Professional Ethics and Self-

Regulation,
Ethical Decision-Making
 Professionalization
A profession is defined as a community of
people bounded by the activities they perform,
founded on a theoretical background acquired
through formal education.
Professions are important in society. Their roles
(medicine, law, engineering or business) affect
the lives of many people.
Professions are neither made, nor are they born:
They evolve out of efforts from large numbers of
people with a common interest and a
commitment to a set of ideals.
In the beginning, formal training and
qualifications are not a prerequisite for
membership, but as associations mature,
technical qualifications become more important.
(First pilots?)
Professionalism is a form of licensing that
achieves two objectives:
1. It ensures that members have acquired the
necessary skills and knowledge for the
profession.
2. It develops an occupational identity that is
committed to professionalism.
The Profession as an Exclusive Franchise

A recognized profession acquires an exclusive

franchise in the field of work with which it is
identified.
In fields like medicine, where public health is at
stake, there is a strictly guarded monopoly.
Recognition by a higher professional association
helps create the professional monopoly (Türk
Tabipler Birliği - Turkish Doctors’ Union for
Turkish doctors)
Prestige, social ranking and economic rewards
for different professions vary from society to
society, but in general in the world, doctors are
higher up in the ranking, attorneys at law are
very high and real estate people are also ranked
high, so are actors and actresses.
 Characteristics of a Profession
OK, doctors are professionals, how about
plumbers?
Here is a checklist to help distinguish between a
profession and an occupation:
 The Power of Knowledge
The primary quality that distinguishes a
profession from a non-profession is the reliance
that clients place on their professional advisers
due to their superior knowledge and expertise.
In other words, professionals know things
others do not.
If the client considers this knowledge important,
then the profession has a major advantage over
those that don’t have it.
This power of a professional is based on her/his
formal education and practical experience.
Let us repeat the question “How about
plumbers?”
Are we saying that plumbers do not receive
technical training?
No, what we are saying is that a plumber’s training
is within the grasp of those who want to do it
themselves.
Accountants, lawyers, engineers and pilots are all
within this scope.
Possession of superior and hard to obtain
knowledge places professionals in a higher-up
place in their relationships with clients, so much
that the client has no choice but to trust the
professional.
However, this makes clients vulnerable to the
questionable practices of careless professionals
(tools forgotten inside a client in a surgery, a
pilot flying a plane into a sea or a mountain
side).
The Implications of Losing the Public’s Trust

The status of any profession rests on social

consent, and in return, the professional accepts
to subordinate self-interest to public interest.
The credibility of any profession is maintained
only if the professional is perceived to be
honest, independent and provides quality
service.
 The Ethics of Self-Regulation
Self-regulation means control by a governing
body over its membership, and the activities of
its members.
The self-regulatory of any profession includes
entry qualifications, quality assurance processes,
conformity with the professional regulations and
rule enforcement.
 Professional Ethics and the Code of
Professional Conduct
Professional ethics is defined as ethics in a
professional situation. A key element in this
definition of ethics is a rule or standard by which
right or wrong behavior can be checked and
judged.
The principle underlying professional ethics is
exactly the same as that of ethics: a rule or
standard by which right and wrong can be
sought and judged.
However, rather than rely on the philosophy of
ethics to define the rule or standard, the rules or
standards that define right from wrong are the
principles of professional conduct.
Why Have Codes of Professional Conduct?
Some commentators distinguish terms such as
codes of ethics, codes of conduct, and codes of
practice on the basis of their content.
For example, code of ethics are statements of
values and principles that define the purpose of an
organization, codes of conduct are statements
that define acceptable and unacceptable codes of
behaviors, and codes of practice interpret and
illustrate the principles of professional conduct
with examples that guide decision-making.
The major benefits of a code of professional
conduct are twofold: First, the code serves as a
public relations tool (it fosters a positive image
of the profession and it serves to build and
retain public confidence). These codes provide
assurance to the public that the profession is
monitoring itself by establishing high standards
of conduct with disciplinary procedures in effect
in case violations occur.
Second, the code is designed to protect the
potentially gullible client from the incompetent
and unscrupulous practitioners, and also
protect the qualified practititoner from unfair
competititon.
Codes provide the moral foundation by
conveying the principles of professional conduct.
The Joint Code of Professional Conduct

