16 | ACCOUNTING AND SOCIETY

Contents
Preview 17
Introduction
Objectives
Teaching materials

Part A: Accountants as members of aprofession 19

Public interest or self-interest? 19
Responsible decision-making
Enlightened self-interest 22
MODULE 1

Ideals of accountingentrepreneurialism andprofessionalism 22

What is a profession? 23
What is a professional? 25
Professionsthe traditional view and the market control view 26
Trust and professions 27
Attributes of the accounting profession 27
A systematic body of theory and knowledge
An extensive education process
An ideal of service to the community
A high degree of autonomy and independence
A code of ethics for members
A distinctive ethos or culture
Application of professional judgment
The existence of a governing body
The professions regulatory process 34
Accounting Professional and Ethical StandardsBoard
The quality assurance process
Professional discipline

Part B: Interaction with society 39

Accounting roles, activities and relationships 39
Relationships and roles
Accounting work environments
Public practice accounting
Professional accountants in business
Accounting in small and medium enterprises (SMEs)
Public sector
Not for profits (NFPs)
Social impact of accounting 48
Social impact exampledepreciation and behaviour
Credibility of the profession 50
Credibility under challenge
Key issues causing reduced credibility
Restoring credibility to accounting
Capability considerations 54
Business leadership capabilities
Technical skills, knowledge and experience
Soft skills, knowledge and experience
TSKE and SSKEcareer perspectives
Career guidance system

Review 57

Readings 59
Reading 1.1 59
Reading 1.2 63

Suggested answers 65

References 71
 76 | ETHICS

Contents
Preview 77
Introduction
Objectives
Teaching materials

Part A: Professional ethics 78

Impact of ethical or unethical decisions
Ethicsan overview
Ethics in accountingreal-life scenarios
The accounting work environment
Applying ethics

Part B: Ethical theories 84

Teleological theories (consequential)
Deontological theories (duty based)
Virtue ethics
Many possible outcomes

Part C: Compiled APES 110 Code of Ethics for

ProfessionalAccountants 92
The public interestethics in practice
MODULE 2

An introduction to the APESB Code of Ethics 94

Part A of the Codegeneral application of the Code
The conceptual framework approach (ss. 100.6100.11)
Part B of the Codemembers in public practice
Part C of the Codemembers in business
APES GN 40 Ethical Conflicts in the WorkplaceConsiderations for Members
in Business
Examples of ethical failures by accountants 119

Part D: Ethical decision-making 122

Factors influencing decision-making 123
Individual factors
Organisational factors
Professional factors
Societal factors
Ethical decision-making models 129
Philosophical model of ethical decision-making
American Accounting Association model

Review 135

Suggested answers 137

References 153
Ethics websites
 158 | GOVERNANCE CONCEPTS

Contents
Preview 161
Introduction
Objectives

Part A: Overview of corporate governance 163

Governance 163
Accountants and effective governance
Importance of governance
Governance and performance
The need for governance 166
Stewardship theory
Agency theory
Agency issues and costs
Components of corporate governance 170
Corporations
Shareholders
The board
Directors
The role of the board
Committees of the board
Internal and external auditors
Regulators
Stakeholders
Management

Part B: International perspectives on corporate governance 204

Global push for improved governance 204
Thirty years of corporate governance 205
International development timetable
United Kingdom
United States
Other international approaches
Australia
MODULE 3

Part C: Codes and guidance 209

OECD Principles of Corporate Governance 209
UK Financial Reporting Council Corporate Governance Code 215
ASX Principles and recommendations 217
Alternative international approaches togovernance 225
Market-based systems
Relationship-based systemsEuropean approaches
Relationship-based systemsAsian approaches

Part D: Non-corporates and governance 237

Governance in other sectors
Family-owned business and small and medium-sized enterprises
Not-for-profit organisations
Public sector enterprises
The significance of the non-corporate sector to the economy

Part E: Governance failures and improvements 244

Common failure factors 244
Remuneration
Wilful blindness
Complex financial instruments
Improving corporate governance 246
Risk management
Independence of the chair of the board
Continued evolution of corporate governance
 CONTENTS | 159

Review 250

Appendix 251
Appendix 3.1 251

Suggested answers 259

References 267

MODULE 3
 274 | GOVERNANCE IN PRACTICE

Contents
Preview 275
Introduction
Objectives
Corporate governance success factors 277
Board appointment and cessation
Diversityfairness and performance
Remuneration and performance
International debates about remuneration levels and fairness
Operational issues 293
Employees generally
Occupational health and safety
Fair pay and working conditions
Family and leave entitlements
Ethical obligationsemployee governance
Trade and labour unions
Audit and related regulation
Impact of the legal system on the corporation 300
The legal system
The economy and the legal system
Proof, penalties and redresscriminal and civil 301
Laws leading to criminal penalties
Laws with civil outcomes and civil penalties
Redress compared with penalties
Competition and protecting markets for goods and services 304
Competition policy
Competition and stakeholders
Regulating anti-competitive conduct
Abuse of market power
Mergers and acquisitions
Agreements between competitorscartel conduct
Unilateral restrictions on supply (exclusive dealing)
Resale price maintenance
Approvals procedures
Legal compliance and governance 316
Whistleblower protection
Consumers and customers 322
Caveat emptor to consumer protection
Misleading conduct and representations
Unconscionable conduct 327
Governance issues in the non-corporate sector 329
Government bodies
Charities and not-for-profits sector
The corporation and financial markets 334
Role of markets
Information and the media
MODULE 4

Protecting financial markets

Insider trading
Market manipulation
Bribery
International experience of bribery and corruption
Rogue trading
Ponzi schemes
Phoenix companies
Representation
The representational role of institutional investors
Expanding ethics

Review 357

Suggested answers 359

References 367
 376 | CORPORATE ACCOUNTABILITY

Contents
Preview 379
Introduction
Objectives
Teaching materials
Overview and introduction to key elements 382
The evolution of corporate accountability
History of CSR reporting
Environmental sustainability
Social sustainability
Economic sustainability
Linking environmental, economic and social sustainability
The boards responsibility for sustainability of the organisation and
organisationalinitiatives
Introduction to the key elements
Drivers of increased business accountability 391
The importance of climate change and its relevance to CSRreporting
The Global Financial Crisis (GFC) and the recognition of market and ethical
failures:acasefor accountability and transparency
Other incentives tied to maximising the value of the organisation and
shareholder wealth
Corporate identity and accountability
The shareholder primacy perspective
Externalities and potential government intervention
Linking to ethical theories 402
Enlightened self-interest
Stakeholder theory
Organisational legitimacy
Institutional theory
Summary
What can be measured and reported? 408
What is measurable?
Limitations of traditional financial reporting 411
Scope of reporting
Elements of financial reporting
The practice of discounting future cash flows
Reliable measurement and probability
Focus on short-term results
The entity assumption
Reporting and guidelines 415
What is required? (Mandatory reporting)
Guidelines and non-mandatory reporting
Other initiatives
Current reporting practice 441
Surveys of current reporting practice
Examples of best practice and innovative reporting
International initiatives on climate change 444
Climate change accounting techniques
Accounting for the levels of emissions
Current developments 451
Socially responsible investments
Natural capital accounting
MODULE 5
 CONTENTS | 377

Review 455

Readings 457
Reading 5.1 457
Reading 5.2 459
Reading 5.3 460

Suggested answers 463

References 475
Websites monitoring progress

MODULE 5