Ethics and Governance Report: Case Study Analysis and Ethics

This report delves into the intricacies of ethics and governance within a business context, analyzing a case study involving a company's ethical dilemmas. The report explores the behaviors of key individuals, such as Mr. Goodrich and Arnold, through the lens of ethical theories including egoism, utilitarianism, and deontology. It then applies the AAA decision-making model to evaluate ethical choices and provides an overview of the APES 110 Code of Ethics for Professional Accountants, focusing on its principles, threats, and safeguards. The objective is to identify unethical practices and propose resolutions, providing a comprehensive understanding of ethical challenges and decision-making in business.

Running Head: BUSINESS AND CORPORATION LAW 0
Ethics and Governance
8/11/2019
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Executive Summary
This report addressed the issue of ethics and governance in business practices. It included
aspects such as ethical theories; AAA decision-making model and CPA code 110. All these
aspects are related to ethics closely. By using ethical theories, behavior of person can be checked
that has been done in this report. The second part of the identified 7-step procedure of decision
making that is well known as AAA model. Lastly, Part C addressed the principles, which applies
to member of CPA along with threats and possible safeguards. APES 110 Code of Ethics for
Professional Accountants consist of these factors. The objective of the report is to check the
common unethical practices that often present in business practices and the methods to resolve
the same.

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Contents
Executive Summary.........................................................................................................................1
Introduction......................................................................................................................................3
1. Goodrich Behavior and theory of egoism 3
2. Goodrich Behavior and theory of utilitarianism 4
3. Arnold’s behavior and theory of utilitarianism 4
4. Arnold’s behavior and theory of deontology 5
Part B...............................................................................................................................................6
Part C...............................................................................................................................................7
Conclusion.....................................................................................................................................10
References......................................................................................................................................11

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Introduction
Business ethics is a kind of applied ethics. In day-to-day business activities, various
people take business decisions as per their knowledge and experiences. However, it is not always
necessary that taken decisions are ethical and therefore situation gets worse sometimes. In the
presented report, 3 parts of the question based on the given case study will be answered. These
three parts will develop a focus on different aspects such as Part A will review the behavior of
parties to the case, using different theories. Part B will be based on AAA decision-making model
and Part C will highlight principles, threats and safeguard under CPA 110. At last, a conclusion
will be drawn upon summarizing findings of the report.
Part A
1. Goodrich Behavior and theory of egoism
Theory of egoism is a prescriptive theory and believes that every person should behave in
self-interest. The theory provides that no one is responsible for the promotion of any else
response (Westacott, 2019). In the presented case, the application of this theory can be seen in
the behavior of Mr. Goodrich. As given in the case study, he did not think of the career of
Amanda and Arnold. Applying the theory of egoism, he did not consider himself liable for the
career as well as the future of these two people. In addition to this, he was thinking to save his
position by not letting the world about the mistake done by the company. Further, he was saving
his reputation by not taking any more advice from the union. Nowhere in the whole scenario, he
seemed worried about the career of two subjective employees or saving them from the situation.
As soon as the matter came into his knowledge he started considering Amanda and Arnold as an
individual not as a part of the company anymore. He even confirmed Arnold that if the news of

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mistaken payment of wrong staff award would be leak then he will held Arnold liable for the
debacle and then after the person will not be able to get any new job. While giving orders to
Arnold, he again thinks of the company only and instructed Arnold to delete every related file
from the company computer. By observing all these actions of Mr. Goodrich, it is clear that
being COO of the company he was thinking of the company and himself only not about others.
2. Goodrich Behavior and theory of utilitarianism
It is a normative ethical theory that develops its focus on consequences or result (Caae,
2019). As per this theory, a person must do the things, which brings happiness, irrespective of
the actions. It means if an action is not ethical but bring positive results to many then this theory
support such actions (Learning-theories, 2019). In the behavior of Mr. Goodrich, one may see the
refection of this theory. He took a final decision after reviewing the whole case and decided to
not to make the news public. At some instance, this decision seems to be unethical but the same
was not if to think of the result. Goodrich was aware of the fact that the company was not in the
position of taking a loan from banks and other financial institutions and therefore there was no
benefit making this news out by asking for a loan. Being on the position of COO, he was well
aware that the news could destroy the reputation of the company as well as to ruin the company.
He thought of the last result in the whole scenario. Company has many stakeholders and interest
of the same is closely attached with decisions of the company. Here Goodrich considered the
greater good and decided to hold the information related to mistake. These decisions seem to be
immoral but are allowed under the theory of utilitarianism. The incident happened and now Mr.
Goodrich knew that making the information public could bring negative result for the company.
Hence, this would not be wrong to state that Mr. Goodrich used the theory of utilitarianism in his
actions.

