thomas n. davidson senior benefits counsel and ethics officer, indiana public retirement system

Thomas N. DavidsonSenior Benefits Counsel and Ethics Officer,

Indiana Public Retirement System

Why study ethics?

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Why study ethics?Professionals are recognized in part because

professions include ethical standards.Develops analytical skills.Consequences for ethical errors.Germane to management decisions.

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GoalsBecome aware of ethical issues.Develop critical thinking skills.Become more personally responsible.Understand how business is involved in

coercion and persuasion.Develop “wholesight” which means to explore

issues with one’s heart as well as one’s mind.

Anyone can miss a turn.

Categories of EthicsThe three main categories

of ethics within western philosophy are (1) Applied Ethics, (2) Metaethics, and (3) Normative Ethics. Applied Ethics proposes that right and wrong can be found within scenarios, Metaethics searches for the origins or causes of right and wrong, and Normative Ethics believes that right and wrong are found in an individual's behavior.

We will focus on normative ethics as it relates to accountancy.

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Things to considerRelativism: What is good or immoral changes

over time.Absolutism: What is wrong is always wrong.Situational Ethics. I choose which model of

ethics to follow depending on the circumstances.

Ethical ModelsLaws & RegulationsReligion – Golden RuleCode of Ethics -

International Ethics Standards Board for Accountants & International Federation of Accountants

Licensing BoardsAmerican Institute of

CPAsState Ethics

Commission

Deontology-focus on the act-not the outcome.

Consequentialism (Teleological Model)

Kantian-Utilitarian Principle-means to an end.

EgoismAltruism-service &

sacrificeEthic of reciprocity –

Golden Rule

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ApologiaAct or omission.Cognitive Dissonance.Rationalization that transforms the act or

omission to being ethical.

Cognitive dissonance is a psychological term which describes the uncomfortable tension that comes from holding two conflicting thoughts at the same time.

5 Accountancy Ethical Fundamental PrinciplesA distinguishing mark of the accountancy

profession is its acceptance of the responsibility to act in the public interest. Therefore, a professional accountant’s responsibility is not exclusively to satisfy the needs of an individual client or employer. In acting in the public interest a professional accountant should observe and comply with the ethical requirements of profession.

IntegrityIntegrity is an adherence to a set of values.

Chose your values wisely.Integrity makes one trustworthy, predictable,

and reliable.A professional accountant should be

straightforward and honest in all professional and business relationships.

Integrity continuedThe principle of integrity imposes an obligation on all

professional accountants to be straightforward and honest in professional and business relationships. Integrity also implies fair dealing and truthfulness.

A professional accountant should not be associated with reports, returns, communications or other information where they believe that the information:

(a) Contains a materially false or misleading statement;(b) Contains statements or information furnished recklessly;

or(c) Omits or obscures information required to be included

where such omission or obscurity would be misleading.Generally, a professional accountant will not be

considered to be in breach of the above paragraph if the professional accountant provides a modified report in respect of the above matter.

ObjectivityA professional accountant should not allow

bias, conflict of interest or undue influence of others to override professional or business judgments.

A professional accountant may be exposed to situations that may impair objectivity. It is impracticable to define and prescribe all such situations. Relationships that bias or unduly influence the professional judgment of the professional accountant should be avoided.

Professional Competence and Due CareA professional accountant has a continuing

duty to maintain professional knowledge and skill at the level required to ensure that a client or employer receives competent professional service based on current developments in practice, legislation, and techniques. A professional accountant should act diligently and in accordance with applicable technical and professional standards when providing professional services.

ConfidentialityA professional accountant should respect the

confidentiality of information acquired as a result of professional and business relationships and should not disclose any such information to third parties without proper and specific authority unless there is a legal or professional right or duty to disclose. Confidential information acquired as a result of professional and business relationships should not be used for the personal advantage of the professional accountant or third parties.

Professional BehaviorA professional accountant should comply with

relevant laws and regulations and should avoid any action that discredits the profession.

A professional accountant has an obligation to evaluate any threats to compliance with the fundamental principles when the professional accountant knows, or could reasonably be expected to know, of circumstances or relationships that may compromise compliance with the fundamental principles.

Free will

Motive Effects to others

Act or Omission

Model

Conflict ResolutionWhen initiating either a formal or informal

conflict resolution process, a professional accountant should consider the following, either individually or together with others, as part of the resolution process:

(a) Relevant facts;(b) Ethical issues involved;(c) Fundamental principles related to the

matter in question;(d) Established internal procedures; and(e) Alternative courses of action.

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Ethical Problem SolvingConsider: Benefit and harms caused by each

alternative; Which alternative;1. Best respects moral rights.2. Best promotes common good.3. Does not discriminate or shows

favoritism.4. Best promotes virtues.

I made a wrong turn; now what?We all make mistakes. All of us. If we aren’t

making mistakes, then we likely aren’t trying new things, and that itself is a mistake. As John Wooden once said, “If you’re not making mistakes, then you’re not doing anything.” Mistakes are the pathway to great ideas and innovation. Mistakes are the stepping stones to moving outside the comfort zone to the growing zone where new discoveries are made and great lessons are learned. Mistakes are not failures, they are simply the process of eliminating ways that won’t work in order to come closer to the ways that will. Amy Rees Anderson 2013

After the wrong turnReport it.Learn from it.Own it.Fix it.Put safeguards in place to avoid a

reoccurrence.

The Six A’sAdmit - I made a mistake.Apologize - I am sorry for making the mistake.Acknowledge - I recognize where I went wrong

that caused my mistake to occur.Attest - I plan to do the following to fix the

mistake on this specific timeline.Assure - I will put the following protections in

place to ensure that I do not make the same mistake again.

Abstain – Never repeat that same mistake twice.

“The time is always right to do what is right.”

Martin Luther King 1929-1968, American leader of civil rights movement and Nobel Peace Prize winner