Case Study Analysis: Ethical Decision-Making in Governance and Ethics

This assignment presents a detailed analysis of an ethics and governance case study, focusing on the ethical dilemmas faced by a company's management. The executive summary provides an overview of ethical principles, theories, and decision-making models relevant to the case. Part A explores the application of ethical theories such as egoism, utilitarianism, and deontology to the actions of key individuals within the case. Part B examines the use of the AAA ethical decision-making model to guide ethical choices. Finally, Part C discusses the relevance of the APES 110 Code of Ethics for professional accountants. The case study involves issues of underpayment of wages, financial reporting, and conflicts of interest. The analysis assesses the behaviors of the COO and management accountant in light of the different ethical frameworks, ultimately providing recommendations for ethical decision-making within the company. The assignment highlights the importance of ethical conduct and its impact on stakeholder relationships and organizational integrity.

ETHICS AND GOVERNANCE

Executive Summary
The ethics are referred to as the set of the moral, legal, and statutory principles
applicable to the circumstances to evaluate whether conduct is ethical or not. The study of the
various ethical theories guides the management of the entities in business context and the
individuals to evaluate their behaviour while addressing the ethical dilemmas. The work
studies the behaviour of the individuals as per different theories to justify or condemn the
same as per the principles described. One of the popular models that can be used by the
individuals to reach an ethically sound decision is the AAA model, which involves a step-by-
step procedure. Lastly, the work involves the study of the APES Code of Ethics as applicable
to the professional accountants.

Contents
Introduction................................................................................................................................3
Part A: Application of the theories of ethics..............................................................................3
Part B: Using an ethical decision-making model.......................................................................5
Part C: Using APES 110............................................................................................................6
Conclusion..................................................................................................................................8
References................................................................................................................................10

Introduction
The term ethics denotes the consideration of the basic principles of morality and
virtue together with the statutes for the conduct in a given situation. Every individual, as well
as the business organisation, is subjected to the ethical conducts in various profession and
rendering of services (Woiceshyn, 2011). In the business context, ethics refers to the code of
the conduct that is applicable on the business entities for the advancement of the interests of
the various stakeholders connected to the business (Woodbine, Fan & See, 2014). The
following assignment is aimed at evaluating the different aspects of the ethical conduct in the
organisation in the context of the given case study. In addition, the applicability of various
ethical theories, AAA ethical decision model, together with the APES 110 code of conduct
for the professionals is discussed.
Part A: Application of the theories of ethics
Ranges of ethical theories have been formulated to guide the individuals to address
the ethical dilemmas faced whether in the organisation of the business context or otherwise
(Barry, 2016). Some of the popular theories prescribed are the theories of egoism,
deontology, and utilitarianism. The analysis of the conduct of various individuals in the
context of the given case study has been discussed as follows.
The theory of egoism is divided into two categories namely the Psychological Egoism
and the Ethical Egoism by which it has been stated that the human beings are naturally
motivated to act in their self-interest and that the humans should always act in their self-
interest (Gantt & Burton, 2013). Thus, the ethical egoism calls for the acting in one's interest
even if the said acts are conflicting with the values and interests of others (Rachels, 2012).
The theory leads to the interpretation that it is the moral duty of the individual to achieve
personal happiness and the individuals must not sacrifice their happiness and welfare for
others. The analysis of the behaviour of Mr Goodrich according to the theory of egoism is
presented as follows. In the given case study, it has been stated that the working style of Mr
Goodrich is such that he is referred to as the tough result achiever. As the COO of the
company, he stresses on the meeting of the forecasted profits to maintain the image among
the investors, irrespective of the compliance with the laws. The said behaviour is justified as
per the theory of egoism, where the happiness of the self is the utmost priority. Further, on
the disclosure of the short payment of the wages and other payments of the workers, Mr

