The Need for Old-Fashioned Ethics

I am somewhat bewildered by Eric Rothenburg’s recent article (“Incorporating Business Ethics into Introductory Accounting Courses,” October 2003) on ethics in accounting.

While it may true that I graduated CCNY in prehistoric times, and my memory may have been somewhat eroded in the intervening years, I do not recall any courses being “taught” on ethics. And yet, my classmates and I were made to understand that when you became a Certified Public Accountant, you were bound by the severest code of ethics you could imagine. It was ingrained deeply in my mind. We also (it seemed to me) were taught that seeking and preventing fraud was part of an audit (but that’s a subject for another time). Somehow, the ethics of the profession were pounded into our heads by every instructor, with or without the use of textbooks.

Now Rothenburg poses the question, “Can ethics be taught?” Well, I sure hope so!

There are those who would suggest that “the olden days” were simpler times. People behaved differently. They were happy to “make a living” and for the most part thought of honesty as a virtue. Of course, there were dishonest people. There were crooks, embezzlers, racketeers, and all kinds of corrupt folk. But they were not admired nor treated with respect. Greedy rascals didn’t get the media exposure that is prevalent today.

But a CPA’s ethics were, and for the most part continue to be, beyond reproach. In spite of the scandals that are foisted on the public every day by the media, the overwhelming majority of CPAs hold themselves out to be ethical. They are, indeed, the trusted professionals, in spite of the disasters that are reported.

The last few decades have seen a tremendous change in the culture of our people and our corporate structure. Greed, insatiability, avarice, the need to “beat the market” and top the other guy’s salary, fee, bonus, and so on have led to a lessening of ethical behavior by people who should know better. If you can get away with lying, cheating, theft, and other goodies---that’s fine. Just don’t get caught. That seems to be today’s mantra.

Ethics is considered to be an old-fashioned concept. It’s for the nerds of the world, the cowards, the fuddy-duddies. If you’ve got talent, imagination, ego, and even some brains, you can play the angles. If you have the gift of gab, you can sell anything. So what if it’s a little shady—just cover it up.

The lack of ethics, it seems, pervades all facets of life today. From students at colleges and universities who plagiarize articles from the Internet for their term papers, to instructors who are loath to discipline or fail the culprits for their misdeeds, to public officials who abuse their constituents’ trust by getting involved in schemes to make a few bucks on the side in a devious deal, to CPAs who look the other way to protect their fees, there is just a lack of ethics.

Sure, ethics should be taught to all students at our colleges and universities. It should be part of the way we live: part of our culture.

The fact is that the Sarbanes-Oxley Act, Congress, the SEC and the PCAOB, and all the oversight in the world will not change the situation until we get back to ethical behavior on the part of business people and the public.

Given the recent overwhelming focus on corporate accountability and governance by financial analysts, economists, and CPAs alike, I think I would be remiss not to mention something about business ethics in an introductory accounting course. I understand that the primary goal of an introductory course is for students to learn the “nuts and bolts” of the double-entry bookkeeping system and to incorporate these entries to prepare basic financial statements. We should not, however, treat the teaching of accounting as if it existed in an academic vacuum. Spending an hour in an introductory course discussing business ethics will not discourage students from being accountants. On the other hand, it might very well encourage students to become CPAs in a field that treats professional ethics as an essential part of being an accountant.

We should also be aware as CPAs that many people rely on financial statements to make business and investment decisions. More Americans today are directly or indirectly invested in the stock market than at any other time in the U.S. history. From day traders to financial analysts to bank officers, the relevance, timeliness, and accuracy in these financial statements and disclosure notes are crucial in making important business and investment decisions.

I think that people’s morals have changed during the past 50 years. The Generation X and Y students (who are and will be the accountants and CPAs of tomorrow) I teach are bombarded with different signals from Madison Avenue and the like. They are constantly told that accumulating the greatest amount of wealth in the shortest time period possible is the only key to success. They see a middle-class lifestyle as boring and a failure to meet their occupational goals. Their decisions are generally based on a short time horizon line and long-term implications are generally ignored. I think we need to teach these students that long-term consequences should be considered when making business or accounting decisions.

Many schools are starting to make ethics courses a mandatory part of their business and accounting curriculums. I think that this will only help our profession and perhaps put a future generation of CPAs on track in a profession that has always been known as honest and ethical.

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