Individual Assignment: Ethics and Governance in Banking Sector Report

This individual assignment analyzes the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry report, focusing on ethics and governance within the banking, superannuation, and insurance sectors. The report examines ethical theories, particularly deontology, and their application to business practices. It discusses the commission's recommendations, especially those related to home loan lending and broker responsibilities. The assignment further investigates a case study involving Freedom Insurance Group Limited, highlighting unethical sales and retention practices and their breach of ethical principles. It also connects these practices with the ethical guidelines provided by APES 110 for professional accountants. The report emphasizes the importance of ethical behavior and the consequences of misconduct in the financial services industry.

Ethics and Governance
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Individual Assignment 1
Executive Summary
Business ethics is need of 21st century, which cannot be avoid or ignored. Businesses are
required to understand their responsibility ahead to profits. Stakeholders demands a level of good
behavior from organizations and feel demotivated and cheated when they do not find such
behavior. In Australia, the level of misconduct was increasing day be day especially in the
sectors related to banking and insurance where trust is a priority. To identify such issues and to
take actions against them Australian government took a significant step by establishing Royal
Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
This commission is engaged in the investigation of misconduct in banking, superannuation, and
insurance industry and also provides recommendations to them. Recently, this commission
prepared its final report and handed over to governor. The report is divided in three parts which
consist case studies related to misconduct and recommendations.
Further APES 110 is there which provide guidelines to members of Certified Practicing
Accountant" and expect that they will keep honesty, integrity, objectivity and due care in their
behavior while performing the designated duties.

Individual Assignment 2
Contents
Executive Summary.........................................................................................................................1
Introduction......................................................................................................................................3
Part A...............................................................................................................................................4
Ethics and its theories 4
Recommendations of Commission 6
Part B...............................................................................................................................................7
Conclusion.....................................................................................................................................10
References......................................................................................................................................11

Individual Assignment 3
Introduction
Ethics and governance are important aspects of every business. In Today’s time, the lead
motive of every organization is to earn profit and in order to fulfill this motive; they divert their
practices towards profit maximization. Businesses often forget that their doings may be wrong to
achieve the ultimate objective and they engaged in practices, which bring negative impacts on
people associated with a business (Managementhelp.org, 2019). Apart from shareholders/owners
of the company, other people and workgroup are also there which influence the working of an
organization. The organization not only hurts the interest of such a group but also affects
shareholders in a negative manner. It becomes the responsibility of managers of the business to
work in the best interest of stakeholders. Apart from managers of the business, other people who
work in their professional capacity also are responsible to work ethically considering the interest
of all and avoiding conflict of interest.
This assignment is developed on the topic of ethics and governance whereby the whole
focus will be on the finding of Royal Commission into Misconduct in the Banking,
Superannuation and Financial Services Industry (Royal Commission). Commission also provided
its recommendations and in this way, the ethics will be discussed in relation to respective
recommendations. In the second part of the assignment, one of the case studies investigated by
Royal commission will be discussed in conjunction with APES 110, standards which provide
ethical guidelines to professionals.

Individual Assignment 4
Part A
Ethics and its theories
Ethics is a bundle of principles that governs the behavior of a persona and let the people
know what should be there. These are moral guidelines, which helps people to work ethically
(Ethics.org.au, 2019). Some generally adopted ethical principles are honesty, integrity, avoiding,
and conflict of interest. It means everyone is aware that they are required to act considering the
interest of all but they face issues in the practical implementation of ethics in their lives and in
this manner, ethical theories are there to help them. These theories can be understood as an
attempt to explain how people can live their lives productively and socially.
These theories are different concepts provided by different philosophers which tell people
that what is to be done while performing functions (Birsch, 2013). Further, they are different
believes that emphases on different factors, i.e some on results and some on actions. Moving
towards a discussion of such theories this is to state that Teleology is a theory that focuses on the
result and greatest goodness to society. On the other side Deontology theory is another important
theory of ethics, which is based on the factor of rights and duty. A philosopher named Immanuel
Kant outlined an idea in terms of moral responsibility to society and duty to safeguard the rights
of all. This is the first attempt at deontology. Here this is important to state that ethical theories
are equally important in the area of business. In addition, to help people in their personal lives, it
also helps managers, decisions makers, and professionals of business to inform how to behave
while performing their duties.
Deontology theory always focuses on duties and actions. The lead principle of the theory
is “Goodness is found in the act.” According to this theory, people follow their duties with all the