Goodrich is only concerned about protecting his job role and his position in front of various
stakeholders and investors. The said safeguard of his position is evident in the fact as he
instructs the management accountant to hide the fact from the authorities, as the disclosure
would have undermined his reputation as the COO of the company. Thus, it can be concluded
that as per the Theory of Egoism, the conduct of Mr Goodrich is reasonable owing to the
personal interests and individual happiness.
One of the yet another significant ethical theory is that of the ethical theory of
utilitarianism as initially established by Jeremy Bentham (Hollander, 2016). The theory falls
in the group of the consequence-based theories and aids the ethical evaluation of one’s
conduct or the actions. The ethical theory is based on the principle that an action can be
justified as morally right if the same leads to an overall utility for the stakeholders’ at large
(Lyons, 2015). The actions are considered as ethically unjustified if the individual interests
are preferred over the general well-being and happiness of the society as a whole. The
evaluation of the actions of Goodrich according to the theory of utilitarianism is stated as
follows. It has been stated in the case study that Mr Goodrich is so much focussed on the
achievement of the business results that he often engages in getting past the applicable legal
compliances. The said conduct is referred to as unethical as the same does not provide any
usefulness at large. Further, the non-disclosure of the shortfall in the workers' payments
undermines the interests of a range of stakeholders namely the workers, regulatory authorities
and even the investors, because the profits of the past years are overstated and there has been
a failure of transparent reporting. Further, he forces Amanda to sign the non-disclosure
agreement to prevent the news of wrong award payment from leaking, setting unhealthy
employee practices and work culture in the organisation, which is not ethical as per the above
theory.
The analysis of the behaviour of Arnold, the management accountant of the entity as
per the theory of utilitarianism is provided as follows. As soon as the problem is discovered
in the entity, Arnold is engaged in the preparation of the reports to identify the magnitude of
the problem. The fact that Arnold has suggested the disclosure of the error to the Fair Work
Commission straightway and making the payment arrangements with the banks; leads to the
observation that he is concerned of the wellbeing of the stakeholders' groups as a whole. As
he discloses the magnitude of the problem and the best option to address it that is disclosing it
as a genuine error to the authorities, he faces the heat from the senior COO. Yet, he does not
step back as an employee of the company fearing threat to his job and placing his individual

interest above the utility of the stakeholders as a whole. He suggests what is best for the
entity and everyone associated with it. According to the theory of utilitarianism, the
behaviour of Arnold is ethical.
The theory of deontology is yet another prominently used and studied theory of ethics
to evaluate the legitimacy of the actions. The term deontology derives its meaning from the
Greek word “deon” which means duty (Chandler, 2019). The said theory is established on the
belief that ethical, moral guidelines must be duly considered during the performance of the
duties, and that the results would automatically follow the ethical principles accordingly
(Hursthouse & Crisp, 2013). The analysis of the behaviour of Arnold on the basis of the
theory of deontology is presented as follows. The fact that Arnold dedicatedly involves
himself in working out the extent of the problem and demonstrating the full details of the
issue to Goodrich describes positive traits in the behaviour. This is because as the
management accountant of the company it is his duty to provide a detailed picture of the
issues to the senior management of the entity. Further, he stresses the option of disclosing the
underpayment to the authorities, and make arrangements with the banks to avoid the
insolvency. The suggestion of the disclosure is compliance of the moral duties on the part of
Arnold and that justifies his behaviour as a whole.
Part B: Using an ethical decision-making model
There have occurred several corporate collapses over the years. One of the chief
reasons of the said corporate collapses is the lack of awareness among the accountants and
the management of the entities about what extent their policies and practices are ethical
(Kidwell, Fisher, Braun & Swanson, 2013). To address this, several ethical decision-making
models have been developed that serve as a guide to the managers to make the best decisions
in the situation of ethical dilemmas. In order to develop a sound ethical decision, Mr
Goodrich can take the aid of the framework specified by the American Accounting
Association model, also known as the AAA ethical decision model (Goza, 2013). The AAA
ethical decision model is based on the pillars that are the establishment of the facts of the
case, data collection relating to the facts, evaluating the data in light of the applicable norms
and principles and reaching the judgement on basis of the veracity of the facts (Thomas,
2012). The model involves certain steps as described below.
The first step is the establishment of the facts of the case. The fact to be established in
the given circumstances is that the workers of the entity are underpaid in the context of the

legally specified payments. The understatement of the expenses of the entity has led to the
overstatement of the profits and the facts have recently come into the light. The next step is
the identification of the ethical issues. The ethical issues involved here is the undermining the
interest of the workers and regulatory authorities. In the next step, the norms, principles, and
values in the given circumstances are identified. There is a conflict of interest on the part of
the management of the enterprise and that transparent reporting has not been done as
prescribed by the Corporations Act and other regulations. The next step of the model involves
the identification of the alternative course of action. The two courses of actions are identified,
that is the continue with the non-disclosure and secondly the acceptance of the fault in front
of the authorities and taking necessary steps to clear the underpaid amount over the years.
The norms and principles are matched with the identified courses of actions in the next step.
This leads to the observation that it is the duty of the management of an enterprise to act in
the best interests of all the stakeholder groups and depict the results in true and fair manner.
The consideration of the consequences of each action is the next step of the model. If the
same practice is continued, there is a higher probability of the fault being noticed by the
authorities and exposing the entity and management to legal consequences. The disclosure
would save the entity and those charged with governance with the punishment and penalties
to some extent and would be in favour of each stakeholder group concerned as well. Thus, the
decision is to be taken in the last step by Mr Goodrich and that the disclosure of the
underpayments is suggested as per the steps of the AAA model.
Part C: Using APES 110
The APES 110 Code of ethics has been published by the Accounting Professional &
Ethical Standards Board Limited (APESB) and is applicable to the professional accountants
who are the members of the CPA Australia (APESB, 2010). The APESB is an independent
body that was established in the year 2006 with an aim to devise and issue the ethical and the
professional standards that are applicable on the members of the CPA Australia, the Institute
of Public Accountants, and the Chartered Accountants ANZ. These are issued in the public
interest so that the highest form of the ethical practices is maintained while discharging the
professional services of the accountants.
The code is divided into three parts. The Part A of the code is applicable on all the
members of the said professional bodies. The said code lays down the basic fundamental
principle in the Section 100 to be followed by the members while discharging their

