ACCT3000 · Contemporary Issues In Accounting
Accounting & Ethical Action
This capstone topic treats ethics as a skill you apply, not a set of beliefs you recite. It centres on APES 110 Code of Ethics for Professional Accountants and its conceptual-framework approach: identify, evaluate and address threats to the five fundamental principles, using safeguards. The exam's signature 20-mark question hands you a manager pressuring you into a misleading accounting choice and asks you to work the structured DECIDE model to a defensible recommendation. Because markers award a mark for each principle and threat you correctly name and tie to the facts, structure and labelling are where the marks live.
What this chapter covers
- 011. What ethics is (and is not) — reasoned, defensible judgement, not private feeling or a fixed set of beliefs
- 022. Why ethics matters to accountants — a duty of care so statements are not materially misstated or misleading
- 033. APES 110 — the mandatory Code and its conceptual-framework approach (identify, evaluate, address)
- 044. The five fundamental principles — integrity, objectivity, professional competence and due care, confidentiality, professional behaviour
- 055. The five threats — self-interest, self-review, advocacy, familiarity, intimidation — met with safeguards
- 066. The DECIDE model — Define, Ethical review, Consider, Investigate, Decide, (Evaluate)
- 077. Applying it — name the principle at threat, weigh options, spot the rationalisation, decide and justify
- 088. Ethics as the counterweight to PAT/agency opportunism — it constrains the income-increasing choice theory predicts
Apply DECIDE + APES 110 to a year-end cut-off dilemma
- +2Define the facts and the issue. Revenue for goods not yet delivered fails cut-off, so booking it now would overstate profit and assets by $900,000 and misrepresent the bonus position. The ethical issue is whether to prepare financial statements you know to be misleading — a material misstatement.
- +3Ethical review — stakeholders and principles. Stakeholders: shareholders, lenders, the auditor, employees, the CFO, the profession and you. The choice directly breaches APES 110 Integrity (do not be associated with misleading information) and Objectivity (do not let the CFO's pressure bias your judgement); professional behaviour is also engaged.
- +2Name the threats. This fires a self-interest threat (your own share of the bonus and your job) and an intimidation threat (the CFO's 'everyone's jobs' pressure). The threats are not at an acceptable level, so safeguards are needed.
- +2Consider the options and investigate consequences. Options: comply; refuse and insist on correct cut-off; escalate to the audit committee or auditor; seek advice from the professional body; resign as a last resort. Complying risks legal liability, audit qualification and a bigger problem next period when the timing reverses. The 'jobs' appeal is a rationalisation, not a justification.
- +1Decide and act. Refuse to record the premature revenue and escalate. Apply the correct cut-off, document your position, raise it with the audit committee and apply APES 110 safeguards; if overruled, consider withdrawal. Justify by Integrity and Objectivity overriding self-interest.
Key terms
- APES 110
- The Code of Ethics for Professional Accountants issued by the APESB. It is mandatory for members of CA ANZ, CPA Australia and the IPA, and non-compliance can lead to disciplinary action.
- Conceptual-framework approach
- APES 110's method: rather than memorising a list of rules, you identify threats to the fundamental principles, evaluate whether they are at an acceptable level, and address any that are not with safeguards.
- Fundamental principles
- The five core obligations under APES 110: integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour. Naming the specific one at threat is what scores marks.
- Threat
- A circumstance that could compromise a principle. The five categories are self-interest, self-review, advocacy, familiarity and intimidation.
- Safeguard
- An action that reduces a threat to an acceptable level — for an employee, applying the correct accounting, documenting a position, consulting a superior or the audit committee, or resigning as a last resort.
- Duty of care
- The accountant's obligation to ensure financial statements are not materially misstated or misleading, because users rely on them to lend, invest and regulate.
- DECIDE model
- A structured six-step ethical decision tool: Define the facts, Ethical review, Consider options, Investigate consequences, Decide and act, Evaluate the result. The final Evaluate step is often flagged 'not required'.
- Rationalisation
- An emotional or self-serving justification ('it's just timing', 'everyone's jobs depend on it') offered for an unethical choice. It is itself a sign of pressure, not a defence, and should be flagged rather than accepted.
Accounting & Ethical Action FAQ
How is ethics examined in ACCT 3000?
Most heavily in Part A, Question 3 (20 marks): you apply the DECIDE model and APES 110 to a scenario in which a manager pressures you into a misleading accounting choice. Ethics also feeds the reflective-writing question (the 'So What?' step usually links to professional scepticism and integrity), the case-study question, and the professional backbone of the client-briefing assignments. So the topic earns marks across the whole paper.
What is the difference between a principle and a threat?
A fundamental principle is an obligation you must uphold (for example, integrity or objectivity). A threat is a circumstance that could push you to breach a principle (for example, a self-interest threat when your bonus depends on the number, or an intimidation threat when a superior pressures you). A strong answer names both: which principle is at risk, and which threat is putting it at risk.
Do I always have to complete every step of DECIDE?
Work every step that is required, using the letters as sub-headings so the marker can find each mark — but read the instruction. The final step, Evaluate the result, is frequently flagged as not required. If it is, skip it and reinvest the time in naming more stakeholders, principles and threats, which is where the marks are densest.
Why do markers say 'this is unethical' scores poorly?
Because it is generic. Marks are awarded for tying the facts to a named principle ('deferring a known write-down associates me with misleading information, breaching Integrity') and naming the threat category ('the CFO's pressure is an intimidation threat'). Condemnation without labels earns almost nothing, so treat the principles and threats as vocabulary to deploy, not just recognise.
How does ethics connect to positive accounting theory (Topic 5)?
They are two lenses on the same fact pattern. Positive accounting theory predicts that a self-interested manager will choose income-increasing policies near a bonus threshold or covenant. Ethics and APES 110 are the counterweight: they say the accountant must not enable that opportunism, and they reframe the bonus or covenant as a self-interest threat to integrity and objectivity. The best answers connect the prediction (Topic 5) with the professional constraint (Topic 6).
Exam move
Treat the ethics question like a technical question with a fixed structure. Memorise the two lists cold — the five principles (integrity, objectivity, professional competence and due care, confidentiality, professional behaviour) and the five threats (self-interest, self-review, advocacy, familiarity, intimidation) — because each correct label tied to the facts is a mark. Rehearse the DECIDE scaffold as literal sub-headings so nothing is skipped, and practise driving every step from the scenario rather than reciting theory: define the misstatement, list stakeholders, name the principles and threats, lay out a real set of options, weigh the consequences while flagging the rationalisation and the future reversal, then decide decisively and justify by integrity and objectivity. Watch the instruction on the Evaluate step, which is often not required, and always link the ethical duty back to the manager's incentive from Topic 5 to show ethics constrains the opportunistic choice theory predicts.
