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Appendix E

Consultancy on teaching of ethics by, or on behalf of, the professional accounting bodies

Statement of Work

The consultancy on the teaching of professional and business ethics by, or on behalf of, the professional accounting bodies required the consultant to:

1. review the courses, or components of courses, on professional and business ethics offered by, or on behalf of, the ICAA, CPA and NIA;
2. review the work programme of the Accounting Professional and Ethical Standards Board and of any other body established by the professional accounting bodies for the setting, promoting or teaching of professional and business ethics;
3. prepare a report for the FRC on the adequacy of the courses (including the matters covered by the syllabus of each course or component of a course), and of any activities taken by the professional accounting bodies related to the setting, promoting and teaching of professional and business ethics;
4. make appropriate final recommendations to the FRC for any changes that might be needed to the content of the courses, the manner in which they are presented or both and on any activities that might be needed for further promoting the teaching of professional and business ethics; and
5. review whether auditors who are not members of a professional accounting body are subject to any mandatory ethical training and make recommendations to the FRC on any changes that might be needed to address any gap in this respect.

The Statement of Work also provided that, without limiting the scope of the work to be performed, the consultant would:

1. consider the adequacy of the accounting profession’s courses on the teaching of professional and business ethics having regard to the content and presentation of equivalent courses conducted by:
   1. Australian professional organisations in respect of disciplines other than accounting;
   2. Australian universities and other tertiary institutions; and
   3. professional accounting bodies in other jurisdictions;
2. consider the inter-relationship between the profession’s courses on the teaching of professional and business ethics and the staff training courses conducted by accounting firms and undertake a review of attendance at these staff training courses;
3. have regard to international developments and overseas trends in the teaching of professional and business ethics and in any mandatory ethical training for auditors;
4. review, and where appropriate have regard to, academic and other material concerning the teaching of professional and business ethics; and
5. consider (and make appropriate recommendations concerning) the action being taken by the FRC to promote the teaching of business and professional ethics.

Consultant’s review

The consultant’s major observations and findings in respect of the teaching of ethics included that:

• the depth of understanding of ethical issues of officers of the three professional accounting bodies and of members of accounting firms, their commitment to deal with these issues and steps being taken to do so, is well beyond anything observed in other disciplines, business or professions, including law;
• ethics education should begin early, preferably at undergraduate level;
• at the professional level, in the absence of a compulsory undergraduate ethical course, there needs to be a separate professional and business ethics component plus integration of the ethical issues throughout other more technical subjects;
• of most importance for the development of an ethical culture is the ‘tone at the top’ — the more committed, supportive and enthusiastic the leaders, the more successful the integration of professional values will be;
• the public practice programmes of the professional bodies appear to be excellent programmes in which ethics education could take a major part;
• all professional bodies mandate 120 hours of continuing professional education per triennium, but there is no requirement for ethics education at this level. ASIC mirrors this requirement for auditors registered with it who might not be members of a professional body, but does not verify its fulfilment;

Against the above findings the consultant has made the following recommendations:

• the professional bodies include ethics as a stand alone course and, in addition, integrate it throughout the technical curriculum with the issues, case studies and problems that students will encounter at every level of practice;
• all possible steps should be taken to develop and reinforce the profession’s appreciation of the importance of culture in ethical standards within their firms and organisations;
• the public practice programmes of the professional accounting bodies should be utilised to develop and reinforce ethical leadership skills;
• ethics should be mandated as an additional component of continuing professional education requirements for the accountancy profession; and
• all auditors who are not members of a professional association should be subject to the same professional ethics educational requirements as those who are members.

Other recommendations made by the consultant included that:

• undergraduate ethical education requirements for entry into the accountancy profession should be reviewed;
• accountancy teaching methodologies and content, at undergraduate and graduate levels, should be reviewed to ensure that they enhance rather than impede ethical thinking skills and behaviours;
• accountancy teaching faculties should be reviewed to ensure that there is a high level of ethical understanding, skill and commitment to teach professional and business ethics in an effective way and to enhance a deep learning experience; and
• undergraduate faculties should, if possible, be influenced to ensure that they role model professional ethical cultures and behaviours for their students.

The FRC intends to examine the findings and recommendations of the consultant as part of its 2006-07 work programme, including consultations with the professional accounting bodies and other stakeholders.