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3. Arnold’s behavior and theory of utilitarianism
As given in the provided situation, Arnold and Amanda came to know about the mistake
first. Arnold could hide the truth in such a situation yet he decided to bring the same into the
notice of Mr. Goodrich. He was fully aware of the strong personality of Mr. Goodrich but he
informed the incident to Mr. Goodrich, as he was worried about the interest of stakeholders and
company. As mentioned above, the theory of Utilitarianism promotes actions, which maximize
the wellbeing of the majority (Dreier, 2009). Arnold did not consider his personal interest and
reported the incident, Mr. Goodrich, even knowing his expected reactions. The application of the
theory of utilitarianism reflects in his saying where he believed and told Amanda that sharing the
full problem with Mr. Goodrich is the right thing to do. Further, he prepared two options that too
considering good for the company and its stakeholders. He spent the whole night working to
resolve the issue; it reflects how badly he wanted to resolve the problem and to bring the
company in an earlier position. He was focusing on the result of action and therefore suggested
to share the information with workers and bankers to element risk of insolvency. He also made
another recommendation where it was suggested to not to share the information with anyone.
Under both of the recommendation, he considered the ultimate good of the company. He was
thinking about what the best option could be there to save the company. Here the theory of
utilitarianism reflects in his behavior.
4. Arnold’s behavior and theory of deontology
Similar to the theory of egoism and utilitarianism, one more theory is also there namely
theory of deontology. The theory of deontology focus on actions rather than results (White,
2010). It distinguishes wrong from right and says that actions must be moral and ethical no
matter what results they bring. In the presented scenario, however, Arnold acted using the theory

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of utilitarianism yet at some of the incidents, the theory of deontology can be seen. These are the
instances where Arnold focused on the morality of actions. As mentioned earlier, he prepared
two recommendations but emphasis the focus on the second one. He believed that the company
should not hide the situation from stakeholders anymore. In addition to this, he personally
believed and wanted to make bankers and workers aware of the situation. He also placed his
recommendations before Mr. Goodrich in which he found it suitable to inform the incident to
Fair work commission. He informed Mr, Goodrich to ask the help of worker and bankers to
escape the situation of insolvency. Here doing this, he wanted to ensure transparency in the
actions. As already one mistake has happened there, Arnold did not want to repeat the same
hence without considering the risk of results, he made the focus on the morality of actions.
Therefore, this can be stated that he acted based on principles of deontology theory.
Part B
An ethical decision is the core of every good and responsible business. Nevertheless,
many of the times, managers face issues with the practice and cannot decide how to come up to
an ethical decision. In such a situation, some of the decision-making models have been
developed in the past that helps leaders to make ethical decisions. The American Accounting
Association model is one such model. This is also known as AAA decision-making model. It
involves 7 step procedures. The model starts with very step 1 that consist establishment of the
facts of the case (Aglobalwall, 2019). Here Mr. Goodrich will review the entire case and will
make it clear that what is under consideration. The second step involved in this model develops
the focus on the identification of ethical issues of the case (Cartlidge, 2011). Mr. Goodrich will
review the issue related to the ethics involved in the whole scenario. At this step, he would
review what ethical issues are at stake. The third step of the AAA model is related to the

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identification of norms and principles related to the case (Accaglobal.com, 2019). The step
involves consideration of applicable norms of profession or code of ethics related to the
profession. At this step, Mr. Goodrich will consider the social expectation of his post. Being a
COO of the company, he has certain duties related to the post and stakeholder expects a good
level of behavior from him that would be considered at this step.
The fourth step is one of the significant ones where decision-makers identify the various
alternative course of actions (Wilson, 2014). At this step, decision-makers only have to review
various options without making any focus on norms and other aspects. Mr. Goodrich will
identify options available to him to resolve the identified ethical issues. 5th step of this model
0jmakes a mix of step 3 and 4th. It means at this step a person is required to review the available
course of action considering applicable norms identified at step 3 (Liu, & Forrest, 2010). This
step let the people know which available option according to the norms. At this step, Mr.
Goodrich s required to check that what option can fulfill the social expectations associated with
his post and profession. Step 6 is the second last step of the model that helps to reach up to
ethical decision (Kfknowledgebank.kaplan.co.uk, 2019). This involves consideration of
outcomes of each option. In the given scenario, under this step, Mr. Goodrich would think of the
result of each option available to him. At last seven and the last step of the model comes that
evidently decide the final decision. Mr. Goodrich will finally be able to make an ethical decision
following the studied AAA decision-making model.
Part C
For accounts and professionals, it is always necessary to work ethically but while
practicing the profession they face many issues. To address and resolve such issues, the

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Accounting Professional and Ethical Standards Board has issued the APES 110 Code of Ethics
for Professional Accountants. As the name of the code implies, it provides ethical principles to
the member and they know about their standard behavior. The code applies to all the members of
certified professional accountants (CPA) Australia. The code is divided into three parts that have
different applicability (Ifac, 2019). If to consider Arnold as CPA members, this is to state that
this code can help him to take the right and ethical decision. Part A of the code applies to all the
members and part C applies to those who work in a business. Members in business are those who
are engaged in service, industry, or commerce. While dealing with the fundamental principles,
such members may encounter threats. Part A, as well as Part C, make the focus on such threats
and the resolutions. Part A of the code outlines fundamental principles that apply to all members.
Being a CPA member, Arnold also would have the following principles:-
 Integrity: - This principle believes that all the professionals’ accountants must be honest
as well as straightforward in their dealings.
 Confidentiality: - This is another important principle, which states that members of CPA
must keep confidentiality in their profession and hence must not disclose any information
to the third party without the permission of client as well as of employer (Moroney,
Campbell, & Hamilton, 2012).
 Objectivity: - Every CPA members have some duties towards professional and client.
This principle states that professional accountants must not allow any conflict of interest
of a third party to make undue influence over their business or professional judgments
(Sivabalan, Sawyers, Jackson & Jenkins, 2016).