This is the first code in the world and was

published by two professional institutions in
Australia: CPA Australia and ICAA.
(See next slide)
 Fundamental Principles of Professional
Conduct
These provide the framework for the
profession’s tecnicaal standards and ethicxal
rules: In effect, the principles provide the
benchmark by which professional behavior is
compared and judged. Simply said, behavior
consistent with the principles of professional
conduct is ethical, and behavior inconsistent
with the principles of professional conduct is
unethical, or at least, unprofessional.
Public Interest: Members must, at all times,
safeguard the interests of their cients and
employees provided that they do not conflict
with the duties and loyalties owed to the
community and its laws.
Integrity: This is vital to maintaining public trust,
because without it, users would have no faith in
the professionals’ work or their opinions.
In general, violation of integrity occurs when an
act or decision is:
• is dishonest,
• is evasive,
• omits pertinent facts,
• subordinates the public interest for personal
gain and advantage,
• takes personal advantage or profit from the
knowledge of the cient’s affairs,
• accepts exorbitant fees even when the cient is
innocently ready to pay them,
• succumbs to pressure from clients and
employers to overlook professionak
obligations
Objectivity: This principle states that members
must be fair and must not allow prejudice, conflict
of interest or bias to override their objectivity.
Briefly, the principle imposes an obligation to be
impartial and free from conflicts of interest.
Independence: This principle states that members
must be and should be seen to be free of any
interest which might be regarded as being
incompatible with integrity and objectivity.
Two essential attributes of independence are:
1. independence of mind: The ability to provide
unbiased viewpoints requires integrity (candor)
and objectivity (impartiality). Here, the person
avoids situations or relationships that can
damage impartiality or create bias that could
affect delicate judgments.
2. independence of appearance: The person
must also appear to be independent. S/he must
be seen to be acting independently, objectively
and with integrity.
Confidentiality: Members must respect the safe-
keeping of information acquired in the course of
their work and must not disclose any such
information to a third party without specific
authority or unless there is a legal or
professional duty to disclose it.
Technical and Professional Standards:
In the performance of their duties, accountants
(or all other officials) are expected to conform to
accounting and auditing standards and rules put
forth by private and government standard
setting authorities.
Competence and Due Care:
The two components are conceptually different.
Competence represents the attainment and
maintenance of a level of knowledge that
enables and accountant to render services with
expertise.
Due Care is the quest for excellence. I requires
that professionals carry out their responsibilities
with diligence.
Ethical Behavior is the general catch all principle
that states that “members must conduct
themselves in a manner consistent with the good
reputation of their profession and refrain from
any behavior that will bring discredit to the
profession”.
 The Conceptual Framework Approach

Figure 3.2 explains this:

IN PRACTICE:
Safeguards that may eliminate or reduce such
threats to an acceptable level are in two
categories:
1. Safeguards created by the profession,
legislation or regulation,
2. Safeguards in the work environment.
Safeguards created by the profession, legislation
or regulation:
a. firm-wide safeguards such as leadership and
policies,
b. engagement-specific safeguards such as
consulting with third parties,
c. safeguards within the client’s systems
processes such as corporate governance
structures
IN PRACTICE:
 Enforcing the Code
The Disciplinary Process: These may vary but
they have overlapping similarities:
Any complaint, originating from a member,
public, government agency or a fellow
practitioner is received by the professional
association and duly investigated. This involves
gathering evidence and interviewing the
complainant and member.
The threat of punishment is an essential part of
the disciplinary structure and it deters
unscrupulous behavior.
Sanctions are designed to reflect the impact of
members’ actions rather than to punish them.
For the most serious of offences, the ultimate
sanction is exclusion and withdrawal of the
right to use their professional title or
designation (CPA, CFA)
Code Effectiveness
The extent to which the code will influence
professionals’ decision-making and behavior
depends on their awareness of the code and its
content and how effectively the code is
enforced.