ACC 4124: Advanced Audit, Governance & Risk

Professional Ethic and Ethical decision making

By – Nuwan Sameera
Lecturer
Department of Accountancy and Finance
Faculty of Management Studies
Rajarata University of Sri Lanka
Ethics

The word ‗ethics‘ is derived from the Greek word ‗ethos‘

(character) and Latin word ‗moras (customs).
• Ethics could be described as decisions, choices, and actions
(behaviors) we make that reflect and enact our values.
• Ethics covers moral principles and norms by which human
actions may be judged
Kohelberg’s Cognitive Morality Development

Level 1 (Pre-Conventional)
▶ Child’s level. (However, some adults act out of this level.)
▶ People at this level judge the morality of an action by its direct consequences.
▶ solely concerned with the self in an egocentric manner.
▶ Person has not yet adopted or internalized society's conventions regarding what
is right or wrong, but instead focuses largely on external consequences that
certain actions may bring
1. Punishment avoidance and Obedience orientation
(How can I avoid punishment?)

2. Exchange of Favors: Self-interest orientation

(What's in it for me?)
(Paying for a benefit)
Kohelberg’s Cognitive Morality Development (Cont’d)
Level 2 (Conventional)

• typical of adolescents and adults.

• Those who reason in a conventional way judge the morality of actions by
comparing them to society's views and expectations.
• At this level an individual obeys rules and follows society's norms even when
there are no consequences for obedience or disobedience.

3. Good Boy/Good girl: Interpersonal accord and conformity

(Social norms)
(The good boy/good girl attitude)
4. Law & Order: Authority and social-order
maintaining orientation
(Law and order morality)
Kohelberg’s Cognitive Morality Development (Cont’d)
Level 3 (Post-Conventional)

5. Social Contract - does the rule truly serve all he

members of the community

6. Universal ethical principles - why the rules are

there any how it serve the society.
Ethics for Professional Accountants
 Ethics for Professional Accountants

Professional values, ethics, and attitudes include a commitment to

• (a) Technical competence and professional skills,
• (b) Ethical behavior (e.g., independence, objectivity,
confidentiality, and integrity),
• (c) Professional manner (e.g., due care, timeliness,
courteousness, respect, responsibility, and reliability),
• (d) Pursuit of excellence (e.g., commitment to continual
improvement and lifelong learning), and
• (e) Social responsibility (e.g., awareness and consideration
of the public interest).
Fundamental Ethical Principles
Code of Ethic for Accountant in Sri Lanka

The Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) as a member of
the International Federation of Accountants (IFAC) is committed to the IFAC’s broad
objective of developing and enhancing a co-ordinated worldwide accountancy
profession with harmonised standards.

This Code is mandatory for all members of the Institute of Chartered Accountants of
Sri Lanka to observe in respect of the performance of professional services in Sri
Lanka after 15 July 2017.
Ethics for Accountant in Business
Ethics for Accountant in Public practice
Non-compliance with laws and regulations (NOCLAR)
Non-compliance with laws and regulations (NOCLAR) (Cont’d)
Why it is important?
Non-compliance with laws and regulations (NOCLAR) (Cont’d)
Non-compliance with laws and regulations (NOCLAR) (Cont’d)
 Audit independence

• In the case of an assurance engagements it is in the public interest and, therefore,

required by this Code of Ethics, that members of Audi teams, firms and, network
firm’s be independent of assurance clients.

Independence

Independence of Independence in
mind appearance
Independence
Independence of mind:

▶ The state of mind that permits the expression of a conclusion without being affected
by influences that compromise professional judgment, thereby allowing an
individual to act with integrity and exercise objectivity and professional skepticism.

Independence in appearance:

▶ The avoidance of facts and circumstances that are so significant that a reasonable
and informed third party would be likely to conclude, weighing all the specific facts
and circumstances, that a firm’s, or a member of the audit team’s, integrity,
objectivity or professional skepticism has been compromised.
?
Questions ?
Thank You !