CRG650 Notes PDF

Chapter 1: Ethics & Its Significance in the Framework for studying business & professional Business Discipline ethics for accountants Ethics: The discipline dealing with what is good 1. Framework and bad and with moral duty and obligation...

Chapter 1: Ethics & Its Significance in the Framework for studying business & professional Business Discipline ethics for accountants Ethics: The discipline dealing with what is good 1. Framework and bad and with moral duty and obligation Overview of business (development, Business ethics: The moral principles that act important and roles) Objectives and as guidelines for the way a business conducts processes must direct attention to the itself and its transactions perspective Governance: About setting appropriate Ethical issues – mandatory and voluntary strategies, objectives & policies, to ensure Ethical decision-making process and appropriate achievement & reporting towards factors that influence decisions stakeholders as a continuing support To ensure public’s expectation are met, Moral: Individual’s own principles regarding regulation may be created body text right and wrong Environmental ethics: Discipline in 2. Moral Reasoning philosophy that studies the moral relationship Associated with the norms, values and of human beings to, and also the value and beliefs embedded in social processes that moral status of, the environment and its non- define right/wrong for one individual or a human contents community 3. Ethical Decision Making Importance of Ethics Ethics = character, spirit/ attitude of a group of people/ culture To produce people who are morally upright and Business ethics = form of professional truthful that will conduct the business in ethics that examines ethical principles and accordance with what the society regards as moral ethical principles that arise in ethical and acceptable business environment Principle Objectives Company need to stay focus on their business’s New governance accountability frameworks objectives as well as maintaining their ethical behavior towards the corporate management Successful corporations are best served by governance and accountability mechanisms Better Public Image Different & broader set of fiduciary The public concern is not on the company’s relationships than in the past profit, but whether the company is doing their Allegiances of directors and executives must business according to the law or not reflect stakeholder interests To direct attention to these new perspectives, and modern accountability framework Benefits of ethical business behavior Attracts more customers that would lead to Reinforced fiduciary role for professional increase in sales accountants Retain existing employees and attract new recruit The condition to meet the public’s expectations Attract potential investor for trustworthy reports on corporate performance are the professional accountants must: o Focus their loyalty on the public interest 5 Steps to create an ethical organization culture o Adopt principles such as independence of Top management leads ethics by example judgement, objectivity, and integrity Communicate clear expectations of organization code of ethics Primary fiduciary responsibility – public Key components of ethics training program interest. If not: Reinforce ethical behavior through ethics o Expectation of stakeholders in society will program not be met Provide protection for whistle blower  o Credibility of the corporation will erode 3. Accountability (effected) Integrity o Credibility of and reputation of the o Some issues are not covered, nor is accounting profession will also erode there always a clear, balanced presentation of how the interests of stakeholders will be affected Responses & Development Transparency 1. Emerging Governance & Stakeholder o An obtuse or unclear manner that the Accountability Models lack of transparency will cloud the Trends understanding of the reader o Expanding legal liability for corporate directors and ultimately the CEO and Accuracy the CFO o Faithful representation is fundamental o Management assertions to to an understanding of underlying facts shareholders on the adequacy of internal control The needed improvement in integrity, o A stated intention to manage risk and transparency and accuracy has motivated protect reputation the discussion among accountants about the nature of the guidelines they should use - Significant Changes for preparation of financial reports, rules or o Delaying, employee empowerment and principles the use of electronic data interfaces o Increased reliance by management on 4. Ethical Behavior & Development in Business non-financial performance indicators Ethics used on a real-time basis Immanuel Kant (German): People are ethical when they do not use other people opportunistically and when they do not act 2. Management Based on Values, Reputation & hypocritical manner demanding a high level Risks of conduct for everyone else while making - Values exceptions for themselves o Hyper norm is a value that is almost Aristotle (Greek): Directors, executives and universally respected by stakeholder accountants should demonstrate integrity, groups honor, loyal, courage and forthright o Honesty, Compassion, Predictability, John Stuart Mill (English): The goal of Fairness, Integrity, Responsibility business is to contribute to increase the physical and psychological benefits of - Reputation society o The reputation of the company and the John Rawls (American): Businesses act in degree of support gathered from an ethical manner when they do not have stakeholders will depend on the discriminatory prices and hiring systems understanding and on the ability of the company to manage the risks facing the company directly as well as those impacting its stakeholders Approaches to Ethical Decision Making o Credibility, Reliability, Trustworthiness, o Consequentialism Responsibility o Deontology o Virtue Ethics - Risks o Modified Five Question Approach o Management and auditors have o Modified Moral Standard Approach become increasingly risk management o Modified Pastin Approach oriented since the mid 1990s o The techniques have been developing in Business Ethics Concepts & Terms identifying risks early and in planning o Stakeholder Concept o This is to avoid or mitigate the o Corporate Social Contract unfortunate consequences inherent the risks The ethics environment for professional Fundamental principles of ethics for accountants professional accountants Role: The public expects all professional Integrity: To be straightforward and honest in accountants to respect the professional values all professional and business relationships of objectivity, integrity, and confidentiality, Objectivity: Not to compromise professional or which are designed to protect the fundamental business judgements because of bias, conflict rights of the public of interest or undue influence of others Professional Competence & Due Care: Conduct: An employee-accountant must o Attain and maintain professional respond to the direction of management and the needs of current shareholders knowledge and skill at the level required o Act diligently and in accordance with Governance applicable technical and professional 1. GAAP and GAAS standards o It is to provide analytical efficiency for Confidentiality: To respect the confidentiality the providers of capital to the world’s of information acquired as a result of market and computational and audit professional and business relationships efficiencies around the world Professional Behavior: To comply with relevant 2. IFAC laws and