ACCT20080 Case Study: Ethical Analysis of From Bad to Worse Scenario

This report presents an analysis of the case study "From Bad to Worse," examining the ethical dilemmas faced by a company's management. The analysis begins by applying ethical theories, including egoism, utilitarianism, and deontological ethics, to the actions of key characters such as Mr. Goodrich and Mr. Arnold. The report then utilizes the AAA ethical decision-making model to evaluate the choices made by Mr. Goodrich. Finally, it explores the application of the APES 110 code of conduct for professional accountants, discussing the relevant principles, potential threats, and necessary safeguards within the context of the case. The report aims to provide a comprehensive understanding of the ethical considerations and decision-making processes involved in the scenario.

Running Head: ETHICS AND GOVERNANCE 0
FROM BAD TO WORSE

ETHICS AND GOVERNANCE 2
Executive summary
The Report is prepared on the Case Study” From Bad to Worse”. The report is about solving the
case study from an ethical perspective. In the first part of the report the ethical theories such as
deontological and utilitarianism is applied to the behaviors of the characters. In the second part,
the AAA model of ethical decision-making is used and in the last part the APES 110 code of
conduct, which includes principals, threats and safeguards for the professional accountant are
discussed.

ETHICS AND GOVERNANCE 3
Contents
Introduction.................................................................................................................................................4
CASE STUDY: FROM BAD TO WORSE.................................................................................................4
Part A: Application of ethical theories....................................................................................................4
Mr. Goodrich’s Behavior according to the theory of Egoism..............................................................4
Mr. Goodrich’s Behavior according to the theory of Utilitarianism....................................................5
Mr. Arnold’s Behavior according to the theory of Utilitarianism........................................................5
Mr. Arnold’s Behavior according to the Deontological theory............................................................6
Part B: AAA Ethical Decision making Model used by Mr. Goodrich....................................................6
Part C: Application of APES 110...........................................................................................................8
Conclusion.................................................................................................................................................10
Bibliography..............................................................................................................................................11

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Introduction
A company faces various ethical dilemmas in its workings. These ethical issues arise due
to the lack of knowledge of ethics or the insincerity of the employee for its applications. The
ethical issues, which arise, are inevitable from the organization. The most important thing that
matters is how the management takes the decision when such unethical issues arise. In the case
study, Mr. Goodrich who is the CEO of the company is faced with the dilemma to take the
ethical decision regarding the exploitation of labor union. The following report will be discussing
the application of ethical theories to the case study in its first section and the usage of AAA
model of ethical decision making in the organization in the section B. It also discusses about
APES 110 Code of ethics for professional accountants and its application according to the case-
study in section C.
CASE STUDY: FROM BAD TO WORSE
Part A: Application of ethical theories
Mr. Goodrich’s Behavior according to the theory of Egoism
The theory of egoism is concerned with an individual whose primary motive is
satisfaction of his wants and desires (Gates, 2013). The theory has two aspects, which are
descriptive and normative. The descriptive aspect is concerned with that an individual’ interests
act as a motivating factor for performance and the normative aspect is concerned with that
individuals should stay motivated regardless of what the motivating factors (Overall & Gedeon,
2019). The behavior of Mr. Goodrich was motivated by his great personal ambitions. In the
beginning of the case, it was described that Mr. Goodrich wants to portray himself as a
distinctive personality to the visitors, which was reflective of his self-obsession. According to the
egoism theory, Mr. Goodrich reflected self-obsession in his attitude. When the Amanda and
Arnold communicated to him regarding the 6$ million fines to Fair work Commission for the

