Ethics and Governance Case Study: Ethical Theories and Practices

This case study examines ethical issues within a corporate setting, focusing on the actions of Mr. Goodrich, Arnold, and Amanda. The report analyzes the behavior of the involved parties through the lens of ethical theories such as egoism, utilitarianism, and deontology, exploring how these theories influence decision-making. It also applies the AAA decision-making model to guide ethical choices. Additionally, the case study discusses the CPA's code of ethics, highlighting potential threats and safeguards for CPA members. The analysis covers various aspects of ethical leadership, decision-making, and corporate governance, offering insights into the complexities of ethical dilemmas in business and provides recommendations for ethical practices.

Ethics and Governance
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Executive Summary
The reports started with a section of introduction that provides an outline of the whole
report. The report developed finding on the behavior of parties to the case using different ethical
theories in its first part. In conjunction with the relationship of theories and behavior of parties,
the basic understanding of theories been provided. The second part of the report discussed each
step involved in AAA decision-making model and how Mr. Goodrich can seek ethical decision
using this model. The last of the report developed the focus on APE 110 code of ethics, which
provides guidelines, and standards of behavior to members of Certified Professional Accountants
Australia. This part summarized the threats that Arnold may have being a CPA member and the
safeguard available to him. The report ended with a conclusion that consist of the main finding
of the report.

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Contents
Introduction......................................................................................................................................2
Part A...............................................................................................................................................3
Theory of Egoism: reflection in Goodrich’s behavior 3
Theory of Utilitarianism: reflection in Goodrich’s behavior 4
Theory of Utilitarianism: reflection in Arnold’s behavior 4
Theory of deontology: reflection in Arnold’s behavior 5
Part B...............................................................................................................................................6
Part C...............................................................................................................................................7
Conclusion.....................................................................................................................................11
References......................................................................................................................................12

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Introduction
One may not separate ethics from a business, as it is an essential part of each business.
Decision-makers of business have different ideologies that they use while taking business
decisions. These ideologies are influenced by one or more ethical theories. The report is divided
into three parts namely Part A, B and C. Part will examine the behavior of parties to the case in
the context of different ethical theories. Part B will discuss AAA decision-making model and
will help Mr. Goodrich to take an ethical decision and lastly, part C of the report will make the
focus on fundamental principles, threats, and safeguard relevant to Arnold’s situation. A
conclusion summarizing key point of the report will be presented at the end of the report.
Part A
Theory of Egoism: reflection in Goodrich’s behavior
The theory of ethical egoism is one of the significant theories of ethics, which states that
moral agents are required to do the actions in self-interest (Österberg, 2012). It is concerned with
the manner one should behave. The theory believes that only a person is responsible for his/her
happiness and not the other people and therefore people must think their interest over and above
others. By reviewing the given scenario in the context of this theory this is to state that the
behavior of Mr. Goodrich seems to be affected and influenced by this theory. He did not consider
himself liable for the happiness and future of Amanda and Arnold and only though of about his
position and reputation. During the whole case, he was saving his place. He fired Amanda and
also instructed Arnold to not to share the situation with anyone else as it could bring adverse
impact to his situation in the organization. He threatened Arnold that he will ruin his career if

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anything related to payment error would leak in the market. He did not think about the
professional career of Amanda and Arnold as ethical egoism puts thee focus on self-interest. At
each stage of the case, he was trying to keep himself free from every liability irrespective of
others' happiness. Apart from hiding the situation from stakeholders, he also decided to delete all
the records related to the payment error and instructed Arnold to do so. Again, he provided
safeguard to himself hence to say that he applied the theory of egoism in his behavior.
Theory of Utilitarianism: reflection in Goodrich’s behavior
The theory of Utilitarianism decides an action as right or wrong based on its outcome
(Ethicsunwrapped, 2019). It means if the outcome of an act is good for a large group of people
then it considers as ethical under this theory, the theory believes that people must pursue those
acts that lead greater benefits (Mandal, 2010). In the given case, Mr., Goodrich seems to use this
theory in his behavior at few of the incident where he considered the goodness of company i.e. a
larger group of people. As an ultimate decision, Mr. Goodrich decided to not to share the
incident with anyone else as he was considering the result of it on the company at last. He
believed that the company did not have any chances to get the funds from business and the
incident if reported, had the potential to ruin the company. Being on the position of COO, this is
to assume that he had reason to believe in it. Stake and interest of various stakeholder groups
were involved with the company and closure of the same could lead to an adverse situation for
them. In such a situation, Mr., Goodrich found ethical to not to share the information with
anyone which seems to be a correct action as per the principles and beliefs of the theory of
utilitarianism. This action could be negative for a few working groups but consist of the idea of
the greater good.