regulations and avoid any conduct o It has developed an International Code that the professional accountant knows or of Ethics for professional accountants should know might discredit the profession Services Offered o The offering of non-audit services to Managing ethics risks & opportunities audit clients has been curtailed Developing a culture of integrity (reduced) so that tighter conflict of interest expectations can be met Corporate governance o The advent and growth of multidisciplinary firms in the late 1990s, which included professionals to provide Professional ethics for accountants a broader range of assurance and other services to their audit clients has also Obtain an accounting qualification and ac quire been reduced by revised SEC and other a certain level of skills and experience standards Competent professional accounts in business o Several major audit firms have are divers, working industry, financial services, redeveloped specifically directed education and public and not-for-profit sectors consulting services Influence by technology, greater regulation, increasing globalization and ever-increasing risk Purpose of Ethics in business & accounting Must be able to employ an inquiring mind to profession their work, founded on the basis of their Relate accounting education to moral issues in knowledge of company’s finance and using a business context their skills and intimate understanding of the Provide the members of the profession with the company and environment in which it operates tools to take decisions that have ethical implications Develop a sense of moral obligation and social responsibility Develop the skills required to deal with ethical conflicts or dilemmas Develop the skills to deal with the ambiguities of the accounting profession Chapter 2: Ethical Thought & Moral Reasoning in o Compliance conditions in contracts Business: Basis for Ethical Behavior o affirmative action programs in corporations 4. Bad Judgement Human tend to make mistakes: Sometimes to public or specific groups take offense at these instances of bad judgement and take action to make directors and management aware that they do not approve Case; Nestle & African Mothers: Nestle products were boycotted in North America and Europe to stop the free distribution of baby formula powder to African mothers who were mixing it with contaminated water – thereby killing their babies 1. Unbridled greed Activist’ stakeholders were clearly able to Uncontrolled desired to have something make a difference – which most people that you need thought was for the best As an individual’s wealth and status rise, so does their tendency to be unethical 5. Activist Stakeholders Schemes to steal money from investors Ethical consumers: Interested in buying Dishonest banks that gives out mortgages products and services that were made in with high interest just so the bank can make ethically acceptable manners money and foreclosure on the house Ethical Investors: Took the view that their investments should not only make a 2. Physical & Environmental Concern reasonable return, but should do so in an Main issue: Concern about air pollution ethical manner centered on smokestack and exhaust pipe smog (e.g. acid rain, dissipation of Earth’s 6. Economic & Competitive Pressures ozone layer) Issues: Some people resorted to Causes: Respiratory irritation and disorders questionable ethical practices, including falsification of transactions and other Consequences: Threats to personal safety records and exploitation of environment or Action: Public (led by special interest workers groups) began to pressure companies as o Part of reason for triggering cases of well as governments directly to improve environment and/or financial safety standards for corporate emissions malfeasance Corporation unable to rely on cyclical return 3. Moral Sensitivity to profitability 1980s & 1990s: Significant increase in o To restore risk of unethical behavior sensitivity (includes feminist movement, to former level native people, minorities) o Due to lack of fairness 7. Competition o Discrepancies in equitable treatment Many products are now manufactured and Social Accountability: Develop workplace sourced all over the world because of the policies, standards, workplace auditor growth of global economies training programs, and reporting With lower rates of domestic workers, the frameworks resulting restructuring has been viewed as Desire for equity: allowing greater competitiveness and lower o Laws costs. Therefore, the burden on working o Regulations  people to keep their jobs does not ease as Issues: demand rises. Nor, given the greater o Lack of trust in corporate processes competition, greater volume would not and activities by investors and other always increase profit, so the burden on stakeholders companies will not to normal to previous o Realisation that unbridled greed by levels executives and/or dominant Increasing competition also have its cons shareholders i.e. the company sells counterfeit goods by Actions: Companies publish more claiming it is original or making sales near information on their websites and free- the expiry date standing reports on their CSR performance The public expects businesses to practice o Subjects include: Environmental, healthy business competition Health & Safety, Philanthropic, Other Social Impacts 8. Financial Scandals/ Malfeasance Financial Fiasco: Public has become 11. Synergy cynical about the financial integrity of The need for improved mechanisms and corporation controls to avoid unethical corporate o Fiasco related to the environment or behavior has become more commonly to dealings with employees, acknowledged customers, shareholders, or The public is concerned about the creditors have put their onus on consequences of businesses’ unethical corporations behavior on society, so they expect o To manage their affairs more businesses to be more careful in their ethically and to demonstrate that actions they have done so This also impacts politicians who react by Expectation Gap: Difference between wat preparing new legislation or tightening public thinks it is getting in audited financial regulations statements and what it is actually getting I.e. International Accounting Standards Credibility Gap: Lack of credibility has Board (IASB) & the International Federation spread from financial stewardship to of Accountants (IFAC) creates the encompass other spheres of corporate International Financial Reporting and the activity Code of Ethics for Professional Accountants 9. Governance Failures & Risk Assessment Enron, Arthur Andersen, WorldCom: 12. Institutional Reinforcement Failure to govern ethics risks – changed the The public’s consciousness influences calculus of risk management profoundly politicians, who react by drafting new laws o Bankruptcy of two of world’s largest or tightening regulations. In effect, the many companies and disappearance of problems that have come to the public’s one of world’s most respected attention result in institutional professional accounting firms reinforcement and codification in the law of within a year the land. The multiplicity of ethical issues Solution: Governance reform was has refocused attention on the need for perceived as necessary to protect public more ethical action interest The public expects regulatory institutions to o Directors – Risks faced by investigate any irregularities and strengthen corporation were properly managed, laws so that the public is not suffered by the ethics risks now seen to be a key villains in business aspect of process The creation of the