies

Those contributing to the finds might have If the insurance companies black-ball him, to increase premiums to offset amounts he would not be able to earn a living in paid out in false claims the insurance industry. If the fraud become public, the adjuster and officials of the companies involved might be prosecuted, fined or imprisoned. The adjusters chance of working for other insurance companies would be jeopardized because his reputation would suffer Filing false claims would save him from economic disaster and would probably increase profit for the companies and their stakeholders The general public would probably admire his honesty but his reputation as a whistle blower would likely work against him in the insurance industry He would also have to evaluate the psychological and emotional damage. He would personally suffer from the whole episode

The positive effect of his refusal to commit fraud would be that those insured by the special fund would not have to pay increased premiums to cover unjustified claims. Unscrupulous companies would also be stalked from defrauding present and future customers The hard part of the utilitarian judgement in this case is how to accurately balance the losses to all the clients insured by the special fund if the adjusters decides to file fraudulent against his own losses if he refuses to file them. Again, coercion by itself does not carry any special weight in utilitarian calculation.