January 1999 Issue

SELF-ASSESSMENT OF YOUR ETHICS ENVIRONMENT

By Charles H. Calhoun and Mary Ellen Oliverio

Attention is now focused on ethics throughout the professional world. Executive management and boards of directors are being pressured into reconciling what is said with the reality of what is happening within their organizations. CPAs have the knowledge and skills to review and, if necessary, assist in implementing ethics programs. Such knowledge and skills include--

* analytical abilities

* problem-solving expertise

* communication skills.

The Value of High Ethical Standards

High ethical standards are valuable. While it may seem old-fashioned to say character qualities such as honesty and integrity count, there is increasing awareness that such qualities have contemporary value. Organizations that strive to maintain high ethical standards enjoy benefits such as the following:

* An organization that people want to work for;

* Employees that are more productive because they are treated fairly;

* Fewer "lost assets" and inventory "shortages"; and

* Loyal customers who remain long-term customers.

In the long run, high ethical standards contribute to sustaining successful organizations. It is easy to prove the benefits by noting what happens in an organization that has no ethical standards. In such an organization, employees do not trust what management says or what motivates their actions; employees in such an environment tend to look out for themselves and ignore others. Customers do not return when services are provided indifferently and ineffectively or when products fail to meet expectations.

The Need for Self-assessment

The goal for the CPA firm is to be a model organization, one that strives and attains high ethical standards. Such a goal requires serious self-assessment by the firm. How does a firm perform an ethical self-assessment? It begins with a desire on the part of top management. Management establishes policies and dictates the allocation of human and financial resources. Initially, the self-assessment must be candid and face reality. Have there been ethical problems in the past? Were those problems addressed or ignored? Has management consistently chosen the ethical solution to a dilemma? To what extent have the ethical implications of decisions been made explicit and discussed in an open, professional manner?

A firm must have a clearly articulated philosophy related to expected ethical behavior if it wants to establish and sustain the image of a quality professional organization. High ethical standards require continuous vigilance until such standards are internalized by all members of the organization.

While questions for a self-assessment may vary from firm to firm, the following are some basic ones:

What is the Current Ethical Framework of the Firm? Does the firm do more than tell the employee to be honest during the "new employee orientation meeting"? If asked about the company's ethics, would an employee be able to say anything more than "I think we have a code of ethics somewhere"?

Are There Statements About Expectations Related to Ethics? Again, if asked, would an employee be able to show someone how the firm maintains high ethical standards? Would he or she be able to describe how the firm's philosophy is translated into actual decisions at critical points?

Is There a Code of Ethics and, If So, Is It Relevant? Is your code a living document, or is it gathering dust in an inactive file? Is it sufficiently specific in its application to the responsibilities of your employees? Besides a code of ethics, does your firm have a code of conduct that sufficiently details situations that will likely be encountered, such as conflicts of interest, lack of independence, and confidential information. Are the likely repercussions identified?

What is the Ethical Message Communicated by the Partners Who Lead the Firm? What are the pronouncements made at firm meetings? To what extent do partners "live" the message? To what extent can partners point to experiences with professional staff in which the staff clearly realized the importance of the firm's ethical message?

Does the Firm Have Clear Lines of Communication Available for People Who Want to Discuss Ethical Problems? Are professional staff informed of what is to be done when faced with what might be an ethical dilemma or problem? Does the staff feel comfortable in bringing such matters to higher-level personnel? Is there a hotline that employees know provides absolute confidentiality? Has the executive committee of the firm reviewed what actually happened in some recently identified serious ethical problems? How were the participants in the matter treated?

Who is Monitoring the Ethical Framework? Is there an ethics committee that meets periodically? Is the ethics committee comprised of professional staff at all levels? Are reviews of monitoring candid and objective? What is the follow-up of monitoring? Do professional staff perceive that there is an unassailable respect for fairness and justice as monitoring is performed?

Is Ethics Training Provided to Professional Staff? Do professional staff participate in ethics seminars? Is the motivation for the training genuine? Is there sincerity about the value of the attitudes and concepts introduced? Is the training to meet only the form of commitment to ethics, or is its substance at the core of the training?

CPAs Have a Tradition of Integrity

The public accounting profession in the United States is more than 110 years old. The early leaders of the profession struggled with the commercial pressures that, in the short run, were indeed difficult to resist. However, the wisdom of the early leaders led them to persist in maintaining professionalism with its unrelenting requirement of integrity in all relations with each other and with clients.

While the contemporary world is far different from the world in which accountants first joined together to form a professional group, the value of high ethical standards for lasting success and credibility is not different. Each firm--and each staff member--is the caretaker of a legacy that is to be honored. *

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