International Financial Reporting Standards (IFRS) and the Code of 10. Increased Accountability & Transparency Ethics for Professional Accountants, are the Desired focal points for harmonization worldwide Institutional Reinforcement o The deviation from a profit-only focus does not mean that profit will fall – in Reactive Legislation: fact, profit may rise U.S. Sentencing Guidelines of 1991 o Profit is now recognized as an o Stimulated significant interest by incomplete measure of corporate directors and executives in whether performance – therefore an inaccurate companies were providing enough measure for resource allocation guidance to their personnel about o Friedman explicitly expected that proper behavior performance would be within the law Sarbanes-Oxley Act of 2002 (SOX) and ethical custom o Drive the reform of corporate governance and professional accounting New governance & accountability frameworks Anti-Bribery Regime Successful corporations are best served by o More advanced in that it seeks to governance and accountability mechanisms facilitate extraterritorial legal action o Different & broader set of fiduciary relationships than in the past 13. Environmental Reality Allegiances of directors and executives must Government reaction, mostly triggered by reflect stakeholder interests (goals, processes, disasters, has been significant at all levels outcomes) The growing concern for local and global o To direct attention to these new environmental sustainability has led to perspectives and modern accountability competitive and activist pressures for frameworks companies to report publicly on their o Which it should include report that focus on environmental impacts using sustainability them frameworks such as the Global Reporting Initiative’s G4 Guidelines Public expects business to take care of the Reinforced fiduciary role for professional environment and set aside budgets for accountability purposes of improving the environment - Replanting trees, no plastic bags day, Professional accountability save the turtle campaign which is o Focus their primary loyalty on the public prohibit the using of plastic straws interest o Adopt principles that protect public interest, i.e. independence of New mandate for business judgement, objectivity, integrity Issue: Loyalty by auditors to management Implications on Milton Friedman’s Theory on and/or directors can be misguided – have profit frequently proven to be self-interested that they o Discounts the myth of businesses will are untrustworthy lose too many opportunities for being Consequence: Primary fiduciary responsibility ‘ethical’ of professional accountants should be to the o Businesses focusing solely on profit is a public interest short-term strategy and is o Otherwise, the expectation of unsustainable in the long run stakeholders in society will not be met o Profit should be sough within the and the credibility of corporations will confine of law and the custom of the erode (destroy) society o Profit guides the allocation of resources to their best use of society Critical issues Chapter 2: Ethical Thought & Moral Reasoning in o Allows people to adapt ethically as the Business: Basis for Ethical Behavior culture, knowledge and technology change in society Ethics: set of rules of conduct or “moral code” o A good and valid form of relativism Characteristics of morality and moral codes Disadvantages o Beliefs about the nature of man o Truth, right and wrong and justice are all o Beliefs about ideals, about what is good relative or desirable or worthy of pursuit for its o Just because a group of people think that own sake something is right does not make it so o Rules laying down what ought to be done and what ought not to be done o Motives that incline us to choose the Egoism right or the wrong course A theory, in ethics, that human beings act or should act in their own interests and desires. Differentiate between moral & legal standards Egoism is opposed to altruism, which asserts that human beings should act in way that help Moral Standards others o Morals are concerned with the principles of A philosophical theory in ethics, which has at right and wrong behavior and the goodness least three subtypes, descriptive egoism, of badness of human character normative egoism and conditional egoism o Morality governs private, personal interactions Descriptive egoism o Morality demands that men should act from Known as psychological egoism, a sense of ethical duty. Morality has no such contends that people always act in self- enforcing authority from the state. It is serving ways, though they may try to autonomous disguise their selfish motives Legal standards o Law is the system of rules that a particular Normative egoism country of community recognizes as Termed ethical egoism, claims people regulating the actions of its members and should act in self-serving ways because may enforce by the imposition of penalties it is morally right o Law governs society as a whole, often dealing with interactions between total strangers Conditionally egoism o The law demands an absolution subjection Asserts that egoism is morally right and to its rules and commands. Law has acceptable if it leads to morally enforcing authority derived from the state. It acceptable ends is heteronymous Self-motivation actions can be considered morally acceptable, if they lead to the betterment of society and Ethical relativism the public as a whole Theory that holds that morality is relative to the norms of one’s culture. That is, whether an Altruism action is right or wrong depends on the moral norms of the society in which it is practice. The The unselfish concern for other people – doing same action may be morally right in one society things simply out of a desire to help, not but be morally wrong in another because you feel obligated to out of duty, Advantages loyalty or religious reasons. It involves acting o It allows for a wide variety of cultures and out of concern for the well-being of other practices. people. Contrasted with egoism, (which claims individuals are morally obligated to serve themselves first)  Examples of altruism Impartial – the person who makes them will o Doing something to help another person be required to judge him or herself with no expectation of reward according to the same standard by which he o Forgoing things that may bring personal or she judges others benefits if they create costs for others If an action is moral for one person, it must o Helping someone despite personal costs or be accepted as moral for everyone risks It builds social connections – studies show that 2. Respect for rational being people who are altruistic tend to be happier, to The person performing the action should be healthier and to live longer not see others as a means to further his own interests but instead respects them as individuals Consequentialism Kant claims that human being, they are to be treated as persons A theory that suggests an action is good or bad This can be understood as not treating depending on its outcome. An action that people as mere resources, respecting brings about more benefit than harm is good, their autonomy, rights even choices. People while an action that causes more harm than should be treated with respect and have benefit is not. The most famous version of this rights that should not be violated upon in theory is Utilitarianism the face of oppression 3. Autonomy Deontology The moral right one possesses, or the Universalizability, respect for rational being, capacity we have in order to think and make autonomy decisions for oneself providing