Accounting and Society
15%of exam
Ethics
20%of exam
Governance Concepts
25%of exam
Governance in Practice
25%of exam
Corporate Accountability
15%of exam
Quick Facts
- Exam
- E&G (CPA Program)
- Body
- CPA Australia
- Time
- 195 min (225 total)
- Pass
- 540 scaled (100-900 scale)
- Format
- Open book, computer-based
- Modules
- Five official modules
- Core Code
- APES 110
- Question Type
- MCQ + extended response
IFAC vs APESB Roles
IFAC
- Global federation of accountancy bodies
- Sets member-body obligations only
- Does not discipline individual accountants
APESB
- Australian ethics standard-setter
- Issues APES 110 directly
- Independent of CPA Australia
Global body vs local standard-setter
Profession & Public Interest
- Social Contract
- Trust for privileges granted
- Public Interest
- Comes before client or employer
- Audit Expectation Gap
- Belief vs actual assurance level
- IFAC
- Global accountancy body, sets obligations
- IFEA (2023)
- Houses IESBA and IAASB now
- APESB
- Sets ethics standards, e.g. APES 110
- AASB
- Sets accounting standards
- AUASB
- Sets auditing standards
Five Principles Mnemonic
Integrity -> Objectivity -> Competence -> Confidentiality -> Behaviour
Integrity: honest, straightforwardObjectivity: no bias or influenceCompetence: skill and diligenceConfidentiality: limited disclosure dutyBehaviour: comply, avoid discredit
Independence of Mind vs Appearance
Independence of Mind
- Internal, subjective state
- Actual objectivity in mind
- Auditor's honest judgment
Independence in Appearance
- Judged by outside perception
- RITP test applied
- Perception equals reality here
Both pillars are mandatory
Threat Response Steps
- Threat is already acceptable→Proceed, monitor situation(No action required)
- Can remove the circumstance→Eliminate the threat(R120.10(a))
- Threat can be reduced→Apply safeguards(R120.10(b))
- Threat stays unacceptable still→Decline or end activity(R120.10(c))
- Your superior is implicated→Escalate to higher authority(Skip the compromised level)
- Internal escalation gets nowhere→Brief the board or TCWG(Audit committee, independent NEDs)
- Governance route stays unresolved→Get independent external advice(Ethics service or lawyer)
- Client breaks a law→Apply the NOCLAR response(Sections 260 and 360)
Five Fundamental Principles
- Integrity
- Honest and straightforwardR111.1
- Objectivity
- No bias or undue influenceR112.1
- Competence & Due Care
- Skill plus diligent careR113.1
- Confidentiality
- No unauthorized disclosureR114
- Professional Behaviour
- Comply, avoid discreditR115
- Disassociation Duty
- Not associated with misleading reportsR111.2
Five Threats Mnemonic
Self-interest, self-review, advocacy, familiarity, intimidation
Self-interest: your own gainSelf-review: judge own workAdvocacy: promote a positionFamiliarity: too close, biasedIntimidation: pressured or coerced
Teleological vs Deontological Ethics
Teleological
- Judge by the outcome
- Utilitarian cost-benefit calculus
- Used in AAA step six
Deontological
- Judge by duty, rules
- Rule-based consistency filter
- Used in AAA step five
Outcome focus vs rule focus
Ethical Model Selector
- Personal reporting dilemma→Use the AAA model(Sequential seven steps)
- Corporate strategic decision→Use Tucker's five questions(Stakeholder filter check)
- An option is illegal→Reject it immediately(No mitigation possible)
- An option is only unfair→Add a mitigation plan(Compensate the affected group)
- Weighing rules against outcomes→Filter first, then assess(AAA steps five, six)
Threats & Safeguards Framework
- Self-interest
- Own financial or personal gain
- Self-review
- Re-judging your own work
- Advocacy
- Promoting a client's position
- Familiarity
- Too close, relationship bias
- Intimidation
- Pressured or coerced judgment
- RITP Test
- Reasonable informed third party
- Eliminate
- Remove the threatening circumstanceR120.10(a)
- Safeguard
- Reduce threat to acceptableR120.10(b)
- Decline or End
- Exit if threat remainsR120.10(c)
Tucker's 5 Questions
Profitable -> Legal -> Fair -> Right -> Sustainable