professional duties. These key fundamental principles are namely the integrity, objectivity,
professional competence and due care, professional behaviour and confidentiality. These
fundamental principles are required to be maintained by all the members whether the same is
engaged in the practice or employed in the professional capacity elsewhere. According to the
said principles, the members must be honest in their dealings and discharge of functions,
should not be biased, and must maintain professional skills and knowledge and respect the
confidentiality of the information together with the compliance with the applicable statutes.
The duty has been cast upon the members to identify and evaluate the threats that undermine
the essence of the above stated fundamental principles and devise means to bring them to
acceptable low levels. The members engaged in the practice have the duty of describing the
true nature of business transactions, assets, or liabilities. This is in addition to the
classification and recording of the information in a timely and proper manner, and complete
and accurate representation of the facts. If Arnold were the member of the CPA Australia, he
would be required to abide by the key basic principles and ethical norms as mentioned above.
Arnold, being the management accountant of the entity, has a prime duty to depict the true
nature of the financial dealings in the enterprise. He cannot get past the duty to provide full
disclosure of the underpayments made to the workers. Thus, Arnold must ensure that he
complies with the basic principles of the code and discharges his duties accordingly.
As stated in the case study, Arnold is employed and hence Part B of the Code of
Ethics would further guide him for the relevant conduct in the business. However, as stated in
the case study given, Arnold is facing pressure from the senior management of the
organisation to hide the said underpayments and fulfil his duties as the employee of the
entity. In this event, discharging professional duties in the context of the code of ethics is
impossible and hence a set of recommendations is made to Arnold as stated below. The first
step of the recommended action is to evaluate the significance of the threats in light of the
various factors, as mentioned below. The threats for a member may be in the form of the
pressure of acting contrary to law or regulation, lie or mislead other especially the regulators
and other stakeholders, and issue or be associated with the misrepresented financial
statements. Further, the significant of the threats is to be evaluated in the light of the source
of the pressure and the degree to which the information is misrepresented. In the given case
study, the threat for Arnold is significant and in the form of hiding the underpayments of the
wages and other awards to the workers and significant overstatement of the profits. The threat
can be stated to be that of the high level because it is directly coming from one of the persons

those charged with the governance of the enterprise, the high amount involved and the fact
that the same practice has been ongoing for a number of the years.
The second step of the recommendation calls for the evaluation of the various
safeguards available and selection of the best one, depending upon the circumstances. One of
the safeguards available to Arnold is to obtain assistance and consulting with the persons
possessing the necessary expertise which includes the other senior members of the
organisation. Thus, Arnold can discuss the issue with the CEO and CFO of the organisation,
as COO Mr Goodrich is not able to understand the ethical issues associated with the
underpayments to the workers. In addition to the above available safeguards to Arnold, if he
does not wish to involve the court actions and litigations, the further safeguard is in the form
of availing of a formal dispute resolution process within the entity itself, as stated in Section
310.
In addition, the consultation can be obtained from the independent experts or a
relevant professional body. If after the consultation as well, the threats are not being able to
be brought to the acceptably low level, Arnold should determine whether the refusal of the
duties is appropriate in the given circumstances in light of the threats of the present situation.
As stated in the case study, the non-consideration of the interests of the workers and the
authorities is a significant threat enough, and therefore Arnold can adopt the safeguard of
refusal to perform the duties and clearly communicate the same. Arnold can further obtain a
piece of legal advice and dissociate himself from the said employers as stated in the Section
320 of the code.
Hence, as discussed in the previous parts, the Code of Ethics provides a framework
for the decision-making apart from the ethical theories and the ethical decision model. The
discussions conducted in the previous parts highlight that here are various options available
to Arnold in light of the code of ethics applicable to the professional members. He can choose
one of the options to safeguard his profession and in the public and the stakeholder interest.
Conclusion
The discussions in the previous parts aid to conclude that ethical principles are a vital
consideration for the conduct of the business functions and the individual behaviours as part
of the organisational operations. The work analysed the various facets of the ethical
applications in the business context such as the application of ethical theories, APES 110

code of conduct and the AAA model to the given case study. Thus, it can be concluded that
the consideration of ethical principles is an indispensable part of the business activities and
individual professional conducts in the business environment.

References
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