some A theory that suggests actions are good or bad degree of control or power over the events according to a clear set of rules. Actions that that unfold within one’s everyday life obey these rules are ethical, while actions that Aims to protect human choice, rights and do not, are not. This ethical theory is most freedoms from the influence of closely associated with Immanuel Kant corporations, the state, or other Kant believes that ethical actions follow individuals from an ethical perspective. It universal moral laws, such as “don’t lie. Don’t essentially allows us to be our own ruler steal. Don’t cheat” Simple to apply. It requires that people follow the rules and do their duty. This approach Types of justice tends to fit well with our natural intuition about 1. Distributive justice what is or isn’t ethical Referred as Social justice A philosophy approach that requires an ethical Primarily on principles designed to cover decision depends upon the duty, obligations, the fair distribution of benefits and rights and justice. burdens of economic activity among Weakness individuals in a society o Categorical imperative does not provide Its roots are in social order and it is at the clear guidelines for deciding which principle roots of socialism, where equality is a to follow when fundamental principle, which also means that everyone is equal 1. Universalizability Benefits: wealth, power, freedom Not a substantive moral principle but a Burdens: taxes, to be subjected to logical feature of the moral terms: anyone restrictions over one’s property who uses such terms as “right” and Recognizes that all members of a social “ought” is logically committed to society do not have the same advantages universalizability mentally, physically and socially  There has to be redistribution of resources to achieve fair shares among all members 2. Libertarian of a society Committed to the principle that liberty is the most important political value 2. Compensatory justice People do not deserve equal economic Refers to the extent to which people are returns since they did not make the same fairly compensated for their injuries by contribution those who have injured the, Reward is compensated with effort Example: Means being free to make you own choices o Mine owners should compensate about your own life, that what you do with the workers (coal mine workers) your body and your property ought to be up whose health has been ruined to you o Compensation to workers who involved in accident People must not forcibly interfere with your liberty and you must not forcibly interfere 3. Retributive justice with theirs Known as corrective justice People are free to choose the kind of contribution they want to make Refers to the extent to which punishments are fair and just Those who commit certain kinds of wrongful acts, paradigmatically serious Virtue ethics crimes, morally deserve to suffer a It may, initially, be identified as the one that proportionate punishment emphasizes the virtues or moral character Justice is served and the wrongdoer In contrast to the approach that emphasizes behavior is changed or he or she is removed duties or rules (deontology) or that emphasizes from society the consequences of actions Example: Ng Chong Hwa carries a (consequentialism) punishment of up to 10 yeas’ imprisonment Someone in need should be helped because and a fine of at least RM1 million upon helping the person would be charitable or conviction for money laundering benevolent The concept of a virtue is the concept of something that makes its possessor good Theory of justice A virtuous person is a morally good, excellent or 1. Egalitarian admirable person who acts and feels as she Three claims about equality should o All persons have equal moral and legal standing o In some contexts, it is unjust for people Golden rule to be treated unequally on the basis of The principle of treating others as one wants to irrelevant traits be treated. It is a maxim that is found in most o When persons’ opportunities or life religions and cultures outcomes are unequal in some “Do unto others as you would have them do important respect, we have a reason to unto you” lessen that inequality o Everyone should be treated the same o All human beings are equals in some Self-interest fundamental respects o Each person has an equal claim to Refers to a focus on the needs or desires society’s goods and services (interests) of one’s self o Equality proportion regardless of Actions that display self-interest are often individual differences performed without conscious knowing Enlightenment o Example: Kindness, love, honesty, courage, integrity, fairness Ideas concerning God, reason, nature and humanity were synthesized into a worldwide that gained wide assent in the West and that Lawrence Kohlberg’s Cognitive Moral instigated revolutionary developments in art, Development philosophy and politics Central to Enlightenment thought were the use There are three levels of moral development and celebration of reason, the power by which with each level splits into two stages humans understand the universe and improve Suggested that people move through these their own condition stages in a fixed order and that moral The goals of rational humanity were considered understanding is linked to cognitive to e knowledge, freedom and happiness development The three levels of moral reasoning include preconventional, conventional and John Rawl’s Veil of Ignorance postconventional Rawl’s recognizes that persons act on self- interest Level 1: Preconventional Morality Veilf of ignorance: A person does not know who they are in the real world Obedience & Egoism A society where the members do not know It is shaped by the standard of adults and the anything about each other’s social position and consequences of following or breaking a rule backgrounds is formed Concern with self with egocentric manner Veil of ignorance helps to prevent people from Common among children promoting biased principles of justice towards their own combination of talents and characteristics 1. Stage 1: Obedience & Punishment orientation Rules that are unfair and with bias will not get Focuses on the individual’s desire to obey acknowledgement from the people rules and avoid being punished An action is perceived as morally wrong because the perpetrator is punished; the Vices & virtues worst the punishment for the act is, the more “bad” the act is perceived to be Vices The individual will obey in order to avoid o Opposite of virtue punishment o Evildoing or immoral behavior of a person 2. Stage 2: Instrumental Relativist Orientation o Will give negative effects to oneself and others The right behavior is determined by o The lives of citizens will be uneasy and whatever the individual believes to be in unhappy when majority of people in a their best interest (what’s in it for me) community are immoral and evil Shows a very limited interest in the needs of o Example: greedy, malice, drinking alcohol & others, only to the point where it might taking drugs, cruelty further the individual’s own interests Virtues As a result, concern for others is not based o Behavior that shows high moral standard, on loyalty or intrinsic good deeds and thoughts A child is asked by her parents to do a o Virtues will bring happiness and goodness chore. Then the child ask “what’s in it for to the heart of a person and it is the most me?” and the parents offer the child useful and attractive qualities in a person incentive by giving rewards o Good conduct arises from habits that in turn can only be acquired by repeated actions