Comparing the Requirements of APES 110 with Those of the FPA Code of Professional Practice - Coursework Example

Professional Ethics Comparing and contrasting the requirements of APES 110 with those of the FPA Code of Professional Practice There are various similarities and differences between the requirements of the APES 110 Code of Ethics for Professional Accountants and those of the FPA Code of Professional Practice. The similarities are in terms of some of the areas that the requirements of both codes are about. The attributes that make the two codes different are in terms of the application of the two codes to different categories of people who use them or are affected by them. The attributes that make the two codes similar or different are as follows. To start with, the requirements of the FPA Code of Professional Practice as well as those of the APES 110 Code of Ethics for Professional Accountants are outlined in three sections. However, the three sections in both codes are different. The three sections of the requirements of the FPA Code of Professional Practice are (a) Code of Ethics; (b) Practice Standards; and (c) Rules of Professional Conduct. In contrast, the requirements of the APES 110 Code of Ethics for Professional Accountants outlined in three sections which are: Part A, Part B and Part C. Notable differences are seen in terms of what each of the three sections of the two codes entail and how they apply to different members of the accounting profession or those involved in financial planning. For instance, both codes use the word ‘shall’ in some instances to impose a requirement to a member or an organisation. The provisions in the FPA Code of Professional Practice apply to all members involved in financial planning. On the other hand, the various sections of the APES 110 Code of Ethics for Professional Accountants apply to different members of the accounting profession depending on where they are practising. Specifically, Part A of the APES 110 Code of Ethics for Professional Accountants applies to all members; Part B applies to members who are in public practice, while Part C applies to members who are in business, even though some members in public practice may find its requirements relevant. More similarities and differences between the two codes are seen in terms of what each of the three sections of the two codes involve. For instance, the FPA Code of Ethics has eight principles. These principles act as the minimum point of reference for professional behaviour for those involved in financial planning as well as different stakeholders, the government and other regulators. The first principle is about making the client the first priority. Under this principle, it is expected that the people who are affected by the FPA Code of Ethics will act honestly and not consider their personal or employer’s gain before the interest of the client that they are working for. The second principle is integrity. In regard to this principle, it is expected that members will act with honesty and openness in all their work undertakings. The third principle is objectivity. By this principle, all members affected by the FPA Code of Professional Practice are required to observe intellectual honesty as well as fairness. Financial planners are also required to also make decisions judiciously and manage conflicts amicably. The fourth principle is fairness, whereby members are required to provide clients with what is due to the clients. That is, financial planners should observe honesty and be able to avoid biases while also disclosing any conflict of interest that might arise in their work. Principle 5, which is about professionalism, requires members to behave with dignity and to show courtesy and respect to clients, their colleagues in the profession, as well as others involved in business activities. Additionally, based on this principle, members should comply with the pertinent rules and regulations and other professional requirements. The sixth principle is about competence, which requires members to have the necessary qualifications for their tasks. Members are also required to observe confidentiality as stipulated in the seventh principle and to uphold diligence as noted in the eighth principle (FPA Code of Professional Practice, p. 6). There are notable similarities between the requirements in FPA Code of Ethics and Part A of the APES 110 Code of Ethics for Professional Accountants. This is because in the same as the principles outlined in the Code of Ethics, issues such as acting in public interest and upholding integrity, objectivity, confidentiality and professional behaviour are outlined in Part A of the APES 110 Code of Ethics for Professional Accountants. Nevertheless, there are some differences in that Part A of the APES 110 Code of Ethics for Professional Accountants has additional provisions in terms of requirements for managing threats and the safeguards available for dealing with threats (CPA Australia, 2015). In regard to section two (Practice Standards) of the FPA Code of Professional Practice, there are several requirements that are different from those in Part B of the APES 110 Code of Ethics for Professional Accountants. First of all, as noted above, the requirements in Part B of the APES 110 Code of Ethics for Professional Accountants apply only to members in public practice while the Practice Standards apply to all members. There are seven Practice Standards in the FPA Code of Professional Practice. These standards outline the rules of engagement that members should follow, details on collecting information belonging to clients, analysis of