Accounting and ethics should go hand in hand. The CPA profession is built on public trust. Regrettably, the last several decades have been marked with some significant financial scandals, sometimes involving those in our profession. Due to the nature of the work performed by CPAs, ethical dilemmas can be common. Regardless of whether you work in public accounting or in industry, circumstances are bound to arise that require CPAs to manage situations with an ethical component. From conflicts of interest and confidentiality issues to pressures from management to manipulate financial statements, situations that require ethical decision-making are certain to crop up.
Can anything be done to increase the development of ethical decision-making? Many employers have an ethics code, provide ethics training, and set the tone at the top. Of course, all CPAs are subject to various ethical codes of conduct, including AICPA’s Code of Professional Conduct. All of this, though, starts after entering the profession, not leading up to a career in accounting.
Students are exposed to ethics in a variety of ways through the accounting curriculum. However, learning about ethics in the classroom and dealing with a real-life situation are two different ballgames. Can accounting professors increase the retention and understanding of ethics in the classroom? This question is complicated by the fact that students entering college come from a range of backgrounds and life experiences. As such, a detailed foundation needs to be established, and traditional teaching methodologies may need to be tweaked or bolstered to reach the entire spectrum of the audience.
Every accounting textbook – from financial reporting, to auditing, to taxation – touches a bit on ethics, and the traditional lecture is not always the best approach for this subject. Ethics case studies, on the other hand, require audience participation and involve students in the outcome of a hypothetical ethical dilemma. There are entire books devoted to ethics case studies. In fact, the Big 4 firms have developed accounting ethics case studies specifically for use in the classroom that can be obtained for free by accounting educators.
Using case studies to teach ethics is a great approach that removes boredom from a topic that can sound preachy and creates a learning experience that energizes students and brings the subject to life. A good case study should mimic what students will be required to do once they enter the profession. The study should lay out an ethical scenario (a real-life scenario is best), but not include the approach or decision that was made by the party or parties involved. This type of case opens up group work opportunities and enables students to think through the circumstances and make their own determination of the correct course of action. After each student has had a chance to develop an answer, the case study will show what decision was made in reality and what the consequences were. This approach is eye-opening, especially when students realize, after reviewing the results, their decision perhaps was not the most ethical one.
There is a belief that ethics cannot be taught: people who want to make unethical decisions will make those decisions regardless of how much ethical coaching they are exposed to. Certainly, there are some, hopefully a sparse few, who will make the decision to be unethical regardless of what they learn about ethics, but there may also be some individuals who would consistently act ethically regardless of the circumstances. Neither argument takes into account those who might make bad choices because they were unprepared for the situations they could encounter or the stress involved in making the right choices. For those individuals, case studies provide a way for them to see real-life scenarios (conflicts of interest, management pressures to inflate earnings, expense fraud, etc.) and demonstrate how they can be resolved in an ethical manner.
Heather M. Demshock, CPA, is associate professor of accounting at Lycoming College in Williamsport and a member of the
Pennsylvania CPA Journal Editorial Board. She can be reached at firstname.lastname@example.org.