there are 6 questions that are needed to be answered, I have provided the required readings and the questions that are to be answered are bolded.

-------------------------------------------------------------------------------------------------------------------------Unit 3 discussed the issue of whether it is sufficient for professional responsibility that professionals just follow their codes of ethics. As we learned, Michael Davis' position is that this is sufficient. In the first reading for Unit 4, "Responsible Engineering: The Importance of Character and Imagination," Michael S. Pritchard argues that there is much more to being a responsible engineer than merely following the codes laid out by one's professional association. Pritchard provides us with a thoughtful and robust conception of engineering responsibility, and some of his main points are outlined below. Focusing on the responsibility of engineers to protect public safety, health, and welfare, Pritchard argues that fulfilling this responsibility "calls as much for settled dispositions, or virtues, as it does for performing this or that specific action."[8] Pritchard argues that, although it is important to consider the kinds of actions and behaviours that engineers must avoid, a full account of engineering responsibility will alsoand, even, primarilyconsider the positive, desirable contributions that engineers could and should (and often do) make in the course of their work.[9] Through the story of William LeMessurier,[10] Pritchard turns our attention to the kinds of desirable and admirable dispositions that he thinks are vital to responsible engineering. Pritchard notes that an engineer might do what is least required in order to count as fulfilling her responsibilities or, at the other end of the continuum, she might fulfill her responsibilities in an exemplary or supererogatory way. The question relating to engineering responsibility thus becomes whether we wouldor shouldsay of the engineer who only minimally fulfills the responsibilities laid out in her code of ethics that she is a responsible engineer and one who conducts herself responsibly. Pritchard's view is that, probably, we should not. Ideally, we want the engineer who both aims toward the exemplary end of scale and (mostly) hits her mark, that is, the engineer whose strong commitment fuels her competence in the production of exemplary results. Even though we might not and, perhaps, should not always expect engineers to live up to the highest ideal of maximal performance, there seems no reason to not expect, at least, a commitment to performing in the upper portion of the range. But how may we recognize an engineer whose level of commitment for satisfying her responsibilities falls at least within the upper range? Aside from meeting codified responsibilities, what indicates that an engineer is a responsible professional in this more robust sense? According to Pritchard, a properly responsible engineer will be one who is competent and who possesses virtues such as honesty, integrity, objectivity, accuracy, and so onbut this is not all. This engineer will possess, as well, a disposition that Pritchard refers to as "engineering imagination."[11] He means by this that, by virtue of the way the engineer is or, in other words, by virtue of her characteristic approach to her work and her world, she exhibits a readiness or a preparedness to "make something of the moments" that can lead to exemplary performance. Her character is such that she is, for example, inclined to respond thoughtfully to events she need not respond to, rather than simply let such events pass by. As Pritchard points out, LeMessurier has just this type of character. For Pritchard, a complete picture of the virtues involved in professional life, when applied to the professional herself, translates into a picture of proper professional responsibility that goes beyond whether a professional satisfies the responsibilities enumerated in a code of ethics.

1) 4.2 Professional vs Ordinary Ethics II Michael Pritchard's account of LeMessurier supports his idea that professionals are properly responsible only when they exhibit virtues and perform beyond the level of merely satisfying the explicit codes of their profession. We saw in Unit 2 that Pellegrino holds a similar view with respect to the performance and responsibility of physicians. If these authors are correct, does this mean that professional ethics is significantly different from ordinary ethics? Explain your answer. ---------------------------------------------------------------------------------------------------------------------------------------------------

1. Learning Activity 1

Browse the CMA Code of Ethics, and list the basic ethical values and principles that you think underlie its guidelines.

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In Canada, there are three major professional accounting designations: Chartered Accountant (CA), Certified Management Accountant (CMA), and Certified General Accountant (CGA). In the United States, there are more than a dozen certifications related to accounting, auditing, and financial management, the most prominent being Certified Public Accountant (CPA), Certified Management Accountant (CMA), Certified Government Financial Manager (CGFM), and Certified Internal Auditor (CIA). Among all of these, Chartered Accountants in Canada and Certified Public Accountants in the United States undergo the most extensive general training, which prepares them to deliver a broad range of services in all domains, that is, private, not-for-profit, public, and government. Although not usually required, it is not uncommon for a CA or a CPA to hold another designation, such as one of the others mentioned above, according to his or her particular expertise or employment position.