ETHICS AND GOVERNANCE 5
underpayment of the workers. Mr. Goodrich gets furious instead of accepting the company’s
fault. He fired Amanda for researching about the company’s fault and very bluntly asked the
accountant to prepare the full financial report. This is representative of Mr. Goodrich selfish
behavior as he is not concerned about the conditions of the factory workers; his only concern is
the company’s reputation. The selfish behavior is one of the elements of egoism theory. Mr.
Goodrich portrayed the selfish behavior by not concerning to the needs of factory workers and
moreover, when the accountant presented the second option to Mr. Goodrich, he got furious and
asked him to keep it confidential. In the motive of safeguarding, the company’s reputation, he
did not care about the interest of factory workers, which is reflective of the egoism behavior of
the company.
Mr. Goodrich’s Behavior according to the theory of Utilitarianism
Theory of utilitarianism states an action is considered, right or moral when it has the
capability to do good for the large number of populations (Bradt, 2016). Any form of action that
has potential to do the best for the large numbers come under the theory utilitarianism (Mill,
2017). For example, an individual who follows the utilitarianism theory in his life might
introspect whether spending money is good in a meal program organized by the charitable
organization for poor or spending it on election campaign by a political party. In the case study,
the Mr. Goodrich behavior is more on egoism side than on the utilitarianism side as he is less
concerned about the good of the greatest number rather, he is concerned about the company’s
reputation and his reputation as a COO of a company. Looking from the company perspective,
his behavior according to the theory is justified to some extent as he tried saving the interest of
all stakeholders associated with the company but at the same time, he did not consider whether
the action was moral or not. The behavior of Mr. Goodrich did not comply with the theory of
utilitarianism. As saving, the interest of the company was associated to his own good as he had a
motive achieving the profit by hook or crook. As according to the Utilitarianism theory which is
concerned with doing best for the greatest numbers but Mr. Goodrich in the case was concerned
in doing good to himself.
His tough and successful image in the company compelled him to save the company from
any further losses.

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Mr. Arnold’s Behavior according to the theory of Utilitarianism
MR. Arnold behavior, when analyzed according to the theory of Utilitarianism. It is
reflected that he was concerned about the interest of the union workers as they were underpaid
which is depicted through his fearless in bringing the matter to the Chief operating officer who
was simply concerned about making profits by hook or nook. As according to the Utilitarianism
theory, the main motive is to serve the interest for the larger good, Mr. Arnold ‘s fearless attitude
to save the interest of factory workers. His behavior of discussing the matter with the Mr.
Goodrich depicts his inclination for doing a morally justified action. Mr. Arnold was concerned
about doing well to the greatest number. When Mr. Arnold was asked to present the report by his
boss. The report presented by him reflected his flexible behavior as he mentioned two options
one was ignoring the matter of underpayment of wages and the other was acceptance of the
misconduct by the company to the Fair Commission. Initially, in the case, there was greater
inclination of Mr. Arnold towards the Utilitarianism but later he developed the flexible approach
to it.
Mr. Arnold’s Behavior according to the Deontological theory
The word deontological, derived from the word “Deon” which means duty. The
deontological theory is concerned with doing the right action no matter whether its consequences
are good or not (Chandler, 2019). In the theory, what matters is the intention to do an act is right
for example stealing the loaf of bread to serve a poor child is not a right action (Friedland &
Cole, 2019). The behavior of Mr. Arnold did not adhere to the deontological theory. When Mr.
Goodrich got furious on the issue and asked Mr. Arnold to come up with solution of the problem.
The fearful Mr. Arnold was afraid of losing his job. He did not stand tall on the ethics of saving
the rights of the factory workers. The next day he came up with the report having the two options
in it. The first option stated to ignore the issue completely and the second option stated the
company to accept the fault of underpayment to the Fair communication then conversation can
fix the issue. In a deontological theory, it is important to work according to the set ethical rules
and regulations, Mr. Arnold did not stand with the first ethical and correct option of saving the
factory workers instead he opined the boss to let the matter go. The reflection of the option

