THE MORAL REASONING OF PUBLIC ACCOUNTANTS

IN THE DEVELOPMENT OF A CODE ETHICS :

THE CASE OF INDONESIA
By Syndicate 10, September 16
th
, 2014
Presented by :
Frans Joflin Panggabean (29114766)
Karina Larasati (29114721)
Lina Setiawati (29114748)
Marnala Joshua Hutajulu (29114880)

Problem Identification and Study Objective
Public
Accountants
Moral Dilemma
Self-Interest or Client-
Interest
Public Interest
Study objective :
to explore perception of Indonesian financial managers as user
towards moral reasoning in influencing the implementation of
ethical codes
Moral Development
Level 1 Preconventional Morality
Level 2 Conventional Morality
Level 3 PostConventional Morality
Stage 1 : Physical Consequences of Actions and Avoidance
Stage 2 : Satisfaction of Ones Own Needs
Stage 3 : Desire to Please Others
Stage 4 : Respecting Authority and Preseving the Rules of Society
Stage 5 : Morality of Contracts, Individual Rights, and Democratically Accepted Law
Stage 6 : Universal Moral and Ethical Principle
Moral Reasoning
Reasoning :
To produce rationalization for our behaviors
To correct our intuitions and leads us to reevaluate our
judgements and decisions





Moral Reasoning :
Arguments about how people should act or reason to
justify or criticize behavior
Has objective for explaining the process of individuals
ethical decision-making
Influenced by levels of an individuals moral
development





The higher the individual moral development, the higher
ones level of moral reasoning
Method : Qualitative Research
Target : 15 Financial Managers & Internal
Auditors
Technique Analysis : Cross-Case Study
Approach : AICPA & Kohlbergs model
Research Design
Variables and Measurement
Relationship between 2 Approaches
Findings
Auditor Selection Criteria of the Interviewees
Independence and Objectivity (Summary)

Integrity (Summary)
Responsibility (Summary)
Due Care (Summary)
Scope and Service (Summary)
1. The study relate to moral
development on the basis of the
moral reasoning process
2. The study relate to the level of moral
reasoning as moral agent
3. The study relate to the key activities by
Indonesian public accountants and
the financial manager
4. The study relate to the establishment
and improvement of ethics codes
Finding Summary
Most violation towards ethical codes primarily occurred in FOC,
then followed by SOC
Study Analysis Professional Approach
No significant infringement related to ethical codes in FrOC





5 Assumptions :
1. Lack of understanding about ethical standards
2. The auditors failed to grasp the purpose of ethical code standards
3. The auditors take advantage from companies which lack of know-how
about public accountants ethical codes
4. The standards might not be appropriate to be implemented in Indonesia
5. Any collusion, cronyism, and nepotism, including in the government
institutions









Assumption :
It has knowledgeable people in accounting and financial area




Study Analysis Individual Approach
4 Assumptions :
Light sanction
Earn more respect
as well as self-
serving
Responsive to
client
Adopt social rule
People who work in financial area should have substantial knowledge
The auditors should choose work based on professionalism, not biggest fee
Shorten contract period between company and auditor
IAI must determine minimum standards of professional public accountants and take
action by exercising proper sanctions for those who break the rule
Adjust local regulation to the expectation of global community
Government should create regulation as well as execute firm punishment
Study Analysis - Recommendations
IAI needs to formulate a clear statement of punishment
Provide a good sysrem of court process
Review existing ethical codes



Professional Approach
Individual Approach
Conclusion
2 elements of analysis : Professional and Individual Approach
Moral reasoning plays an important role to influence ethical
awareness in public accountants
It is necessary to develop ethical codes and effective
compliance monitoring system for Indonesia