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Theory of Utilitarianism: reflection in Arnold’s behavior
Arnold had chances to hide the situation from Mr. Goodrich nevertheless; he has shared
the whole situation with him knowing the danger to his job. He considered the interest of the
company and its stakeholders over the self-interest. His lead focus was on the ultimate goodness
of the company. He also made Amanda believe that it is right to let the Goodrich know about this
situation. He spent his whole night in searching for options to deal with the situation. Both of the
options searched by him were expected to bring better outcomes for the company. He wanted to
bring the best results to the company and considering the goodness of various stakeholders he
suggested Mr. Goodrich ask for the help of bankers and unions, as he was aware of the risk of
insolvency. Further, by doing so, the company also could escape situations like damage to
goodwill in the future. In his other option, he has suggested to not to share the incident with
anymore else and to hope that no one notices the same. Nevertheless, this option does not seems
to be ethical but as could save the company hence Arnold developed the same. He was putting all
the efforts to bring the best outcomes for the company and the theory of utilitarianism reflects in
his performance.
Theory of deontology: reflection in Arnold’s behavior
Theory of deontology is just the opposite of the Utilitarianism theory. As Utilitarianism
theory develops its focus on consequences, deontology focuses on actions (Philosophybasics,
2019). The theory states that one must do the actions that are ethical irrespective of the
consequences. In the given cases, sometimes Arnold behaved according to the principles of this
theory. The theory can be seen at the moment when he made the focus on the latter option that is
to ask the help of unions and bankers. Arnold was trying to carry the best results for the company
but also wanted to keep the environment ethical. He was aware of the fact that the company

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consists of many of the stakeholders that have an interest in the business of the company and
hiding anything from them is not ethical. He recommended Mr. Goodrich to declare the error to
the industrial regulator and to ask time to fix the problem. By suggesting this option, Arnold was
trying to ensure transparency and good governance in an organization. He believed there is no
good to put the company into the danger of insolvency and in such a situation; the company
should ask the help of banks and workers. He was not happy with the decision of Goodrich
regarding keeping the information secret and it shows that he believed in ethics in actions and
followed deontology theory of ethics.
Part B
The lead issues which often business manages faces is related to the way in which they
take ethical decisions. They do not understand how to reach up to an ethical conclusion of a
situation. AAA decision-making model helps the managers and decision-makers in such a
situation. This model consists of 7 steps, following which an ethical decision can be attained
(BPP Learning Media, 2013). In the following discussion, the discussion in respect to these 7
steps and their implication to the given case study scenario will be discussed. Starting from the
very first step, this is to state that the same is related to the formation of facts of the case. As the
title of the step implies, Mr. Goodrich will check and review the facts of the whole situation. The
second step requires decision-makers to identify the ethical issues involved in a case (Goza,
2013). Here Mr. Goodrich would check what exact issues related to ethics he may face or facing.
Under the third step of the model, one is required to identify values, norms, and principles of a
case. Under this step all the related principles and rule of law are is to check. Mr. Goodrich will
evaluate different laws applicable to the incident.

