View
216
Download
0
Embed Size (px)
Citation preview
ACCOUNTING & INTEGRITY CAPACITY ACCOUNTABILITY
Dr. Joseph A. PetrickExecutive Director
Institute for Business IntegrityWright State University
2007 Dayton Accounting ShowThe Ohio Society of CPAs
May 23, 2007
Raj Soin College of BusinessWright State University
• The only Accounting Department in the country whose students have won the IMA National Case Competition on 5 different occasions.
• Business student teams won the National Intercollegiate Ethics Bowl in 2002 and in 2004 were National runner-up champions.
Agenda
A. Accounting and Rebuilding Stakeholder Trust B. Integrity Capacity Model for Professional Development
1. Accounting Process Integrity Capacity2. Accounting Judgment Integrity Capacity3. Accounting Developmental Integrity Capacity4. Accounting System Integrity Capacity
C. Microeconomic and Macroeconomic Improvements1. Improved Microeconomic Moral
Accountability2. Improved Macroeconomic Moral
AccountabilityD. New Agenda for Responsible Leadership in Accounting
Organizations & Accounting Ethics
• AICPA Standards & JEEP• IMA Standards• Global & Industry Standards• SEC Standards• SOX Accounting Oversight Board• Independence Standards Board (ISB)• State Societies of CPAs & NASBA• Others: GAO, DOL, ASB, FASB
among others.
Corporate Reporting Supply Chain(DiPiazza: PricewaterhouseCoopers, 2002)
Rebuilding Accounting Stakeholder Trust
1. Renewed Spirit of Transparency and Assurance
a. Tier 1: Global GAAP
b. Tier 2: Industry-Based Standards
c. Tier 3: Company-Specific Information
2. Culture of Accountability
3. People of Integrity
Integrity Capacity Theoretical Model
The individual and collective capability for repeated process alignment of moral awareness, deliberation, character and conduct that demonstrates balanced judgment, enhances sustained moral development, and promotes supportive systems for moral decision making.
Instrumental Value of Integrity Capacity
Accounting Integrity Capacity
ReputationalCapital
Sustainable Competitive Advantage, Public Trust & World-Class
Performance
Dimensions of Accounting Integrity Capacity
1. Accounting Process Integrity Capacity
2. Accounting Judgment Integrity Capacity
3. Accounting Developmental Integrity Capacity
4. Accounting System Integrity Capacity
Accounting Process Integrity Capacity
The alignment of individual and/or collective accounting moral awareness, deliberation, character, and conduct on a sustained basis, so that enhanced reputational capital results.
Accounting Process Integrity Capacity
MORAL AWARENESSPerceptionSensitivity
MORAL DELIBERATIONAnalysisResolution
MORAL CHARACTERCognitive Readiness to ActVolitional Readiness to Act
MORAL CONDUCTResponsibleSustainable
Virtues That Build Professional & Organizational Character
1. Intellectual Virtues
2. Moral Virtues
3. Social Virtues
4. Emotional Virtues
5. Political Virtues
Accounting Judgment Integrity Capacity
The balanced and inclusive use of key ethics theories and their subordinated cognate theoretical resources in the analysis and resolution of individual and/or collective accounting moral issues.
Accounting Judgment Integrity Capacity (R2C2)
External
Internal
Control
Flexibility
Achieve Good Results
Follow Right Rules
Build Virtuous Character
Enhance Supportive Contexts
Positive & Negative Zones of Accounting Professional Moral Judgment Integrity (R2C2)
Character
Context
ResultsRules
Negative Zone
AmoralProfessionalism
Negative Zone
Positive ZoneWastes Energy
DisruptsContinuity
DestroysCohesion
OffendsIndividuals
StiflesProgress
NeglectsPossibilities
SlowsProduction
AbdicatesAuthority
CollectsInformation
Maintains Structure Provides Structure
Initiates Action
AcquiresResources
Envisions Changes
FacilitatesInteraction
Shows Consideration
Accounting Judgment Integrity Capacity Based on Four Human Nature Drives
Character
Context
ResultsRules
Negative Zone
AmoralProfessionalism
Negative Zone
Positive Zone
DRIVE TO DEFEND
DRIVE TOACQUIRE
DRIVE TO LEARN
DRIVE TO BOND
Context
Results
Character
Rules
Flexibility
ExternalInternal
Control
(INVOLVEMENT)
(ADAPTABILITY)
(EFFECTIVENESS)
(CONTINUITY)
ACCOUNTING PARTNER EXTREME CONCERN FOR PROFITS
Ranges of Moral Judgment Evaluation using R2C2 ™
Quantitative Qualitative Anchors Ranges 0 – 1 Extremely Unacceptable
Under-emphasis
2 Unacceptable Under-emphasis
3 Minimally Acceptable Emphasis
4 Below Average Emphasis
5 Average Emphasis
6 Above Average Emphasis
7 Optimal Emphasis
8 Unacceptable Over-emphasis
9 – 10 Extremely Unacceptable Over-emphasis
Accounting Developmental Integrity Capacity
The organizational and extra-organizational cultural cognitive improvement of individual and/or collective accounting moral reasoning capabilities from a stage of self-interested connivance, through a stage of external conformity, and onto a stage of internalized commitment to moral principles.