Simply put, accountants prepare, analyze, verify, and communicate financial information. Depending on an accountant's particular specialization, work situation, and position, duties may include:

• ensure the completeness and accuracy of financial reports, and ensure that reports conform to professional and legal standards, such as the Generally Accepted Accounting Principles (GAAP) and Sarbanes-Oxley;
• develop, analyze, and administer budgets;
• prepare and report tax information and ensure proper payment of taxes;
• develop and implement solutions for business and financial problems;
• develop and maintain accounting systems using information technology;
• provide assessments and advice in relation to such things as financial and investment planning, management controls, mismanagement and waste, and, generally, the efficiency of business operations;
• conduct forensic analyses by investigating and scrutinizing situations and activities associated with disputes and possible crimes.

The Canadian designation of Chartered Accountant is very similar to that of Certified Public Accountant in the United States. As mentioned, initial training prepares these accountants for practically any accounting job that exits. Having passed very rigorous certification requirements, CAs and CPAs tend to occupy authoritative positions and perform complex roles. They often end up working as financial controllers, senior managers, executive officers, and auditors in corporate or governmental organizations, or they work in firms that specialize in a variety of accounting and/or auditing services. The standards for all accounting professionals tend to be set by CAs and CPAs.

The Canadian designation of Certified General Accountant also permits involvement in both business and government at various levels. General Accountants may work in not-for-profit organizations, corporations, accounting firms, government agencies, or in private practice, and may work as employees, managers, consultants, partners, or owners. Often, they occupy positions in companies where they create and enact business solutions and oversee financial planning and reporting.

In both Canada and the United States, Management Accountants usually work for private or public companies in supervisory and executive positions, where they may be involved with virtually all aspects of business. Generally, they help ensure that sound business decisions are made. Their duties may include most of those listed above, as they engage in strategic planning and development, financial analysis and reporting, performance evaluations, budgeting, cost accounting, problem solving, etc.

In the United States, Government Financial Managers or, as they are also called, Government Accountants, work in the public sector for government agencies where they mainly perform one of two functions. First, they may act as internal experts and managers for these agencies, similar to the ways in which Management Accountants work for and from within particular companies. Second, they may perform audits of organizations, businesses, or individuals who are subject to governmental regulations; that is, they work asexternalauditors (see below). In Canada, these governmental jobs are performed by CAs, CGAs, or CMAs who specialize in governmental accounting and, sometimes, in external auditing.

Some accountants, with one or more of the above designations and often with an additional licence, specialize in auditing. Among auditors, some focus on the financial records of individuals, as when an individual's tax returns and records are audited by the government through the Canada Revenue Agency, in Canada, or through the Internal Revenue Service, in the United States. In this unit, however, we will focus on auditors who attend to the financial operations of publicly traded corporations. Within accounting practice and within business generally, auditing plays a vital role. The primary job of auditors is to evaluate the overall financial operations of organizations with the aim of helping those organizations function more efficiently. Accordingly, audits can be vital to an organization's success. Auditors (a) collect, assess, and report organizational financial information, (b) judge whether an organization's operations are effective and efficient and whether its financial records comply with professional and legal regulations, and (c) provide guidance to organizations in order that they may improve their operations, especially operations associated with financial risks and controls.

There are two kinds of auditors: internal and external. The main differences pertain to their respective work situations. Internal auditors are employed by the companies for whom they provide auditing services, whereas external auditors work for auditing firms or for government agencies that serve various companies in a variety of industries. While internal and external auditing jobs are more similar than they are different, there are some important differences. Both, for example, have a responsibility to protect all stakeholders from financial misrepresentation. Internal auditors, however, primarily focus on the direct stakeholders of the particular company for which they work, namely, the shareholders, managers, and employees of that company. By contrast, external auditors, in addition to serving the interests of the shareholders, managers, and employees of the companies for which they perform audits, also bear significant responsibility for the public's interests insofar as the public and the economy are affected by how companies operate, how they comply with or fail to comply with legal and ethical regulations, and whether, generally, they succeed or fail. This difference between internal and external auditors is not so much that internal auditors do not concern themselves with public interest, since they may do so and often do, but is more a matter of emphasis in that the day-to-day responsibilities of internal auditors concern the health and wealth of the companies for whom they work, whereas external auditors are not engaged day in and day out with a single company, but work with companies on a contractual basis and assess and counsel various companies.