Individual Assignment 5
ethical principles without considering the results of their actions (Faculty.washington.edu, 2019).
It means no matter what results action can bring, but a person should act with honesty and
integrity. This theory is very simple to apply in practice, as it just requires people to follow their
duties and rules. The subjective theory makes the difference between right and wrong. As per the
rules of this theory, everything is right that a person does performing his/her defined duties
irrespective of the results of their duties (Bbc.co.uk, 2019). Further to say, in the application of
deontology theory, an action is treated morally well because of features of the action itself and
not because the result of actions is good (Kizza, 2014). Although the application of this theory
seems to be very easy, as people only require to follow their duties and their action are treated as
ethical but certain negative points are also associated with this theory. As mentioned above, this
theory does not make focus on the result, it creates problems sometimes. This theory generates
results that many individuals find improper. This can be explained by an example. For instance,
imagine a situation where a software engineer comes to know about the launching of a nuclear
missile, which can cause a war. This engineer can stop this war by hacking the network and can
save many lives. Nevertheless, applying the provision and rules of deontology theory, hacking
the software would be treated as unethical task and will expect the engineer to not to do so. In
this manner, the theory would advise to not to breach the code of conducts. In this case
application of this theory does not seems to be good as letting the missile launch, can cause the
death of many people (Ethicsunwrapped.utexas.edu, 2019).
In this manner, this is to say that deontology theory requires people to follow their duties
but it may lead to some negative outcomes sometimes

Individual Assignment 6
Recommendations of Commission
In the first volume of its report commission investigated in intermediated home loan
lending area of the banking industry. In the investigation conducted by the commission it was
found that in case of home lending, mortgage brokers are engaged in the defaulting practices. In
many of the incidents, it was found that brokers suggested those lenders to borrowers that were
used to provide a high commission to them. Commission of brokers comes from lenders and
therefore they often consider their personal interest while advising borrowers. In addition to the
brokers, misconduct has also been detected at the end of other parties involved in home loans
lending transactions such as mortgage aggregator and Australian credit license holder. These
people were avoiding the interest of borrowers while performing their duties. Not only borrowers
but lending institutions also suffer from a certain risk. Part 2.1.2 of volume 1 of the final report
submitted by the Royal Commission is focused on customer outcomes (Treasury.gov.au, 2019).
Commission claimed that in many cases, brokers proceed with a home loan where the risk
associated with borrower was high and brokers did not disclose this fact to lenders. The reason
behind the same was value-based incentives where the focus of market intermediaries was to
increase the sale of home lenders.
In addition to these findings, the commission also suggested certain recommendations to
control the issue of continue misconduct that was found in the sector of home lending through
intermediaries. Discussing these recommendations this is to state that the same are seems to be
closely connected with deontology theory of ethics as a commission focused on the performance
of duties. In the first recommendation of the commission on this topic (Recommendation 1.2 –
Best interests duty), the same said that when performing the duties related to home lending, it
becomes the responsibility of brokers to act in the best interest of the potential borrower. In the

Individual Assignment 7
next recommendation, the commission stated that the borrower should pay the fee to brokers and
not the lender so brokers can give independent advice to them. In part, 2.5 of the report,
commission said that whenever brokers work as an advisor it becomes their responsibility to
perform this duty setting aside their personal interest. The further commission also focused on
reporting obligation and information sharing system. Here it is clear that the commission focused
on duty factor and provided a message that the brokers should be fair and honest in their
dealings. Commission did not focus on the results of the actions and believed that if actions
would be moral and good then the result will always be positive.
Part B
Royal Commission did not investigate in banking sectors only but also in superannuation
and insurance industry too. In the second volume of the final report of the Royal Commission,
the same disclosed some case studies where default and misconduct found in the functions of
entities. 15 case studies related to the superannuation sector and 11 case studies related to the
insurance sector are presented under the subjective volume. In the following section of this
report, one of such case study from insurance sector will be discussed where the company was
involved in misconduct and personnel of the company performed their duties breaching the
ethical principles. The case is related to Freedom Insurance Group Limited. Company is one of
the famous insurance companies, which has its headquartered in New South Wales the state of
Australia (Bloomberg.com, 2019). Royal Commission investigated the conduct of management
and staff of this company and found that the same were not acting ethically. Sales and retention
practices adopted by the company and performed by its staff were in breach of ethical and moral
principles. If to talk in particular one case, then to say that sales representative of the company
sold an insurance policy to Mr. Stewart’s son, which was of no use for him. Mr. Stewart’s son

Individual Assignment 8
was suffering from Down syndrome and could not understand anything related to an insurance
policy, its cost, benefits, and protection covered by the same. It revealed afterward that the sales
representative had an idea about the incapacity of Mr. Stewart’s son yet he sold the accidental
insurance policy to him which was of no use. In addition to the deceptive sales practices,
retention practices of this company were also fraudulent. The retention department of the
company denied canceling out this policy, which the sales representative sold fraudulently
(Royalcommission.gov.au, 2019). Apart from this case, the company sold many policies
fraudulently and later on denied canceling them all. It became the general practice of Freedom
personnel. Sales personnel of the company were used to receive the volume based incentive and
therefore they adopted fraudulent practices to increase the sales revenue level of the company.
All these practices seem to be unethical as people associated with the company worked for their
personal benefits breaching the professional code of conduct.
Now the other issue is to check the code of conduct that professionals are required to
follow. For all the professional accountants of Australia (CPA members), an important document
is there which is known as Code of Ethics: APES 110. It helps accountants in their ethical
decision-making (Apesb.org.au, 2019). This code is made out of three parts namely A, B and C.
Part A of the report is applicable to all the members and stipulated some fundamental principles,
which should be there in the behavior of all the professional accountants of the country (CCH
Australia Limited, 2009). These principles are as follow:-
 Integrity:- It means professional accountants should be honest in their workings and
should mean what they say and should say what they mean (International Monetary Fund,
2012)