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second in the report made Mr. Goodrich furious and asked Mr. Arnold to delete the report
completely from the computer. Mr. Arnold did not reply and left which shows he was not duty-
bond to protect the interest of the workers thus the behavior of Mr. Arnold did not comply with
deontological theory.
Part B: AAA Ethical Decision- making Model used by Mr. Goodrich
The AAA Ethical Decision-making is a seven-step process of reaching at the best ethical
decision possible. The model application gives the clarity of the decisions to be taken by
recognizing the facts and the issues (Payne, Corey, Raiborn, & Zingoni, 2019). In the case, Mr.
Goodrich now interested in reaching to the ethical decision of the case. The following steps will
be involved in it.
The information of the case-
The account and human resource manager visits the office of the Chief operating officer
of the company to discuss the issue of short payment of wages, leaves and superannuation faced
by the factory workers for the past two years and the unions are pressurizing them to compensate
the amount lost with $6million.
Ethical issues involved-
The ethical issue involved is the company’s black practices of reimbursing its factory
employees with low wages, leave and superannuation. The practice meant violation of the rights
of factory workers. It is the responsibility of the company to take care of the stakeholder’s rights
and to control any form of unjust practices done to them.
The principals and norms in the case-
There are principles and norms in the case. It is the responsibility of the company to take
care of the rights of the people associated with it. The company’s motive is not just earning
profits and gains; it has some duties towards the society to offer as form of corporate social
initiative. Any kind of harm done by the company is unethical and it should try to control its bad
actions with the positive ones.
The course of actions to applied-

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The first action is ignoring the plea of the unions, to protect the image of the company.
The other option is the acceptance of the mistake committed by the company to the fair
commission and asking them some time to pay the compensation amount.
The best course of action-
The best course of action according to the principles and norms is the second alternative.
MR. Goodrich as a COO of the company will accept his company’s mistake of paying short
wages to factory workers to the fair commission. After, acceptance of the mistake, he will ask
them some time to fix the problem, during which time he will arrange money with bank to pay
the specified amount or he could genuinely bargain with them to lower the amount.
Action consequences-
Following the second course of action will have positive consequences as the company
will be able to take care of the interest of the factory workers and at the same time, it will secure
the future of the company. The action taken will also help the company from getting into the
insolvency in the future, as the fair commission will bargain the amount and give them enough
time for its repayment. Overall, it will improve the company’s image. The first option, if chosen
will put the company in trouble as at some time there would be strong opposition from the union
thus hampering the company’s image.
The final decision-
The ethical decision chosen is the second option because this is the best ethical option as
it compensates the unethical actions caused by the company in past.
Part C: Application of APES 110
APES 110 are the ethical professional code of conducts for the professional accountants
of Australia to be followed. It lays down principles, guidelines that are essential for the
accountants to comply with in order to be considered the member of Chartered Accountants
Australia and New Zealand (Yesseleva, 2013). The APES has a list of principles to be followed
by the registered professional accountants. The APES 110 structure is divided into three parts the
first part explains the important principals of professional practice (Gabbitas, 2010). The second
and the third part explain the applications of the practice to the various specific situations. The

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code has five essential principles which are Integrity, objectivity, professional skill and due care,
confidentiality and professional behavior. The Integrity principal states the professional
accountant to be honest in all the dealings and affairs. It is considered a solid rock foundation on
which the conduct of the accountant is evaluated. According to the code, the practicing
professional accountant must be honest and straightforward in all his dealings. It is concerned
with being truthful and fair in all business relationships. The second principle is of objectivity
where the professional accountants are instructed to never guide their decision based on
emotions, bias or under somebody’s influence. The third principal is of professional skill and due
care where the professional accountant is expected to maintain the skills and knowledge of
profession at all the levels and they are expected to act according to the professional and
technical standards.
The fourth principal is of confidentiality where the professional accountant is expected to
maintain the secrecy of the information provided to them, they are made to keep the information.
Confidential (Farooq & de Villiers, 2019). The last principal is of professional behavior that is
concerned with dealings with clients in respectful manner. It focuses that having professional
knowledge is not enough; one needs to have a proper and respectful conduct with colleagues and
clients. The good professional behavior is required to make the dealings successful (Dellaportas
& Davenport, 2008). In the case, if Mr. Arnold is considered the member of charted accountancy
Australia and New Zealand than it is mandatory for Mr. Arnold to follow all the principles
diligently. The APEC110 is also applicable on Mr. Arnold. The APEC 110 describes the threats
and risks, which are present in professional life of an accountant. These threats are self-interest,
self-review, advocacy, familiarity and Intimidation (Duff, 2016). The first threat is self-interest
where an individual could ignore the interest of the public at large over his own interest in this
case the Mr. Arnold who is an accountant, can be swayed away by the interest by the incentives
provided to him by his boss to not disclose the underpayment of factory staff to anyone.
Intimidation is another threat where an individual can be pressurized by someone in authority to
not to act in a public interest. The intimidation is negative which pressurizes an individual to act
in a certain way (Davenport & Dellaportas, 2009). In the case Mr. Arnold was dominated by his
boss decision to not to disclose the underpayments of staff to anyone otherwise he would be fired
from his job. His boss negatively threatened him. The third type of threat that comes up is the
familiarity threat in this an individual working in a organization develops relationship with the

