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Ethical dilemmas – What would you do?

As members of the IPA, accountants know that they are bound to act ethically and in the public interest. But what exactly does this mean? If you are confronted by an ethical dilemma then how do you make the right decision?

  • Contributed by Vicki Stylianou
  • June 14, 2019
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What do we mean by an ethical dilemma?

This is a situation in which a difficult choice has to be made between two courses of action, either of which entails transgressing a moral principle. Put another way, when faced by an ethical dilemma, you can’t win. Or you are damned if you do, and damned if you don’t.

A moral dilemma is a choice between right and wrong, as opposed to an ethical dilemma, which is a choice where all options are right (or none are wrong).

Our starting point is APES 110 Code of Ethics for Professional Accountants (including Independence Standards), (the Code). This is the guiding light for all accountants who are members of one of the three accounting bodies in Australia, including the IPA. The Code has been restructured and is taking e ect from 1 January 2020 (with early adoption permitted).

The Code is promulgated by the Accounting Professional and Ethical Standards Board (APESB) the members of which are the three accounting bodies (IPA, CA ANZ and CPAA).

The five principles that underpin the Code are:

  • Integrity;
  • Objectivity;
  • Professional competence and due care;
  • Confidentiality (subject to NOCLAR); and
  • Professional behaviour.

How do you apply these principles when faced with an ethical dilemma?

What type of decision-making process or framework should you apply using these high-level principles?

The Code states that it “requires members to apply the conceptual framework to identify, evaluate and address threats to compliance with the fundamental principles”.

“Applying the conceptual framework requires exercising professional judgment, remaining alert for new information and to changes in facts and circumstances, and using the reasonable and informed third party test,” it says.

The conceptual framework centres on identifying threats to compliance with the fundamental principles, and then evaluating them and eliminating or reducing the threats to an acceptable level. The Code is over 200 pages long and provides guidance on complying with the principles.

We urge members to review the revised Code at: https:// www.apesb.org.au/uploads/ home/02112018000152_APES_110_ Restructured_Code_Nov_2018.pdf

It also contains a new section (260) on ‘Responding to Non-compliance with Laws and Regulations (NOCLAR)’, which requires members to evaluate and report where applicable, any potential or actual material breach of laws or regulations.

Examples include situations relating to fraud, corruption, money laundering, data protection, tax and pension liabilities, environmental protection, public health and safety, and so on.

To help in applying the Code and the conceptual framework, one of the most common models is the ‘AAA model’ or variations of it. Essentially, this takes you through the stages of: 

  •  Recognising an ethical issue;
  •  Getting the facts;
  •  Evaluating alternative actions;
  •  Making a decision and testing it; and
  •  Acting and reflecting on the outcome.

However, how do you evaluate and make a decision? To drill down even further it may be helpful to consider some of the numerous ethical theories and frameworks that can be applied, depending on the particular situation.

For instance, we have the following:

  • Utilitarian approach – doing the most good or the least harm;
  • Rights approach – best protection and respect for the moral rights of those a ected;
  • Fairness or justice approach – all equals should be treated equally;
  • Common good approach – refers to the interlocking relationships of society; and
  • Virtue approach – acting according to the highest potential of our character.

Some commentators believe that the virtue approach is the most suited to accountants and the profession. This means that no matter what the situation, accountants must always behave virtuously and develop a virtuous disposition. It was espoused by Aristotle over 2,300 years ago and is still relevant today.

Then we have the different types of ethics and ethical dilemmas:

  • Normative ethics – how do people work out the correct moral action;
  • Meta-ethics – understanding the nature of ethical judgments;
  • Applied ethics – applying theories from philosophers to everyday life;
  • Moral ethics – how do people develop their morality, why is it different or the same;
  • Descriptive ethics – how do people operate in the real world, rather than theorising about it; and
  • Samaritans dilemma – what if helping people stops them from helping themselves – research shows countries receiving aid do not prosper as much as those that don’t.

Classical ethical dilemma scenario

The classical ethical dilemma scenario is used in countless ethics courses around the world.

Imagine you are driving a runaway trolley car, which has steering but no brakes.

In front of you are five workers facing certain death, while off to the right is a laneway with a lone worker on the road.

Do you steer towards the laneway killing the one worker, but saving the five workers, or do you kill the five workers and save the one?

Now imagine you are on a footbridge overlooking the track, where a trolley is rushing towards five people who have nowhere to escape. Standing near you on the bridge is another person, whose bulk will likely stop the trolley.

Would you push that person over the bridge to stop the trolley? Would you sacrifice them to save the five workers?

What if the trolley was a driverless car and you were the programmer? How would you program it for situations like these?

The classical response to the first trolley scenario is that people would choose to save the five workers and sacrifice the one. Yet, in the second scenario, most people would refrain from pushing the bystander of the bridge, even if it means saving five people.

Why would people sacrifice the one person in the first situation but not in the second?

There is no right answer. However, in the second scenario, most people revert to making a decision based on the actual process involved. People find that throwing an innocent bystander of a bridge, as he kicks and screams for his life, is a lot worse than steering a trolley car in a person’s path.

In the third scenario, which may be more familiar to accountants, we have a situation where you have been auditing the books of a local, well-respected charity for the last five years.

While undertaking the audit you discover an anomaly. You suspect that the accountant working for the charity has been committing fraud, so you approach them seeking an explanation. They confess and are extremely remorseful. They promise to return the funds and explain that their spouse has a gambling problem, they are about to lose their family home and that their eldest child has been diagnosed with a serious illness.

What would you do? What should you do?

As accountants you are leaders, not only in business, but also in the community. You have an opportunity as trusted professionals, citizens, consumers and taxpayers to shape the agenda and be involved in the conversations affecting the world in which we live. Currently, and in the future, we are all facing numerous ethical dilemmas, including:

  • Do you save the planet but at the expense of developing countries wanting to expand their industries and lift their people out of poverty?
  • Do we genetically modify humans to prevent disease?
  • Do we sacrifice online privacy for national security?
  • Should robots in war have the right to kill?
  • Should we impose population controls if it meant sustaining the planet?
  • How do you program autonomous vehicles to make a decision in a life and death situation?

The IPA would like to hear about the ethical dilemmas that members may have faced professionally. Send us your feedback on any of the above, or on any other ethical dilemmas facing our society, to [email protected] publicaccountants.org.au.

And remember, the IPA is here to assist members when faced with an ethical dilemma.

So, if you are in doubt, or if you simply need a sounding board, don’t hesitate to call us. We’re here to help.

Vicki Stylianou, executive general manager – advocacy and technical, IPA

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