and corrections Level 2: Conventional Morality Universal principles of justice: equality of human rights and respect for the person as An individual sense of morality is tied to an individual personal and societal relationship People at this stage have developed their Still continue to accept the rules of authority own set of moral guidelines which may or figures, but this is now due to their belief that is may not fit the law. The principles apply to necessary to ensure positive relationship and everyone societal order In this way, the individual act because it is morally right to do so, if they violate those principles, they feel guilty 1. Stage 3: Good Boy, Nice Girl Orientation Behavior is determine by social approval The individuals want the approval of others Ethical reasoning process and act in a ways to avoid disapproval Emphasis is placed on good behavior and Ethical reasoning: pertains to the rights and people being “nice” to others wrongs of human conduct. Each person has 2. Stage 4: Law-and-Order Orientation standards that are defined by their personal The individual blindly accepts the rules and values which come into play when faces certain convention because their importance in dilemmas or decisions maintaining a functioning society Practical ethical decision making Rules are seen as being the same for o Philosophical theories, utilitarianism, everyone and obeying rules by doing what consequentialism, deontology, justice & one is “supposed” to do is seen as valuable fairness, virtue ethics and important o Ethical dilemma If one violates a law, there is an obligation o Practical constraints, personal and duty to uphold laws and rules characteristics, organizational features, I’m personally against the war but would environmental forces never publicly protest it on campus without o Behavior the administration’s permission Ethical Vs Unethical Behavior Level 3: postconventional Morality Ethical Behavior Individual live by their own ethical principles o An individual who follows the rules and (basic human rights/liberty/justice) abides the ethics will get considered as a They view rules as useful but changeable person with good and healthy habits mechanism, rather than absolute dictates that o Respectful must be obeyed o Being kind o Fair o Responsible 1. Stage 5: Social-Contract Orientation o Honesty Individuals have different view, right and Unethical Behavior values o A person who does not obey the rules and has an unethical manners will get viewed as Laws are regarded as social contracts a person with bad and unhealthy habits rather than rigid edicts o Disrespectful Individuals become aware that while laws o Bad and mean might exist for the good of the greatest o Unfair number, there are times when they will work o Irresponsible against the interest of particular individuals o Dishonest 2. Stage 6: Universal-Ethical-Principle Orientation Moral reasoning is based on abstract reasoning using universal ethical principles Quantitative Reasoning Approach amount of inductive evidence guarantees the conclusion Application of basic mathematics skills such as Not logical necessities, inductive algebra, to the analysis and interpretation of arguments are not simply true real world quantitative information in context of 3. Abductive Reasoning a discipline or interdisciplinary problem to draw Guessing – conclusions drawn here are Can be found in areas such as health, based on probabilities economics, politics and science Typically begins with an incomplete set of QR and mathematics are inextricably linked but observations and proceeds to likeliest while mathematics is primarily discipline, QR is possible explanations for the set primarily a skill It yields the kind of daily decision-making Ability to understand and use quantitative that does its best with the information at information and come to a solid conclusion. It hand, which is often incomplete involves critical thinking skills to draw justified conclusions from facts and evidence available at hand Moral Reasoning Approach Importance o As a component of a complete education – Thinking process with the objective of it is one of four-state mandate students determining whether an idea is right or wrong learning outcomes In order to know whether something is right or o To solve quantitative reasoning problems wrong one must first know what that something and to make well-reasoned judgements is intended to accomplish derive from quantitative information in a Called as moral developing variety of context It is important as people consistently faced with o Enable people to think critically about moral dilemmas and conflicts mathematical and numerical information Components of moral reasoning approach that surrounds them o Moral sensitivity: ability to see an ethical dilemma including how our actions will effect the others Logical Reasoning approach o Moral judgement: ability to reason correctly about what ought to be done in a specific The process of using a rational, systematic situation series of steps based on sound mathematical o Moral motivation: a personal commitment procedures and given statements to arrive at a to moral action, accepting responsibility for conclusion the outcome o Moral character: courageous persistence in spite of fatigue or temptations to take the 1. Deductive Reasoning easy way out Using a given set of facts or data to deduce other facts by reasoning logically It starts with the assertion of a general rule and proceeds from there to guarantee specific conclusion It moves from general rule to specific application If the original assertions are true, then the conclusion must be also true 2. Inductive Reasoning Generalize an information based on the pattern and trend It moves from specific to the general Conclusions reached by the inductive method are not logical necessities; no Chapter 2: ethical thought & moral reasoning in 10. ‘Ilm cannot be acquired through senses but business: basis for ethical behavior only through the intellect Irada (will) The psychological nature of man o When a man understands the full Ethical system relates to psychological significance of an object and the desirability foundation of a man of seeking it, a yearning is aroused in him to If the concept of human psychology is wrong, achieve that object by adopting appropriate then the codes of morality will fall means. This yearning is Irada Al-Ghazzali examines the psychological nature o The will in man is different from the will of of a man and he discovers that all psychological animals phenomena originate in the Self o The will in man is conditioned by the development of knowledge through intellect o The will in animals is a quality of anger as Self well as of appetite The Self or Qalb is the essence of man Called as Qalb (heart) - it is connected with he Elements in the nature of man physical heart, even though the connection is merely transcendental 1. The sage in him – ‘Aql Al-Ghazzali – self includes Qalb, Ruh (soul), 2. The pig – ash-Shahwa (or his lust or gluttony) Nafs (desire? Nature) and ‘Aql (intellect) 3. The dog – al-Ghadab (or anger and ferocity) 4. The devil – the brute which incites these two Six powers animals to rebel against ‘Aql 1. Appetite - Eating and drinking are samples of acts that assist the body ‘Aql and Shaytaniyya are contrary forces in the - To secure human progress and the human self that work through the Shahwa and species’ existence the Ghadab for construction and destruction 2. Anger If ‘Aql overcome the evil tendency, the self will - Derived from ferocious be on the state of an-Nafs al-Mutma’inna (the - A person’s extreme anger can bring tranquil soul) them to unsafe situations If Shaytaniyya overcome ‘Aql, the Self will be in 3. Impulse the state of an-Nafs al-Ammara (the instigating - Something that causes something to soul) happen or happen more quickly When divine element is continually struggling 4. Apprehension with the human evil tendency, the self is in the - Suspicious or worry of the future state of an-Nafs al-Lawwama (the admonishing 5. Intellect soul) - Derived from divine - Intellect related to ‘Aql 6. Will Axioms of Islamic ethical philosophies - It allows to deliberate action 1. Unity Related to the concept of tawhid The political, economic, social and religious Self Vs Animals aspects of man’s life form a homogeneous ‘Aql (intellect) whole 7. Intellect is a fundamental rational faculty in A Muslim businessman will NOT: man which enables him to generalize and o Discriminate among his employees, form concepts suppliers, buyers or any other 8. Intellect is the basis of the ‘Ilm (knowledge) stakeholder 9. ‘Ilm includes: knowledge of the affairs of o Be coerced into unethical practices, this world and the next, rational principles, since he has only Allah to fear and love. self-evident truth He follows the same, unified code of  behavior whether he is in the mosque, Concept of responsibility earning a living or acting out other o Fard al ‘Ayn aspects of his life o Fard al kifayah o Hoard his wealth avaricious. The Application to business ethics: concept of Amanah or trust is of critical o A Muslim businessman cannot blame importance to him his actions on the pressures of business 2. Equilibrium or on the fact that everybody else is Related to the concept of ‘Adl behaving unethically. He bears the The property of equilibrium is a dynamic ultimate responsibility for his own characteristic which each Muslim must actions strive for in his or her life o All obligations must be honored unless To maintain a sense of balance between morally wrong those who have and those who have not, Allah stresses the importance of giving and 5. Benevolence condemns the practice of conspicuous It is all about showing others kindness or consumption ihsan without expecting anything in return Allah admonishes Muslim businessman to: It is an act that helps other people than the o “give full measure when you measure people from whom the act proceeds and weigh with a balance that is without requiring them to do anything straight: that is the most fitting and the Six kinds of benevolence most advantageous in the final o If a person needs a thing, one should determination” give it to him, making as little profit as o Another meaning of ‘Adl is justice and possible. If the giver forgoes the profit, it equity will be better for him o A balanced transaction is also equitable o If a man purchases anything from a poor and just person, it will be more graceful on his 3. Free will part to suffer a little loss by paying him Individuals have been given the freedom (to more than what he considers to be the a degree) to direct their own lives proper price He has been given the ability to reason and o It is only proper that people who want to make decisions, to pursue whatever path in return the goods they have purchased life he desires and most significantly, to act should be permitted to do so as a in line with any code of conduct he chooses matter of benevolence He has the option of acting ethically or o It is a graceful act on the part of a debtor unethically if he pays his debts without being asked Application to business ethics: to do so, if possible long before they are o Man has the freedom to make a due contract and either honor or break it. A o When selling items on credits, be kind Muslim, who has submitted to the will and also do not push for payment if of Allah, will honor all contracts customers do no pay according to the o Allah clearly directs all Muslims to fulfil terms their obligations or contracts 4. Responsibility It implies no responsibility and Halal (Lawful) and Haram (Unlawful) accountability War’al-Adul: avoidance by minister of justice of To meet the dictates of ‘Adl and unity, man things that have been pronounced Haram by needs to be accountable for his actions jurists Islam is fair; a person is not responsible for War’as-Siddiqun: abstaining from things that his/her action if he/she: are naturally Halal but should be avoided for o Has not reached the age of puberty the sake of God’s pleasure o Is insane War’al-Muttaqin: abstention from things that o Is acting during sleep are Halal yet can lead to Haram if taken  War’as-Salihun: abstention from things that are neither completely Haram nor completely haram Makruh o Anything that is inappropriate, distasteful or offensive o Although makruh behaviors are less bad than sins or haram, it is nevertheless advised that they should be avoided Haram o In the religious writings of the Quran and the Sunnah, haram acts are forbidden Chapter 3: Approaches to ethical decision o Concern with overall utility-embraces all of making and workplace ethics these variants Deontology Ethical decision-making framework (EDM) o Focus on the obligations or duties Incorporates traditional requirements for motivating or decisions or actions rather profitability & legality, as well as requirements than on the consequences of the actions shown to be philosophically important o Rightness depends on the respect shown demanded by stakeholders for duty & the right & the fairness that duties Designed to enhance ethical reasoning by reflects providing: o It also could yield universal respect for o Insights into the identification and analysis human rights & fair treatment for all of key issues to be considered and Virtue ethics questions or challenges to be raised o Concerned with the motivating aspects of a o Approaches to combine and apply moral character demonstrated by decision decision-relevant factors into practical makers action o Consists of two dimensions: the actus reus Proposes that decisions or actions to be (guilty act) & the mens rea (guilty mind) compared against three standards for a o Those character traits dispose a person to comprehensive assessment of ethical behavior act ethically & make that person morally o Consequences or well-offness created in good human being terms of profit, net benefits or net cost o Rights & duties affected including fairness and those protected by law Stakeholders impact analysis o Motivation or virtues expected Modified traditional decision-making The first two of the considerations involve approaches practical application of the philosophical o Each approach has been modified to principles of consequentialism, deontology include tests of virtues expected and justice are examined by focusing on the o Three traditional approaches as follows: impacts of a decision on stakeholders and - Modified 5-question approaches (short other affected stakeholders. An approach term impacts & no externalities) known as stakeholder impact analysis - Modified moral standards approach The third consideration is motivation of (medium and long term impacts with decision maker involve applying what externalities) philosophers known as virtue ethics - Modified Pastin’s approach (decisions These approaches provides insights that likely within companies, innovative to be helpful when assessing current and future techniques) governance problems as part of risk Fundamental interests of stakeholderse management principles 1. Well-offness: the proposed decision should result in more benefits than costs 2. Fairness: the decision should result in a fair Philosophical