the financial status of clients, advising clients and recommending for them various strategies on financial planning, implementing the recommendations, reviewing the situations of clients, as well as other professional obligations. On the other hand, Part B of the APES 110 Code of Ethics for Professional Accountants has provisions such as members being required to act professionally when dealing with clients, being in able to deal with conflicts of interest, seek second opinion on matters that may involve some level of threats, as well as requirements on acting professionally such as handling of gifts. Basically, it can be seen that both Part B of APES 110 and the second part have requirements on members dealing with clients in a professional manner. Turning to the third sections of both codes, what comes out is that this section is used to emphasise and elaborate on the requirements under the Practice Standards in the FPA Code of Professional Practice. As well, Part C of the APES 110 Code of Ethics for Professional Accountants has requirements that emphasise the matter of dealing with clients in a professional manner. This includes areas such as disclosing conflicts of interest, upholding high levels of expertise and professional conduct such as requirements on how to deal with gifts/inducements. It is therefore notable that the two codes are different in terms of their structures and issues addressed in various sections. However, in both codes, there are clear similarities in terms of the areas addressed – with much attention being paid to professionals in accounting and financial planning acting professionally when dealing with their clients. 2 Part 1 (a) One case that involved violation of the requirements of the APES 110 Code of Ethics for Professional Accountants is that reported by Olding and McClymont as it appeared in the Sydney Morning Herald of 3 April 2015. The case is about a corruption deal involving the chief executive officer (CEO) of a company known as Orix. The Orix CEO, Mr John Carter, made corrupt payments to an employee of Coca-Cola Amatil. The payments amounting to $504,000 to the fleet manager of Coca-Cola Amatil were made in return for vehicle leasing contracts. Carter was arrested and charged for making the illegal payments in the period around between June 2014 and February 2015. Also involved in the corruption scheme was the fleet manager of Coca-Cola Amatil who laundered the money that had been paid into a secret account by Mr. Carter. The corruption scheme involved making four large payments into the secret account on different dates during the said period (Olding & McClymont, 2015). (b) The corruption act is in violation of the requirements of several articles in section 200 of the APES 110 Code of Ethics for Professional Accountants. This section is related to Part C of the code, which applies to people in business, such as employees of Orix and Coca-Cola Amatil. Specifically, Section 200.2 requires members not to knowingly be involved in any business of activity that distorts the objectivity, integrity or good reputation of the accounting profession. Section 200.3 also prohibits members from acting in self-interest (Accounting Professional & Ethical Standards Board Limited, 2013, p. 29). Additionally, section 350 of the code requires members not to accept inducements so as to influence the decision-making process of a person or an organisation. The act by the CEO of Orix and the employee of Coca-Cola Amatil clearly violated the aforementioned sections of the APES 110 Code of Ethics for Professional Accountants given that a bribe was paid to the fleet manager of Coca-Cola Amatil to influence him to favour Orix when Coca-Cola Amatil seeks vehicle leasing services. It is also clear that both the fleet manager of Coca-Cola Amatil and the Orix CEO acted in self-interest, against the provisions of the code. The actions of the two individuals also distorted the objectivity, integrity or good reputation of the two firms that they work for, against the requirements of the FPA Code of Professional Practice. (c) One theory that applies to the case is the theory of egoism. According to this theory, it is natural for people to be selfish and to act in self-interest (Murray, Poole & Jones, 2006, p. 200). This means people are wont to place their self-interest above all other concerns when making decisions on how to act. The application of this theory to the case can be seen where both the CEO of Orix and the fleet manager of Coca-Cola Amatil acted in self-interest by partaking in the corrupt deal between them. The Orix CEO acted in self-interest by giving the bribe and the fleet manager of Coca-Cola Amatil did the same by accepting the bribe and laundering the money that had been deposited in a secret account. Based on the theory of egoism, it is not wrong to act in self-interest since all actions have value if they benefit the agents who do them (Feinberg, 2013, p. 179). Therefore, according to this theory, it was not wrong for the two individuals to partake in the act of corruption. Another theory is utilitarianism. This theory holds that the best moral act is one that achieves maximum utility for the greatest number of people. Looking at the act that was committed by the Orix CEO and the fleet manager of Coca-Cola Amatil, it can be argued that the corruption act was not meant to benefit the majority of people but only the two individuals. Therefore, it was morally wrong for the two individuals to facilitate the action that was not meant to benefit the other stakeholders of their respective companies. (d) The act of corruption between the Orix CEO and the fleet manager of Coca-Cola Amatil was basically driven by greed and the need to enhance self-interest. The Orix CEO was interested in showing that his company was performing highly by winning fleet management contracts from Coca-Cola Amatil through the corrupt deal. On the other hand, the fleet manager of Coca-Cola Amatil was interested in the money that was being to him paid by the Orix CEO. The corruption deal could have been avoided by having stiff company rules and penalties that create fear that overcomes any desire to take greed-driven risk and violate the law, as noted by Du Plessis Hargovan, Bagaric and Harris (2005, p. 222). 