Profitable: economic returnLegal: statutory complianceFair: equitable distributionRight: moral duty, honestySustainable: environmental, long-term
Ethical Theories & Decision Models
- Teleological
- Judge by outcomes
- Deontological
- Judge by duty, rules
- Virtue Ethics
- Judge by character
- Egoism
- Maximise own self-interest
- AAA Model
- Seven-step accountant process
- Tucker Model
- Five-question corporate filter
- NOCLAR
- Respond to client law breachs260/360
Independence Standards
- Independence of Mind
- Actual, internal objectivity
- Independence in Appearance
- Perceived by a reasonable party
- Part 4A
- Audit and review engagements
- Part 4B
- Other assurance engagements
- PIE
- Public interest entity, stricter rules
ASX 8 Principles Grouped
P1-2 board, P3 culture, P4-6 reporting, P7-8 risk+pay
P1: Lay solid foundationsP2: Structure board effectivelyP3: Instil ethical cultureP4: Safeguard report integrityP5: Timely balanced disclosureP6: Respect security holdersP7: Recognise and manage riskP8: Remunerate fairly, responsibly
Agency vs Stewardship Theory
Agency Theory
- Managers may self-serve
- Needs monitoring and incentives
- Assumes distrust by default
Stewardship Theory
- Managers as trustworthy stewards
- Needs empowerment, not control
- Assumes trust by default
Distrust vs trust as default
Corporate Form & Theories
- Separate Legal Personality
- Company owns itself
- Limited Liability
- Shareholder risk is capped
- Perpetual Succession
- Company outlives its owners
- Agency Theory
- Managers may self-serve
- Stewardship Theory
- Managers are trustworthy stewards
- Stakeholder Theory
- Accountable to all affected
- Resource Dependency
- Control over external resources
- Managerial Hegemony
- Management dominates a weak board
ASX 8 Principles (4th Ed.)
- Principle 1
- Lay solid foundations
- Principle 2
- Structure board effectively
- Principle 3
- Instil ethical, lawful culture
- Principle 4
- Safeguard reporting integrity
- Principle 5
- Timely, balanced disclosure
- Principle 6
- Respect security holder rights
- Principle 7
- Recognise and manage risk
- Principle 8
- Remunerate fairly, responsibly
- If Not, Why Not
- Explain any departure
Global Codes & Regulators
- UK Code 2024
- Comply or explain basis
- Section 172
- UK enlightened shareholder value
- Sarbanes-Oxley
- US rules-based regime
- OECD Principles
- G20 global benchmark
- ASIC
- Market conduct regulator
- APRA
- Prudential safety regulator
- ACCC
- Competition and consumer regulator
- Twin Peaks
- ASIC plus APRA model
Two-Strikes Escalation
25% Twice -> Spill Vote -> 90-Day Meeting
Strike 1: 25%+ against onceStrike 2: 25%+ against againSpill vote: majority triggers s250VSpill meeting: within 90 days
Malus vs Clawback
Malus
- Applies before reward vests
- Forfeits an unpaid amount
- Reduces a future payout
Clawback
- Applies after reward is paid
- Reclaims an already-paid amount
- Recovers a past payout
Unpaid risk vs paid recovery
Two-Strikes Escalation
- First AGM, 25%+ against→Record a first strike(Board must explain next year)
- Second AGM, 25%+ again→Put a spill resolution(s250V)
- Majority backs the spill→Call a spill meeting(s250W)
- Executive reward not yet paid→Apply malus(Forfeit before vesting)
- Reward already paid out→Apply clawback(Reclaim the paid amount)
Board & Committees
- Board Role
- Set strategy, oversee management
- Management Role
- Run daily operations
- Chair-CEO Split
- Chair independent, not CEO
- Audit Committee
- Rec 4.1: three-plus, independent-chaired
- Independent Director
- No material relationship
- Board Diversity
- Reduces groupthink risk
- Malus
- Forfeit unvested reward
- Clawback
- Recover already-paid reward
NDB Scheme vs SOCI Act
NDB Scheme
- Covers Privacy Act breaches
- Regulator is the OAIC
- Assess within 30 days
SOCI Act
- Covers critical infrastructure assets
- Regulator is the ACSC
- Report in 12 or 72 hours
Data privacy vs infrastructure risk
Cyber & Privacy Response
- Significant impact on CI asset→Report to ASD ACSC in 12h(SOCI Act deadline)