Individual Assignment 9
 Professional skills and due care: - Professional accountants should maintain skills and
knowledge at each level of their performance in order to provide competent professional
services (Moroney, Campbell & Hamilton, 2012).
 Objectivity: - Conduct of professionals should not be influenced by undue influence and
emotions and they should be unbiased (Sivabalan, Sawyers, Jackson, & Jenkins, 2016).
 Confidentiality: - CPA members must not make the documents related to their client’s
public and keep the information related to them secret and confidential.
 Professional behavior: - having professional knowledge is not enough and therefore CPA
members are required to use their knowledge in practice too. They should not do
anything that cans disrepute their profession.
These above-mentioned principles are applicable to all the professional accountant
including the accountants of freedom insurance. In order to examine sales and retention practices
of Freedom insurance in relation to above-mentioned principles, it is clear that these practices
were unethical. Accountants of Freedom did not act in an honest manner and breached the
provisions of APES 110.
Part C of APES 110 is applicable to all the CPA members that are engaged in services.
This code does not only provide principles but some safeguards also that can be adopted by the
members in order to eliminate the risk associated with their duties. This safeguard may exist at
the professional level, environmental level, and personal level. According to the paragraph of
200.9 of the code, safeguards may be divided into two broad categories, which are as follow:-
 Safeguards that are created by profession: - By adopting legislation, regulations, and
knowledge of APES 110, professionals may avoid threats.

Individual Assignment 10
 Safeguards developed in the work environment: - By using, client’s or accountant’s work
environment also, threats can be avoided.
Conclusion
In order to conclude the discussion hereby, this is to state that ethics is an important part
of every business and manager of the business are liable to adopt principle related to this subject
in their practices. In the presented report, the discussion was made on ethical theories. Further
sayings of royal commission have been evaluated with respect to deontology theory of ethics. In
the second part of the report, the general and specific misconduct of Freedom association has
been studied. In addition to this, the focus was also made on fundamental principles of ethics
mentioned in APES 110 and safeguards available to professional accountants under the
respective code of ethics.
The Royal Commission is continuously making efforts in the direction of ethics and
businesses in this manner are required to understand expectations of society as well as of other
stakeholders from them.

Individual Assignment 11
References
Apesb.org.au. (2019). Issued Standards. Retrieved From: https://www.apesb.org.au/page.php?
id=12
Bbc.co.uk. (2019). About duty-based ethics. Retrieved From:
http://www.bbc.co.uk/ethics/introduction/duty_1.shtml
Birsch, D. (2013). Introduction to Ethical Theories: A Procedural Approach. IL: Waveland
Press.
Bloomberg.com. (2019). Company Overview of Freedom Insurance Pty Ltd. Retrieved From:
https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapid=284989178
CCH Australia Limited. (2009). Australian Master Accountants Guide. Australia: CCH Australia
Limited.
Ethics.org.au. (2019). Part of what makes humans unique is our freedom to determine how we’ll
act. Retrieved From: https://ethics.org.au/why-were-here/what-is-ethics/
Ethicsunwrapped.utexas.edu. (2019). Deontology. Retrieved From:
https://ethicsunwrapped.utexas.edu/glossary/deontology
Faculty.washington.edu. (2019). Varieties Of Deontological Ethical Theories. Retrieved From:
http://faculty.washington.edu/wtalbott/phil240/hdnoncon.htm

Individual Assignment 12
International Monetary Fund. (2012). Australia: IOSCO Objectives and Principles of Securities
Regulation—Detailed Assessment of Implementation. DC: International Monetary Fund.
Kizza, J., M. (2014). Computer Network Security and Cyber Ethics, 4th ed. Carolina: McFarland.
Managementhelp.org. (2019). Business Ethics and Social Responsibility. Retrieved From:
https://managementhelp.org/businessethics/index.htm
Moroney, R., Campbell, F. & Hamilton, J. (2012). Auditing, Google eBook: A Practical
Approach. Australia: John Wiley & Sons.
Royalcommission.gov.au. (2019). Final Report. Retrieved From:
https://www.royalcommission.gov.au/sites/default/files/2019-02/fsrc-volume-2-final-
report.pdf
Sivabalan, P., Sawyers, R., Jackson, S. & Jenkins, G. (2016). ACCT2 Managerial. Australia:
Cengage AU.
Treasury.gov.au. (2019). Final Report. Retrieved From:
https://treasury.gov.au/sites/default/files/2019-03/fsrc-volume1.pdf