ETHICS AND GOVERNANCE 10
client or boss due to the long term association with the organization. The familiarity hinders the
professional in working justly thus resulting in complete ignorance of the public interest, as the
emotions and connections with the person comes in between (West, 2018) .In case, Mr. Arnold
who worked as an accountant could be sharing a long-term employer and employee relationship
with Mr. Goodrich thus breeding familiarity between the two. The long-term acquaintance might
stop him to act against the company and his boss.
The fourth kind of threat is advocacy threat where the member supports the clients or
employer’s judgment. The member is aware of the unethical act but he becomes a sales person
for employee. He does what the employer tells him to do (Cameron & O'Leary, 2015). In the
case, Mr. Arnold might act as sales person for his boss Mr. Goodrich that means supporting his
judgment of keeping the issue of underpayment, confidential. The fourth threat is self-review
threat, where a member stops evaluating his own work or the work of his colleague. The lack of
evaluation of one’s work could lead to corruption in ones professional code of conduct like in
this case there is greater chance of Mr. Arnold not evaluating his actions according to the
professional code of conduct, which might lead to corrupted actions on his part. In order to
eliminate these threats, there are some safeguard measures provided by the APES 110 (Clayton
& van Staden, 2015). There two options, the first one is application of safeguard until it is
removed and the second is removing it disassociating oneself from the job. There are safeguards
of different levels. The first one is having an appropriate knowledge of the regulatory framework
of the APES110. In the case, Mr. Arnold as a professional accountant and a registered member
of the company has an appropriate knowledge of the code of conducts. He can base his
unwillingness to not disclose the issue by standing tall on the principle of Integrity or by sticking
to his objectivity. Another level of safeguard is the working environment of the company with
the help of a policy or procedures; one can use it for beneficial in the case, if the company has a
special cell for union rights then the member can directly report the matter there (Perera &
Chand, 2015). The last level of safeguard is the personal level, which involves the strong sense
of judgment of what is right or wrong. Mr. Arnold can fearlessly deny the boss request of not
disclosing the matter. After, the application of all safeguard levels, nothing works than Mr.
Arnold can disassociate with the organization.

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The Principles/Threats Grid (based on APES 110)
Principles\
Threats
Self-
interest
Self-
review
Advocacy Familiarity Intimidation
Integrity
Objectivity
Professional
competence
Confidentiality He had his
self-
interest to
remain
confidentia
l.
He did not
introspect
and
remained
confidentia
l.
He supported
the idea of
Mr. Goodrich
with
Confidentialit
y.
The
familiarity
between the
two led to the
application of
principal of
confidentialit
y.
MR. Arnold
followed the
principal of
Confidentialit
y.
Professional
behaviour
Mr. Arnold
in the fear
of losing
his job
followed
the
Principal
of
profession
al
behavior.
He supported
him with
good
professional
conduct.
The
familiarity
made him
follow good
professional .
conduct
The
intimidation
of getting
fired made
him to act
respectfully.
Conclusion
In an organization application of ethical theories are important to achieve the ethical
framework in the organization. Ethical theories of deontological and utilitarianism as guiding

ETHICS AND GOVERNANCE 12
principal for an organization to follow if employees of the organization are trained on these
theories then unethical issues can be avoided. The AAA model of ethical decision-making is
helpful in arriving at a right decision. The auditors and accountants who are the registered
members of APES110 should follow the professional code of conduct diligently to avoid any
kind of unethical conduct in the organization.

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