- Relevant impact on CI asset→Report to ASD ACSC in 72h(SOCI Act deadline)
- Suspect an eligible breach→Assess it within 30 days(Privacy Act s26WH)
- Serious harm is likely→Notify OAIC and individuals(NDB scheme duty)
- Remedial action stops the harm→No notification is required(Safe harbour, s26WF)
Remuneration & Risk Oversight
- Section 300A
- Requires a remuneration report
- Section 308(3C)
- Auditor opines on report
- Two-Strikes
- 25%+ against, twice [s250U]s250R
- Spill Resolution
- Majority vote triggers re-elections250V
- Spill Meeting
- Held within 90 dayss250W
- Three Lines of Defence
- Operations, risk, audit layers
- COSO ERM
- Enterprise risk management framework
- CPS 511
- APRA's remuneration standard
Remuneration Vote vs Spill Vote
Remuneration Vote
- Non-binding, advisory only
- Held at every AGM
- No automatic consequence
Spill Resolution
- Binding escalation trigger
- Needs two consecutive strikes
- Forces director re-election
Advisory vote vs escalation trigger
Whistleblowing & Cyber Duties
- Part 9.4AAA
- Corporate whistleblower protection regime
- Eligible Discloser
- Officer, employee, or contractor
- Large Proprietary
- 2 of 3: revenue, assets, staff
- APPs
- Thirteen privacy principles
- NDB Scheme
- Notify serious-harm data breach
- 30-Day Rule
- Assess a suspected breach
- SOCI Act
- Eleven critical infrastructure sectors
- Incident Reporting
- 12h significant, 72h relevant impact
CSR Materiality Lenses
GRI = Impact | ISSB = Financial | Both = Double
GRI: society's impact lensISSB: investor's financial lensCSRD: double materiality, both lenses
GRI vs ISSB Standards
GRI
- Impact materiality, inside-out lens
- Serves multiple stakeholder groups
- Set by the GSSB
ISSB / IFRS
- Financial materiality, outside-in lens
- Serves capital providers mainly
- Set by the IFRS Foundation
Society lens vs investor lens
CSR & Sustainability Reporting
- Triple Bottom Line
- Profit, people, and planet
- Carroll's Pyramid
- Economic up to philanthropic
- Legitimacy Theory
- Match society's values, norms
- Stakeholder Theory
- Accountable beyond just shareholders
- GRI
- Impact materiality, inside-out lens
- Integrated Reporting
- Six capitals create value
- ISSB
- Financial materiality, outside-in lens
- Double Materiality
- EU CSRD uses both lenses
- AASB S1
- Voluntary general disclosure standard
- AASB S2
- Mandatory climate disclosure standard
AASB S1 vs AASB S2
AASB S1
- General sustainability disclosures
- Voluntary to apply now
- Broader ESG topic coverage
AASB S2
- Climate-related disclosures only
- Mandatory, phased by size
- Groups 1, 2, and 3
Voluntary standard vs mandatory standard
Common Traps
Legal vs Ethical Minimum
Law is the floor ≠ Ethics can exceed the law
Pass Score vs Raw Percent
540 scaled score is fixed ≠ Raw percentage is never published
APESB vs CPA Australia
APESB writes the Code ≠ CPA Australia enforces it on members
Malus vs Clawback Timing
Malus stops an unpaid reward ≠ Clawback reclaims an already-paid reward
First Strike vs Second Strike
First strike just requires disclosure ≠ Second strike can trigger a spill
GRI vs ISSB Audience
GRI serves broad stakeholder groups ≠ ISSB serves investors and lenders
AASB S1 vs S2 Status
S1 general disclosure stays voluntary ≠ S2 climate disclosure is mandatory
NDB vs SOCI Deadlines
NDB gives 30 days to assess ≠ SOCI gives 12 or 72 hours
Last Minute
- 1.Governance modules: 25% each, largest
- 2.Exam: 195 minutes working, 225 total
- 3.Pass: scaled score 540 of 900
- 4.APES 110 has five threat categories
- 5.Threats: eliminate, apply safeguards, or decline
- 6.Independence needs mind and appearance both
- 7.Two strikes: 25%+ against, twice running
- 8.Spill resolution: re-election within 90 days
- 9.Malus forfeits pay before it vests
- 10.Clawback recovers pay already paid out
- 11.AASB S2 climate disclosure: mandatory, phased
- 12.AASB S1 general disclosure stays voluntary
- 13.Whistleblowers include current and former staff
- 14.Data breach: assess within 30 days
- 15.ASX Code sets 8 core principles
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