Approaches distribution of benefits and burdens Each approach contributes differently to a 3. Rights: the decision should not offend any useful & defensible approach for ethical of the rights of any stakeholders and decision making in business or personal life decision maker Consequentialism, utilitarianism or teleology 4. Virtuosity: the proposed decision should o An act is morally right if and only if that act demonstrate virtues reasonably expected maximises the net good o Some believe that only the act that maximises the net benefit of favorable minus negative consequences is morally right or ethical Modified 5-Question approach Modified Pastin’s approach Involves examining the first four key aspects of ethics. The last aspect – the examination of motivation, virtue and character – has been added to ensure the review of these items Objective of these techniques should be construct a profile about motivations, virtues, character traits and processes involved with and exhibited by the decision or action that can 1. Ground-rule ethics: pastin uses this concept to be compared to those expected show that individual and organisation have It involves the examination or challenges of a ground rules or fundamental values that govern proposed decision through the five questions their behavior or their desired behavior as the table showed 2. End-point ethics: pastin suggest employing the If a negative response is more than one when all full extent of the measurement techniques- five questions are asked, the decision maker profit, cost-benefit analysis, risk benefit can iteratively attempt to revise the proposed analysis and ranking of stakeholder impacts action to remove or offset the negative 3. Rule ethics: used to indicate the value of rules If the revision process is successful, the that spring from the application of valid ethical proposal is ethical. If not, then it should be principles to an ethical dilemma abandoned as unethical 4. Social contract ethics: Pastin suggest Even if there is no negative response when the formulating the proceed decision into an question all asked, they should improve the imaginary contract would be helpful – it would proposed action using the question as a guide allow the decision maker to change places with the stakeholder to be impacted on Modified moral standards approach Steps for ethical decision 1. Identify the facts and all stakeholder groups and interests likely to be affected 2. Rank the stakeholders and their interests, identifying the most important and weighing them more than other issues in the analysis All four standards must be applied, none is a 3. Asses the impact of the proposed action on sufficient test by itself each stakeholder group interest with regard to This approach to stakeholder impact analysis their well-offness, fairness of treatment and builds directly on the fundamental interests of other rights, including motivations, virtues and stakeholder character traits expected It is more general than the 5-question approach and leads the decision maker to a more broadly based analysis of net benefit rather than just profitability as a first challenge of proposed decisions In result, it will offer a framework that is more suited to the consideration of decisions that have significant impacts outside the corporation, including externalities Measurement of quantifiable impacts of all stakeholders and their interests and on a full appreciation of the significance of 1. Profit the impacts on the position of each Fundamental to the interests of stakeholders & CBA does not fully reflect the importance of essential to the survival & health of our a stakeholder or the impact involved corporations Profit essential simply to replace inventory at the higher prices required Short-term measure Map of corporate stakeholder accountability Corporation 1. Shareholders 2. Employees 3. Customers 2. Bringing the future to the present 4. Suppliers It is handled in a parallel in manner to 5. Activists capital budgeting analysis, where the future 6. Governments values are discounted at an interest rate 7. Creditors that reflects the expected interest rate in 8. Lenders future years 9. Other, including the media who can be Demonstrated as part of cost-benefit affected by or who can affect the analysis in Brooks 1979 achievement of the corporation’s objectives Assessment of non-quantifiable impacts 3. Dealing with uncertain outcome Fairness among stakeholders Analysis can be based on best estimates, o The concern for fair treatment on current on three possibilities which is most issues that related to human society such optimistic, pessimistic and best estimate or as discrimination against women, hiring, on expected values developed from a promotion & pay computer simulation o A decision will be considered unethical if its All these are expected values, which are not properly addressed fairly among other combination of a value and a probability of stakeholders its occurrence Rights of stakeholders o A decision will only considered ethical if its impacts do not offend the rights of stakeholders impacted upon & rights of The advantage of this expected value formation person making decision is that the cost-benefit analysis can be o The stakeholders rights involve life, health & modified to include the risk associated with safety, fair treatment, exercise of outcomes to be included conscience, dignity & privacy, freedom of Referred to as risk-benefit (RBA) speech 4. Identifying stakeholders & ranking their interest The usefulness of stakeholder impact analysis depends on the full identification Workplace ethics Workers are entitled for fair policies that protects their rights on fairness 1. Employee rights Life 4. Health and safe workplace Health and safety The need for a healthy & safe environment Fair treatment in the company is also important Exercise of conscience Smoke-free workplace areas where the Dignity and privacy company must recognise the need for Freedom of speech fitness and recreation by establishing centres for these on-sites 2. Motivation, virtue, character traits & process Employer cannot take this matter lightly expectations because it is unethical Motivation o Self-control rather than greed o Fairness or justice considerations Ability to exercise one’s conscience o Kindness, caring, compassion and benevolence Ability to exercise one’s conscience: ability to Virtues act according to their fundamental value of o Duties loyalty individual o Integrity and transparency Conscience: guide to one’s behavior whether it o Sincerity rather than duplicity is right or wrong Character traits A worker just did what he was ordered to do will o Courage to do the right thing per personal & no longer provide the worker with protection in professional standards many jurisdictions, so the worker should o Trustworthiness exercise his conscience o Objectivity & impartiality Lead to blind loyalty concept: a concept where o Honesty & truthfulness worker just do what they were ordered to do o Selflessness rather than selfishness Those who engage in blind loyalty in allegiance o Balanced choices between extremes is more important than objectivity They believe keeping a positive image of the 3. Fair treatment/discrimination person or cause is more important that the The quality of treating people equally or in a truth way that is right reasonable How to avoid blind loyalty There should be equal opportunity for o Understand your responsibility to your employment and equal pay for balance employee. Blind loyalty is not a job work (women & minority) requirement. Loyalty is