The idea that external auditors bear a greater degree of responsibility for the public's financial interests and safety than do internal auditors arises from the different realities of the two positions. Given that internal auditors are immersed in the organizational structure and the daily culture of a single company, they develop interpersonal and structural (e.g., hierarchical) relationships, along with commitments and loyalties, and these relationships are likely to affect how they carry out their jobs or, at least, how they are perceived to carry out their jobs. When the company one audits is the company from which one receives a paycheque, upon which one and one's colleagues depend, and in which one invests one's talents and efforts, the goals and success of that company can tend to have a more immediate and stronger grip on one than do the public's interests. In general, the work situation of internal auditors gives us some reason to believe that they will aim to promote the interests of their own organizations first, and only secondarily will they aim at serving other interests, such as the public's, especially if these compete with the company's interests.

Although objectivity is understood to be an important characteristic of both types of auditors, and it is not the case that internal auditors are necessarily any less objective than external, there is reason to believe that, on a practical level, it is more difficult for internal auditors to be truly and consistently objective. There is also reason to believe, however, that this is not a bad thing. External auditors benefit from being independent of their clients, but this may be optimally beneficial, since internal auditors may be dedicated to their companies, while external auditors provide a more distanced expertise. Ideally, the two kinds of auditors, when it comes to assessing a particular company, benefit from working together, which they often do.

Among other things, audits serve a specific, practically important purpose: they yield expert opinions about the accuracy, fairness, and representativeness of a company's financial statements. Auditors, internal and external, assess and then present a formal opinion about the degree to which companies follow professional, legal, and ethical accounting standards, and their opinions are available to whoever has an interest in the company audited (employees, shareholders, banks, potential investors, and, especially in the case of publicly traded companies, the public).

There are four possible opinions that an auditor may officially advance:

1. AnUnqualified Opinionrepresents an auditor's view that a company's financial statements are accurate, fair, and representative of the company's overall financial situation. This opinion states that the company's statements are non-problematic, that is, at least, both free of misstatements and in accordance with Generally Accepted Accounting Principles (GAAP).
2. AQualified Opinionis advanced by an auditor when he judges that a company's financial statements are essentially accurate, fair, and representative, but determines, also, that there are minor concerns and corrections to be made. One example of a situation where this opinion may be issued is when some financial information has been misstated, albeit rather inconsequentially, in relation to the company's overall financial profile. Another example is when an auditor judges the company's statements to be, in the main, orderly and in compliance with regulatory standards, while he also explicitly acknowledges his inability to verify one or another aspect of those statements. This opinion is favourable but is also qualified by explicit references to those parts of the audit that could not be verified and/or approved.
3. AnAdverse Opinionsignifies an auditor's unfavourable judgment of a company's financial operations and/or statements. An auditor issues this professional opinion, for example, when he learns that a company's financial statements do not reliably reflect its financial position and/or that its practices are unsatisfactory with respect to compliance with, for example, GAAP.
4. ADisclaimer Opinionrepresents a refusal on the part of an auditor to issue any one of the other three official opinions. In this case, an auditor has tried to perform an audit but has not been able to complete it. A disclaimer is generally considered appropriate when, for example, there is a lack of independence and it becomes known that there is a real, apparent, or potential conflict of interests between the auditor and the company being audited. Another situation where this opinion is generally considered appropriate is when significant impediments somehow prevent an auditor from performing the assessments required. For example, he may encounter insurmountable problems accessing and gathering information or verifying material inventories.