2 Part 2 (a) Another case that illustrates a violation of the principles in the APES 110 Code of Ethics for Professional Accountants and the FPA Code of Professional Practice is that in which an accountant was jailed for stealing more $1 million from the company in which he was working. Demetres Kyriacos Zacharoudes pleaded guilty to diverting $1,024,144.76 from his employer, EPAC Salary Solutions to his personal bank account in the period between November 2011 and April 2012. Zacharoudes falsified accounting reports and made payments into his own bank accounts as well as another account operated in the name of his parents. The money was then withdrawn in small amounts at different locations (Doran, 2013). (b) The act by Zacharoudes, the accountant of at EPAC Salary Solutions, violated several principles in the APES 110 Code of Ethics for Professional Accountants and the FPA Code of Professional Practice. Specifically, the accountant violated the principles of client first, integrity, objectivity, fairness, professionalism, and diligence as stipulated in the FPA Code of Professional Practice. As well, the act of diverting funds to personal bank accounts violated some of the principles in the APES 110 Code of Ethics for Professional Accountants such as integrity, objectivity, professional competence and due care, and professional behaviour. (c) The first normative theory of ethics that applies to the case is the theory of egoism. According to this theory, human beings are inclined to be selfish and will act in a manner that benefits their egos. This is evident in the manner in which Zacharoudes acted by diverting funds that were meant to be reflected in his employer’s account into his own personal accounts. In other words, Zacharoudes was interested in his own personal gain at the expense of the wellbeing of his employer company. This is the reason why he channelled the funds into his own bank accounts as well as one operated in the name of his parents. Based on the theory of egoism, it was not ethically wrong for the accountant to divert the funds from his employer since any act that benefits the agent that does it has value to that agent. The second theory that applies to the case is utilitarianism. This theory asserts that an act is good if it benefits the majority of the people or achieves maximum utility. Looking at the act by the accountant, it can be seen that the diversion of funds from his employer’s account into his personal bank account was meant to benefit him and perhaps his family members only. The act could not have benefited the majority of the people, such as the shareholders and other stakeholders of the company. Therefore, based on the theory of utilitarianism, it was ethically wrong for Zacharoudes to transfer funds from his employer into his personal bank accounts since this act was meant to benefit only a few people. (d) The decision by Zacharoudes to divert his employer’s funds into his own personal account can be linked to greed and self-interest. It can be said that the accountant was motivated by the need to promote his own personal gain at the expense of his employer. This could have been avoided by the company having in place mechanisms to monitor any financial malpractices by its employees. Having stiff rules and penalties against fraud in place could also have helped in averting the desire to steal funds as the accountant would have been afraid of the ramifications. References Accounting Professional & Ethical Standards Board Limited. (2013). Compiled APES 110 Code of Ethics for Professional Accountants. Retrieved from http://www.apesb.org.au/uploads/standards/apesb_standards/compiledt2c1.pdf CPA Australia. (2015). An overview of APES 110 Code of Ethics for Professional Accountants. Retrieved from http://www.cpaaustralia.com.au/~/media/corporate/allfiles/document/professional-resources/ethics/an-overview-of-apes-110-code-of-ethics.pdf?la=en Doran, M. (2013, June 18). Accountant jailed for $1 million fraud. ABC. Retrieved from http://www.abc.net.au/news/2013-06-18/accountant-jailed-for-million-dollar-fraud/4762184 Du Plessis, J.J., Hargovan, A., Bagaric,M. & Harris, J. (2005). Principles of contemporary corporate governance. Port Melbourne: Cambridge University Press. Feinberg, J. (2013). Psychological egoism. In Shafer-Landau, R. (ed.), Ethical theory: An anthology (2nd ed.) (pp. 178-192). West Sussex: Wiley-Blackwell. FPA Code of Professional Practice. (2013). The pillars of our profession. Retrieved from http://fpa.com.au/wp-content/uploads/2015/09/FPA_CodeofPractice_July2013.pdf Murray, P., Poole, D. & Jones, G. (2006). Contemporary issues in management and organisational behaviour, Melbourne: Cengage Learning Australia. Olding, R. & McClymont, K. (2015, April 3). Orix boss John Carter charged over Coca-Cola corruption scandal. The Sydney Morning Herald. Retrieved from http://www.smh.com.au/business/orix-boss-john-carter-charged-over-cocacola-corruption-scandal-20150402-1mdo9b.html Read More