Accounting Cultural Context: Moral Development Stages
Principled Integrity
Democratic Participation
HOUSE OF COMPLIANCE
HOUSE OF MANIPULATION
Allegiance to Authority
Popular Conformity
Machiavellianism
Social Darwinism
(Conformity)
(Connivance)
HOUSE OF INTEGRITY
(Commitment)
Accounting System Integrity Capacity
The development and alignment of the moral infrastructure within the organization and the shaping of the external moral environment of the accounting organization to provide a supportive context for sound moral decision making.
Internal System Integrity Capacity
Organizational Moral Environment
• Compliance-Based Systems• Prevent Criminal Misconduct
• U.S. Federal Sentencing Guidelines
• Sarbanes-Oxley Act
• Professional Association Standards
• Integrity-Based Systems• Enable Responsible Conduct
Compliance-Based Organization Internal Systems
1. Establish compliance standards and
procedures
2. Assign high level individuals to oversee
program
3. Exercise due care in delegating
discretionary authority
4. Communicate and train
Compliance-Based Organization Internal Systems
5. Monitor, audit, and provide safe reporting system
6. Enforce appropriate discipline with
consistency
7. Respond to offences and prevent
further misconduct
8. Comply with SOX requirements
9. Comply with professional standards
Integrity-Based Organization Internal Systems
1. Moral Leadership at the Top
2. Ethics Needs Assessment &
Compliance Standards in Place
3. Ethics in Strategy and Structure
4. Integrity Steering Committee
5. Statement of Values/Written
Code of Conduct
6. Ethics Policy and Procedure Manuals
Integrity-Based Organization Internal Systems
7. Ethics in Selection, Socialization, and Performance Subsystems
8. Ethics in Appraisal, Rewards/Recognition/Incentive,and Development Subsystems
9. Ethics in Communication Processes and Work Attitudes
10. Ethics Training and Education Programs11. Ethics in Decision-Making/Meeting
Processes
Integrity-Based Organization Internal Systems
12. Organizational Integrity AdvisorResponsibilities
13. Ethics Reporting, Whistleblower Protection and Conflict Resolution Processes
14. Enforcement Processes of Ethical Standards
15. Ethics Monitoring, Auditing & Improving Subsystems
16. Ethics System and Quality Work Process Control and Improvement
External System Integrity Capacity
1. Domestic External Moral Environment• Corruption Elimination and/or Control• Industry & Professional Standards• Proactive Positive Stakeholder Relations &
Triple Bottom Line Accountability
2. Global External Moral Environment• Corruption Elimination and/or Control• Industry & Professional Standards• Proactive Positive Stakeholder Relations &
Triple Bottom Line Accountability
Improved Microeconomic Moral Accountability
A. Individual Accountability Improvement1. Demonstrated Process Integrity Capacity2. Demonstrated Judgment Integrity Capacity
B. Partner Accountability Improvement1. Demonstrated Developmental Integrity Capacity2. Demonstrated System Integrity Capacity
Improved Macroeconomic Moral Accountability Improved Macroeconomic
Moral AccountabilityA. Professional Association/Industry
Accountability Improvement1. More rigorous quality control & enforcement2. Partner with competent stakeholders for reform3. Strengthen accounting professional education
B. Political Economy Accountability Improvement1. Financial markets & statistical variation2. Types of capitalism/forms of economic democracy3. International accounting harmonization
New Agenda for Responsible Leadership in Accounting
• National commission with task forces on improving microeconomic levels of integrity capacity accountability
• International commission with task forces on improving macroeconomic levels of moral accountability
• Integrity capacity building skills in mainstream accounting professional education