These opinions can mean a lot for organizations. An audit, properly conducted, yields an expert, objective verdict of a company's accounting practices and reports, and this verdict may affect, for example, the company's abilities to borrow money, to attract or keep investors, and to secure and retain suitable human resources, not to mention its abilities to improve its operations. We will see, as we now move on to discuss the first three articles in this unit, that auditing services have played a key role in the serious ethical situations created by Enron and other companies, and that they are also expected to play a key role in preventing similar problems.

Study Question Forum

8.1 Accountants' Responsibilities I

List the parties toward whom accountants tend to have responsibilities. Next, imagine an accountant in some particular work situation (any sort of example will do), and consider whether this accountant has a responsibility to the public. If you think he doesn't, explain and defend your view. If you think he does, what precisely is this responsibility and by what reasoning do you ascribe it to him? Also, where would this accountant's responsibility to the public rank in priority among the responsibilities he has to others, and why?

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Professional and Legal Regulations

Virtually every accounting and finance professional working in North America is subject to a formal code of ethics. Codes of ethics are laid down by professional associations, and they are often also laid down by particular organizations. A professional is bound by the code of the professional association(s) of which he is a member, and may be bound, additionally, by a code internal to his workplace.^[1]Since most professional associations operate at a national level, even though they also, typically, have regional divisions overseeing professional responsibilities on a province-by-province or state-by-state basis, accountants tend to be bound by very similar codified principles and rules. Additionally, codes of ethics that are internal to particular organizations rely, by and large, on these same fundamental principles, although different organizations might underscore different principles within the more comprehensive set.

In North America, professional and organizational codes of ethics relating to accounting and finance are modelled upon a set of guidelines known as the "Generally Accepted Accounting Principles" (GAAP). GAAP is a broad set of values, rules, and conventions widely recognized as embodying proper accounting standards. The history of GAAP is literally normative in that GAAP consists in existing and evolvingnormsof accounting practice. These norms may be traced back to Luca Pacioli (1446/7-1517), a mathematician, educator (he tutored Leonardo da Vinci), and Franciscan monk who is known as the Father of Accounting. As a set, the norms of accounting have evolved in relation to political and economic circumstances as well as in relation to prevailing views of accounting's best practices. During the twentieth century, when accounting practices were increasingly scrutinized, GAAP became further refined and formalized, as its standards were underwritten by certain newly established legal statutes and formal professional codes of ethics. In many ways, though, GAAP remains our most reliable source of what is acceptable and unacceptable within finance-related professions.

Currently, however, GAAP itself and accounting regulations generally are in the midst of a further important transition. Globalization, especially as it pertains to business and economics, has spurred renewed interest in establishing international accounting standards. GAAP and other sets of guidelines from around the world, including an earlier set of international standards, have come together to form the "International Financial Reporting Standards" (IFRS). As stated by the IFRS Foundation, "The IFRS Foundation is a not-for-profit, public interest organisation established to develop a single set of high-quality, understandable, enforceable and globally accepted accounting standardsIFRS Standardsand to promote and facilitate adoption of the standards."^[2]In Canada, public companies and government businesses have adopted IFRSs as of January 1, 2011.^[3]

Of course, accounting and finance professionals are also regulated in some respects by law. Arguably, the law plays a much more direct and influential role in accounting and finance than in most other professions. Perhaps this is because, by virtue of the kind of services they provide, finance professionals encounter direct opportunities to enhance their personal monetary and material interests. In any case, the need for legislating ethics in accounting has been addressed in various ways since the market crash of 1929 and with the Sarbanes-Oxley Act of 2002. A question taken up by Howard and Joanne Rockness in their article, "Legislated Ethics: From Enron to Sarbanes-Oxley, the Impact on Corporate America," is whether we should expect legislative measures to control ethical behaviour within accounting and corporate governance. When we turn to this reading, we should consider some of the measures Sarbanes-Oxley introduced and aims to enforce.

Study Question Forum

8.2 Accountants' Responsibilities II

The rules of financial reporting, as given by GAAP, "allow for a plurality of reporting methodologies" (Vaidya, 53) that can be exploited by accountants in order to present a company's financial information more favourably to particular recipients of the information. Such plurality is a result of honest professional disagreements about best practices. Do you think that, despite conflicting professional views, the rules should specifyonemethod of financial reportage to be followed, or do you think that we should trust accountants in any given situation to choose from among the different methods that are viewed as acceptable to report the information in the manner judged best by the particular accountant responsible? Defend your response.