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In conjunction with he would also evaluate expectations associated with his role in the
company Once he would be done with the identification of the norms, he will move towards the
next step i.e. step 4. From this step, the work of decision-making gets starts in actual. This step
involves preparing a rough draft of all the alternative available to reach up to the decision. Here
this is necessary to state that this step does not consider any norms or principles identified under
step 3. In step 4, Mr. Goodrich would collect all the alternatives available to address the issue
without considering any expectations attached to his role or the law related to the area of issue.
These alternatives may be anything such as hiding the issue from everyone or to announce the
same or anything else. The next step i.e. step 5 can be seen as a good combination of step 3 and 4
where alternatives of step 4 are required to be review considering norms identified under step 3
(Cartlidge, 2011). Mr. Goodrich here would be expected to check the various alternatives as per
the applicable principles. This step helps to understand elements of each alternative and their
capability to resolve the ethical issue. Step 6 develops its focus on the consequences of each
alternative. It is obvious that different alternatives consist of different results hence under this
step, Mr. Goodrich would review what results different alternative would bring to the company
as well as to different stakeholders. It means the pros and cons of various options are used to be
discussed in this step. The seventh step is the final step of this model that lead to the decision
(Verbeke, Roberts, Delaney, Zámborský, Nagar, & Enderwick, 2019). Under this step, Mr.
Goodrich would finally take the decision, which will be an ethical one as this model only
supports to ethical decision making. In this way, by following the studied steps, Mr., Goodrich
will reach up to an ethical decision.

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Part C
Every professional accountant is required to behave in a standard and ethical manner.
Certified professional accountants (CPA) Australia is a body that consists of and regulates
accounting professional. These accountants are known as CPA members and have to comply
with the code and guidelines provided by a professional accountant. Accounting Professional and
Ethical Standards Board have developed certain code of ethics for CPA members, which are well
known as APES 110 Code of Ethics for Professional Accountants (Moroney, Campbell, &
Hamilton, 2012). This code outlines the standard manner of decision making and working for
CPA members. Now, this is to state that some of the professional accountants remain in business
whereas some of them remain in employment hence the subjective code has three parts. These
parts apply differently to the members in business and members in services. Part A has common
applicability whereas Part B is there for members in public practice and Part c guides members
in business (Cpaaustralia.Com, 2019). Part A, which applies to all members, has a different
significance when it comes to ethics and governance as the same grants fundamental principles.
These principles can be understood as elements, which are required to be there in the behavior of
every CPA member. As Arnold is a CPA member, the following principles would apply to him:-
S. No. Title Explanation
1. Confidentiality This is the core and foremost principle applicable. The
Principle states that it is required for CPA members to
keep the confidentiality in their dealing while acting
on behalf of the client (for members in business) or for
client and employer (for members in services). Being
the accountant, they have access to confidential

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information of the client and of employer that must be
kept confidential only as accountants have a fiduciary
duty towards them (Trotman, & Carson, 2018).
2. Integrity There is no specific definition of integrity, yet this can
be understood as honesty. This principle demands
every CPA members remain straightforward and
honest while doing performing their duets (Hoggett,
Medlin, Edwards, Tilling & Hogg, 2012)
3 Professional competence and
due care
The accounting profession has certain professional as
well as a technical standard. The subjective code of
ethics demands every CPA member to remain updated
with these standards and to perform their practice
according to these standards, current law, and rules of
the area (Woltes Kluwer, 2017).
4 Objectivity Every professional has an ultimate objective to act as
per their business judgmental and hence in such a
situation no CPA member is expected to be a part of
professional biasness or to let the undue influence of
others to change their decisions (Gay & Simnett,
2017)
5 Professional Behavior This principle states that every CPA member must act
professionally and comply with applicable regulations
and law. Further, they also must escalate all the
matters that discredit the profession