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 Professional behavior: - As the title implies, this principle demands every CPA member
to comply with relevant regulation and laws and to ignore every possible action that may
discredit the profession (Apesb, 2018).
 Professional competence and due care:- While serving to clients, CPA members are
required to ensure that their services are based on current development in practices,
techniques, acts, and legislations and they are working in accordance to professional and
technical standards.
It is now clear that all the above-mentioned principles apply to Arnold but principles of
objectivity, professional behavior, and professional competence seem to be the most relevant in a
situation where he has been sent out of Mr. Goodrich’s office with an unethical decision. Part C
of the code states some pressure that creates threats for CPA members. These pressures include
an instruction to act in against of law or regulation, in against of professional standards order to
mislead others, and so on (Cpaaustralia, 2019). Further Part A states that threats may be there
because of a broad range of circumstance and relationship. Many of the threats are there that are
relevant to above-discussed principles. The most relevant threat in this situation is the advocacy
threat. The thereat states that a member will promote the position of a client or employer to the
extent of compromise with the member's objectivity. Another threat is the familiarity threat. As
Arnold is associated with the company, it is possible that because of such close or long
relationship, he will be to the interest of the company. It is a threat to the principle identified
above especially to the principle of objectivity and professional behavior. Intimidation threat is
another threat that is relevant to the situation. This states that a member may take wrong
decisions or decisions that are in breach of the principle of objectivity because of the undue

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influence of the employer. Mr. Goodrich influenced the decision of Arnold and exercised his
judgment over Arnold’s decision. At this place, intimidation threat reflects in the situation.
Nevertheless, to say that code does not only address threats but also the safeguard
available to members. These safeguards are ways that can reduce or eliminate threats. Safeguard
varies according to threats. In the give situation, Arnold may ask for the help of senior
management of the company that is CEO or CFO. Mr. Goodrich is senior to Arnold and hence
had undue influence over him. In conjunction with this, he may also inform the decision of Mr.
Goodrich to the head of compliance. Further, intimidation threat can be addressed and resolved
by having an appropriate reviewer who does not take part in the Audit engagement. Apart from
this, a regular external, as well as internal quality review of the engagement, also may help.
Since advocacy threat is another issue for Arnold, he may take the service of professionals who
are not a member of the Audit Team.
Conclusion
To conclude the report presented hereby, this is to state that ethics is the core for every
business and different standards and code are there to help the decision-makers. The report
focused on the behavior of Arnold and Mr. Goodrich using different ethical theories. In part 2,
AAA decision-making model has been studied and using the same Mr. Goodrich may reach up to
an ethical decision. In the last part of the report, the principles applied to Arnold being a CPA
member have been identified. He may face intimidation and advocacy threat mostly as he
employed in a company and has the undue influence of senior management. Certain safeguard

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such as reporting to CEO and CFO and appointment of the independent external and internal
auditor may be used by Arnold.

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References
Accaglobal.com. (2019). Ethical decision making. Retrieved from:
https://www.accaglobal.com/gb/en/student/exam-support-resources/professional-exams-
study-resources/strategic-business-leader/technical-articles/ethical-decision-making.html
Aglobalwall. (2019). AAA Model Ethical Decision Making. Retrieved from:
https://www.aglobalwall.com/aaa-model-ethical-decision-making/
Apesb. (2018). APES 110 Code of Ethics for Professional Accountants (including Independence
Standards). Retrieved from:
https://www.apesb.org.au/uploads/home/02112018000152_APES_110_Restructured_Co
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Caae. (2019). Utilitarian Theories. Retrieved from:
http://caae.phil.cmu.edu/Cavalier/80130/part2/sect9.html
Cartlidge, D. (2011). New Aspects of Quantity Surveying Practice. London: Taylor & Francis.
Cpaaustralia. (2019). Part c. Retrieved from: https://www.cpaaustralia.com.au/professional-
resources/accounting-professional-and-ethical-standards/apes-110-code-of-ethics-for-
professional-accountants/part-c
Dreier, J. (2009). Contemporary Debates in Moral Theory. US: John Wiley & Sons.
Ifac. (2019). Code Of Ethics For Professional Accountants. Retrieved from:
https://www.ifac.org/system/files/publications/files/ifac-code-of-ethics-for.pdf

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