Ethics and Governance

Ethics and Governance is a core component of the knowledge and skill base of today’s professional accountants. As key business decision makers, accountants must be proficient in regulatory regimes, compliance requirements, and governance mechanisms to ensure lawful and effective corporate behaviour and operations. A better understanding of ethics, corporate governance frameworks and mechanisms links with the various roles and responsibilities outlined in other segments of the CPA Program.

From an individual perspective, this segment provides candidates with the analytical and decision-making skills and knowledge to identify and resolve professional and ethical issues. The skills and knowledge obtained are also important for segments that specialise in the functional disciplines of accounting, such as Advanced Taxation, Financial Reporting, Strategic Management Accounting and Advanced Audit and Assurance.

Today's professional accountants are less involved in traditional accounting functions and are more concerned with leadership and management. They are leaders in their fields providing key support to senior management and are directly involved in many important decisions. An understanding of ethics and governance matters is essential to those in leadership roles, and to those who support their leaders. This segment not only develops an awareness of corporate governance approaches, but also helps members — and those whom they support — with discharging their stewardship functions.

Ethics and Governance is a compulsory segment in the CPA Program professional level for candidates commencing from semester 2, 2009. It is recommended that you enrol in Ethics and Governance as part of your first enrolment.

Segment aims

The segment has three key aims, namely:

1. Promoting awareness of the ethical responsibilities of professional accountants, thereby enabling them to identify and resolve ethical issues or conflicts throughout their career.
2. Ensuring professional accountants understand the importance of governance, including their role in achieving effective governance.
3. Understanding the role of accounting, and of accountants, in providing information about the social and environmental performance of an organisation.

General objectives

This segment provides candidates with the knowledge and skills required of a professional accountant to operate effectively in a demanding and dynamic global business environment. This segment is designed to ensure the development of a range of professional ethics, values and attitudes among professional accountants.

On completion of this segment, candidates should be able to:

• explain, from a global perspective, the nature of the accounting profession and the roles of professional accountants
• apply the key professional responsibilities of an accountant from the perspective of a member of CPA Australia
• highlight the importance of ethics and professional judgment
• describe key governance and regulatory frameworks, including international perspectives on corporate governance and the roles of various stakeholders
• explain the expectations placed on various internal and external stakeholders arising from organisational governance responsibilities
• ascertain various compliance and regulatory regimes impacting the global business environment
• identify the strategic, leadership and global issues impacting accountants and the accounting profession
• describe the nature, role and importance of corporate social responsibility, including climate change and sustainable development

Segment content

Module 1: Accounting and society

This module considers what it means to be a professional accountant and examines the wide range of capabilities and skills required to be a professional accountant. Professional accounting is more than the application of technical knowledge. It must also be understood as a social force that effects changes on organisations, people and their lives and on entire societies. It is therefore important to ensure that the accounting profession has a positive impact on society. The module also explores various environments in which accountants work and the pressures that can challenge a professional accountant. While criticisms of professions (including accounting) are sometimes made, in responding to these criticisms, the module emphasises the value that accounting can and does bring to society.

Contents: 

• Interaction with society 
• Accountants as members of a profession

Module 2: Ethics

This module discusses the practical implications of professional ethics based on the notion of the ‘service ideal’ and the public interest. The module introduces a number of analytical tools that guide accountants to help them resolve complex ethical dilemmas. These tools include a code of professional conduct, philosophical theories of ethics and ethical decision frameworks.

Contents:

• Professional ethics
• A conceptual framework for ethical behaviour

Module 3: Governance

Module 3 covers key corporate governance approaches which have international recognition. The nature of corporate governance and key rules, principles and recommendations that exist globally to support effective corporate governance are discussed, including coverage of the Asia Pacific region.

The relationships between companies, boards of directors, managers and various other stakeholders are discussed. The role and impact of differing cultural approaches are explored. The module also provides a series of case illustrations of corporate governance successes and failures in recent times. The module highlights that professional accountants must have a strong understanding of governance concepts in order to successfully fulfil their duties and obligations, and add value to corporations and entities of all types and sizes.

Contents:

• Overview of corporate governance
• Codes and guidance
• International perspectives on corporate governance
• Case studies of governance failure

Module 4: Corporations and their stakeholders

Corporate governance involves many rules and requirements which generally provide the legal framework for the effective operation of various types of entities, especially corporations. This module considers the creation of corporations and the various rules and requirements under which they are managed in order to reach the necessary standards of corporate governance. It includes discussion of how the ‘agency problem’ gives rise to the need for effective corporate governance.

The module emphasises various stakeholder protections including employee protections, whistleblower protections, business competition and consumer protection. The module concludes by exploring corporations and their relationships with markets and shareholders, including specific rules targeted at directors and senior managers. Overall, the module seeks to ensure that professional accountants are aware of the key regulatory requirements and approaches that must be complied with to ensure that good governance is not overwhelmed by the pursuit of inappropriate financial and other outcomes.

Contents:

• Stakeholder concepts
• Agency theory and remuneration
• Employees
• External stakeholders
• The economy and legal system
• Competition and protecting markets for goods and services
• Criminal and civil – proof, penalties and redress
• Consumers and customers – key stakeholders
• Unconscionable conduct – stakeholder contracts
• Suppliers and lenders
• Financial markets as a stakeholder
• Owners
• The corporation

Module 5: Corporate social responsibility

This module provides an explanation of corporate social responsibility reporting together with information about its history and evolution. The relationship between different, and sometimes conflicting, managerial perspectives of corporate responsibilities and accountabilities and the decisions about ‘to whom’, ‘how’ and ‘what’ social responsibility information to report are investigated. Different theoretical perspectives are provided about ‘why’ organisations voluntarily report social responsibility information. Accounting issues associated with the important topic of climate change will also be explored.

Contents:

• Alternative perceptions about the responsibilities of organisations
• Motivations for embracing CSR reporting
• Limitations of traditional financial reporting
• Current regulations for CSR reporting
• Voluntary frameworks for CSR reporting
• International guidance in CSR-related performance and reporting
• Social audits and their relationship to CSR reporting
• Examples of best practice and innovative reporting
• International initiatives on climate change
• Environmental management accounting
• Corporate governance mechanisms aimed at improving social and environmental performance