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(Publicaccountants, 2018).
Arnold, in this case, would pursue all the above-tabled principles. To discuss the most relevant
principles for Arnold, this is to mention that being a part of the company he was required to
maintain the confidentiality but since the matter was required to inform stakeholder hence he was
now also to liable to maintain integrity and professionalism. In such a situation, professional
behavior, integrity, and professional due care seem to be the most relevant ones for Arnold. This
is to mention that compliance with these principles becomes difficult sometimes as due to the
threat associated with these principles.
Different threats are there that are there according to the facts and other situations of the case.
Intimidation threat is one of the most significant ones for members who are engaged in service.
The threats consist of a risk to take wrong decisions by members after having undue influence
from employers. Arnold in such a case had the same threat as Mr. Goodrich was of influencing
nature. He did the same and forced Arnold to hide the incident from everyone else. Another
threat that fits in the case is an advocacy threat. The threat consists of a risk that to promote the
best result for client or employer, members would compromise with their objectivity. Arnold
faced this threat, as he had to move from Goodrich’s cabin after knowing his final decision,
although he was aware with the ethics involved in the decision of Mr. Goodrich, yet he
comprised with his objectivity. Familiarity threat was also relevant to Arnold's situation as he
was a part of the company. This threat is related to the principle of objectivity and professional
behavior and doubts that Arnold may work in the interest of the company forgetting the
principles applies to him being a member of CPA.

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Now after the discussion of threats, safeguards are also required to discuss. As the name implies,
these safeguards provide how identified threats can be addressed. The code itself provides
safeguard to deal with various threats. These safeguards are divided into two categories. First,
those, which are provided by profession, legislation and regulation and others, are those that
developed in the work environment. Arnold many use both kinds of safeguards. To eliminate the
advocacy threat, he may ask for the help of an independent reviewer who would have no
influence from Mr. Goodrich and can provide independent advice. Further, to seek an ethical
decision, he may ask advice from independent audit panel. Another threat i.e. intimidation threat
can be eliminated by informing the whole situation to senior management or compliance head of
the company. To minimize the undue influence of Mr. Goodrich, Arnold can report the issue to
higher authorities than Mr. Goodrich. Few people are there in businesses that have the expertise
of the matter, hence Arnold may seek the assistance of those people and can analyze the way in
which he may maintain confidentially of his organization along with maintaining the dignity of
the profession.
If to discuss the safeguards provided by the work environment, Arnold has the option to take
help of ethics or corporate governance of the company if any. This seems to be the best
safeguard available to Arnold as by using this, he may eliminate any chances of litigations and
can save his time and cost. Further by doing this, he can also act in the best interest of the
organization, which is also his duty in conjunction with compliance of principles of the
profession.

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Conclusion
Conclusively, this is to state that various ethical theories are there which reflects in the
behavior of professionals. Sometimes, they make their focus on actions and some of the times at
results. AAA decision-making model is there that helps decision-makers to attain ethical
decisions. In Part C of the report, the discussion over APES 110 code of ethics has been done,
the Principle of objectivity, professional behavior, and professional due care seems to be the
most relevant principles to Arnold. Further, the relevant threats to Arnold involve advocacy,
intimidation and familiarity threat that can be resolved by reporting the issue to seniors of Mr,
Goodrich and by seeking advice from independent auditors.

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References
BPP Learning Media. (2013). ACCA Paper P1 - Professional Accountant Practice and revision
kit. London : BPP Learning Media.
Cartlidge, D. (2011). New Aspects of Quantity Surveying Practice. London: Taylor & Francis.
Cpaaustralia.Com. (2019). APES 110 Code Of Ethics For Professional Accountants. Retrieved
from: https://www.cpaaustralia.com.au/professional-resources/accounting-professional-
and-ethical-standards/apes-110-code-of-ethics-for-professional-accountants
Ethicsunwrapped. (2019). Utilitarianism. Retrieved from:
https://ethicsunwrapped.utexas.edu/glossary/utilitarianism
Gay, G. & Simnett, R. (2017). Auditing and Assurance Services in Australia, Sixth Edition
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Practice, 14(6), 107-115.
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Moroney, R., Campbell, F., & Hamilton, J. (2012). Auditing, Google eBook: A Practical
Approach. John Wiley & Sons.

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Österberg, J. (2012). Self and Others: A Study of Ethical Egoism. The Netherlands: Springer
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Professional Accountants due to revisions to IESBA’s Code of Ethics for Professional
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