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Are Professional and Legal Regulations Enough?

Part of the underlying rationale for recent changes to professional and legal public accounting regulations, that is, changes aimed primarily at preventing or at least lessening auditing failures, is addressed in "The Lessons from Enron." Again, auditing is the main concern, although other aspects of accounting practice and corporate governance play a crucial role. This reading identifies specific problems as well as options for ameliorating them. At the heart of it all are "perverse incentives and conflicts of interest."^[6]The authors agree with the widely held view that, in order to ensure auditors' independence, there must be more distance between corporate managers and external auditors, which indicates that first, there should be more distance between managers and shareholders and, second, shareholders themselves should reclaim the responsibility of appointing the auditors whose services protect and potentially enhance shareholder investment. An underlying assumption, here, is that corporate executives cannot be sufficiently trusted, and some critics attribute this to executives' opportunities to personally capitalize on "perverse incentives."

In 2002, the United States Congress passed the Sarbanes-Oxley Act, which, although not uncontroversial, is widely accepted as an important step in fortifying public accounting controls and restoring public trust in corporate governance. Sarbanes-Oxley legally regulates public accounting firms as well as the boards of directors and managers of all US publicly traded companies. It does not directly concern private business, although its tenets and affects spill into the private domain in various ways (which will not be discussed here). To monitor and enforce external auditors' compliance with Sarbanes-Oxley, a board was established called thePublic Company Accounting Oversight Board(PCAOB). This board functions as a sort of administrative associate of the Sarbanes-Oxley legislation. With the legislation and this oversight board in place, public accounting's self-regulation is severely impacted, arguably to a point where its privilege of self-regulation is now limited to only relatively minor matters, at least as far as external auditing goes.

The article in our textbook by Rockness and Rockness covers a lot of ground in its explanation of the legal history of accounting regulations leading up to Sarbanes-Oxley and the PCAOB. The authors' main purpose is to critique the idea that legislation can successfully control ethical behaviour in corporate accounting and in corporate culture more generally. They rely on the idea that, ideally, it is better to promote ethically upright behaviour proactively than it is to merely discipline transgressions retroactively. It is important to note, however, that Sarbanes-Oxley and Canada's similar legislation aim to fulfill both of these general functions in certain ways. The legislation proclaims ethical principles that are to be respected by public accountants, auditors, and corporate executives and boards, and it also denotes enforceable sanctions for violations of the ethical and legal rules it declares.

Notable among the directives contained in Sarbanes-Oxley are:

• it holds CEOs and CFOs responsible for an accurate and transparent representation of their company's financial statements;
• it limits corporate officers and directors from receiving loans, and limits their ability to trade their securities;
• it provides extended protection for whistleblowers;
• it allows for more power on the part of internal auditors.

In relation to the effectiveness of this sort of legislation, Rockness and Rockness contend that, at best, it can only complement a company's existing strong ethical culture. They assert that the "tone at the top" of a corporate hierarchy is the mechanism capable of creating and sustaining corporate and accounting ethics, for better or for worse.^[7]In the view of these authors, corporate officers and boards of directors are responsible for setting a tone that models and commands ethically respectable behaviour, and not only in terms of merely abiding by the formal regulations laid out by professional associations and the law, but also in terms of inspiring a "do the right thing" culture.

8.7 Regulatory Power

Construct an example depicting a situation where an accountant has a conflict of interest. Do you think a conflict of interest of the sort you depict is (largely) preventable by professional and/or legal regulations? Alternatively, do you think that regulations are relatively ineffective and that preventing this sort of conflict of interest depends mostly on the integrity of individual accountants who actively choose to not put themselves in that situation? Explain your answer.

8.9 Sarbanes-Oxley

Insofar as whistleblowing is discussed in our readings from this unit (all readings are useful, but see pp. 94-97 in particular), do you support or not support the protection offered to whistleblowers by Sarbanes-Oxley? Defend your position.