earned over time not Fair policies include: just simply given o Fair promotion o Be loyal to employer after they earned your o Fair wages loyalty o Fair hours of working o Respect and over time because there is a People with disabilities are also required for deep relationship between two sides fair treatment and this is considered as How to prevent blind loyalty ethical o Whistle-blowing Discrimination is treating a person or a particular group differently It involves age, race, gender or sexual Whistle Blower preferences A person who exposes information or activity It is considered unethical and illegal that is deemed illegal, unethical or not correct It may lead to anxiety, sadness and within the firm depression, thus, productivity of the To protect the firm’s interest from being company will be lower manipulated by a certain person  Discover any wrongdoings done by anyone o White: collar crime refers to financially within the firm motivated, non-violent crime committed by Send a report or directly inform the manager or business and government professionals the person with the highest rank in the firm o Executive are expected to ensure that they take reasonable steps to guide, influence and control employees who might be Whistle-blowing inclined to become involved and external auditors are expected to be alert for A policies that may protect the workers from potential problems any harmful act or action from employer o Experience has suggested that an Where whistle blowers are encourage to report understanding for the circumstances their concern outside the enterprise leading to enabling fraud and white-collar Receive protection and their identify are also crime and the motivation for it provides a kept confidential useful foundation for preventive measures Employers cannot discriminate against an employee who exercises his right under Bribery and facilitating payment Occupational Safety and Health Act (OSHA) o Bribery: usually a larger payment than It includes nominal and is paid to gain a competitive o Job loss advantage and without which desired result o Demotion would not to occur o Disciplinary action o Facilitating payment: usually a nominal in value and made a speed up a result that would have happened anyway given enough Whistleblower schemes time o The offering, giving, receiving or soliciting of Primarily for concerns where the interest of any times of value to influence the actions others or the Group are at risk of an official or other person in charge of a Designed to encourage employees to report public or legal duty alleged malpractices or misconduct, to ensure o Bribery is offered to do something for that all allegations are thoroughly investigate someone for the expressed purpose of and suitable action is taken where necessary receiving in exchange o Why problematic other than illegality? - It adding the cost of the operation, good Trust or service - Undermining the practice of purchasing Refers to the relationship between manager based on merit in a country or firm and employee in the organisation - Risking possible negative It is important to have a sufficient trust between consequences from stakeholder group, both parties to that employees can share ideas should find out without fear of losing jobs and to build loyalty - Impossibility of assessing sales forces and hardworking effectiveness In order to maintain trust, the management - Impossibility of enforcing performance need to be prepared to make trustable or obtaining a contract, after bribes are commitments paid Crisis management Challenges related to workplace ethics o A process by which an organisation deals Fraud & white-collar crime with a disruptive and unexpected event that o Fraud: wrongful or criminal deception threatens to harm the organisation or its intended to result in financial or personal stakeholders gain o A crisis has the potential to have a very significant impact of a crisis on the reputation of the company and its officers,  on the company’s ability to reach its objectives and its ability to survive o If ethical behavior is considered to be a great importance by a corporation in its normal activities, ethical considerations should be more important crisis situations o How to avoid/minimise impacts - Anticipating crisis or recognising early warning signs as soon as possible and responding to soften or minimise the impact and shorten the time during which the crisis is uncontrolled - Proper advance planning, by continued monitoring and speedy, effective decision making during crisis Chapter 4: professional & business ethic: the Conflicts between competing interest and accountant & organisation stakeholder o Sometimes the priority of competing for interest can be made clear in training session. If not, the protected routes for consultation should be available When should the professional blow the whistle and to who? o A protected internal route for discussion and reporting should be available for professional accountants Adequate protection of whistle blower o The most successful arrangements for Threats to good governance & accountability whistle-blowing involve reporting, in confidence, to an autonomous individual of Misunderstanding objectives and fiduciary duty high rank or someone who reports to a Failure to identify & manage ethics risks person of a very high rank in the Conflict of interests organisation Service decisions involving judgement Key elements of corporate governance & o Codes of conduct should fashioned so it accountability does not rule out the exercise of a Compelling evidence for the development of an professional’s value when those are ethical corporate culture required for the judgements they must Corporate psychopaths make Developing, implementing & managing an ethical corporate culture Director & officer liability Ways to increase profit by having a proper code Corporate codes of conduct of conduct Ethical leadership Public accountability benchmarks It will give perception from consumer thus influence the consumer to buy products from the company Corporate code of ethic and conducts Attract investors to invest in ethical company because the probability of having fraud is low Corporate code of conducts vary extensively in Financial institutions will consider providing design and objective financing policies because of the companies Codified set of ethical standards to which ethical environment. Perception that day will corporations aim to adhere commit to pay Commonly generated by corporations themselves Crucially they are not directly subject to legal Ethics of data usage and technology enforcement Data ethics encompasses the moral obligations of gathering, protecting and using personally Corporate codes of conduct identifiable information and how it affects individuals Conflicts between codes It allows accountant to catch any example of o The employee is subjected to an employer’s unethical data collection, storage or use code & other code (professional code) To analysts, data scientists and information o To avoid the ethical dilemma of debating technology professionals which code to follow, consultation with By doing so, accountant can protect their ethics officer is advised customers’ safety and save their organisation from legal issues Nature of profession o Accountant has a fiduciary duty towards the stakeholders such as shareholders, Profession is any type of work that needs creditors, investors special training or a skill, often one that is o Accountant must abide by the professional respected because it involves a high level of code of conduct as the public trus