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Issues in Social and Environmental AccountingVol. 3, No. 1 June 2009Pp. 88-94 Research Note An Urgent Need for Ethics Education for Accountants Desti Kannaiah Middlesex University, Dubai N.S.Kumar SRM University Chennai, IndiaAbstractSocial, political and technological changes have challenged traditional idea of professionalpractice by accountants. Accounting is both an essential practice and a vital profession in theeconomically developed world of today (Ronald F.Duska and Brenda Shay Duska,2003). To-day, professional accountants cannot exist by technical knowledge alone; they have to possesand apply that within a framework of professional values, ethics and attitudes.(Peter Williams,2007). Ethics, values and principles serve as benchmarks of the accounting profession. Theydetermine what is right and wrong, appropriate and inappropriate, on a universal basis everytime. (Joe Lienandt, 2003). Enron’s bankruptcy case, in which their auditors and consultantsfrom the accounting firm Arthur Anderson, came under criticism for not apparently carryingout their responsibilities as accountants. The Enron/Arthur Anderson’s case has raised the ethi-cal question, ‘what is the appropriate behaviour for accountants?’ and ‘what are the accountantssupposed to do?’ This paper attempts to address the following issues: How to teach ethics tothose entering the profession; How to ensure that the ethical standards and behaviour of experi-enced accountants are as fresh and relevant as technical knowledge.Keywords: Professional bodies, professional ethics, accounting education, code of ethics, ethi-cal behaviourIntroduction same time, accounting has an ethical dimension. In carrying out their respon-The purpose of accounting is to provide sibilities as professionals, accountantsinformation on economic affairs. Ac- should exercise sensitive professionalcounting is a skill demanding expertise and moral judgment in all the activities.and since accountants have clients who (American Institute of Certified Publicdepend on that expertise, accounting is Accountants –Code of Ethics). Ac-included among professions. At the countants have a duty to provide infor-Dr. Desti Kannaiah is a Senior Lecturer at the Middlesex University, Dubai. N.S.Kumar is a Research Scholar withSRM University and an Executive Consultant with Creatif Mindz.
D. Kannaiah, N.S. Kumar / Issues in Social and Environmental Accounting 1 (2009) 88-94 89mation to stakeholders that is under- Literature Reviewstandable, timely and relevant, and theybear the responsibility of ensuring that In 2002, the accounting profession wasthese purposes are met. under attack with the fall of Enron/ Arthur Anderson and WorldCom. Ac-Ethics countancy profession thus faced a credi- bility crisis. (Earley and Kelly, 2004;Institute for Global Ethics defines ethics Zabibullah, 2004). Accountants, in per-as “Ethics in its broader sense deals with forming their functions, face not onlyhuman conduct in relation to what is legal rules of behaviour but also moralmorally good and bad, right or wrong. It elements created by specific circum-is the application of values to decision stances. It is a never ending challenge tomaking. These values include honesty, make sure that a mix of honesty, objec-fairness, responsibility, respect and com- tivity, integrity and judgment are inpassion”. (Kidder) equilibrium. As a result, there has been a proliferation of code of ethics or ofEthics and Accounting professional conduct. The drafting of such a code provides an opportunity forAn article in the Wall Street Journal accounting professionals to examine thequoted a young entrepreneur in Russia nature and goals of their work, and offeras saying that he was getting ahead in information to others about what can bebusiness by breaking laws. He stated, expected from them. (Catherine Gow-“Older people have an ethics problem thorpe and John Blake, 1998).By that I mean they have ethics.” Con-versely, Roger Smith, former chairman “Ethics’ in all forms is concerned withof General Motors said, “Ethical practice right or wrong, good or bad. Brookis , quite simply, good business.” First (1989) noted that accountants are alwaysand foremost, practicing good ethics is faced with a dilemma – to satisfy thethe right thing to do. Second, unethical need of their clients or risk losing them.behavior always comes back to haunt Higgs and Kepelianis (1999) alsoyou. Most large companies have a code pointed out that the need to satisfy mul-of ethics designed to encourage ethical tiple interest groups do create ethicaland responsible behavior by employees. conflicts among accountants. A num-However, general guidelines may not be ber of studies suggest that cultural fac-specific enough to identify misbehavior, tors have an effect on the ethical beliefsand list of dos and don’ts can lead to the and attitudes of accountants.false view that anything is okay if it’snot specifically forbidden. Most busi-nesses are intolerant of unethical con- Research Methodologyduct by employees. Codes of conductare not enough. Senior management This paper is purely based on secon-must set a high ethical tone that is dary research- local news papers, profes-steadily reinforced by management sional journals, magazines and govern-words and actions. ment sources.
90 D. Kannaiah, N.S. Kumar / Issues in Social and Environmental Accounting 1 (2009) 88-94This paper attempts to address the fol- ity and law. (Christopher J, Cowton,lowing issues: 2007). Chua and Mathews (1995) noted How to teach ethics to those entering that public confidence in the work of the profession (new accountants) accountants will enhance the trust of How to ensure that the ethical stan- accountants. “ Mere rule following will dards and behaviour of experienced not make accountants get respected’. accountants are as fresh and relevant (Turpen and Whitner, 1997). People as technical knowledge.(Integrity) value accountants for their skills, knowl- edge, independence, objectivity and in- tegrity. ( Mohammad Adam Bakar).Discussion & Findings Ethical dilemmas faced by account-The Professional Accountant and the antsCode of Ethics It should be recognized that rules cannotToday, professional accountants act as cover all eventualities and ambiguitiesbusiness advisors, financial analysts, will remain. (Page and Spira,2005).communicators, negotiators and manag- When deviant behaviour is exhibited byers. top management, and accountants within the organization are in a position toA qualified accountant is able to use cer- identify them, then it must be in the pub-tain designatory letters and that provides lic interest for accountants to ‘blow thevaluable signals, in the market place whistle’. (Susan Richardson and Billabout the standard of behaviour that can Richardson, 1998). In practice, howbe expected from the individual mem- many accountants will be able to dober. (Christopher J.Cowton, 2007). this?The accounting profession is self-regulated through various professional The tax practitioner, acting as an agentbodies rather than being regulated by the of a client, has a professional ethicalgovernment. Violations of ethical stan- duty to that client to minimize the cli-dards can lead to a person being publicly ent’s tax liability by legal means. Pres-expelled from the professional organiza- sure to exploit the law and find loop-tion. The professional accounting bod- holes come from the client, and fear ofies have taken adequate steps to combat losing the client will intensify the per-unethical behaviour among accountants. sonal moral dilemma of the tax practitio-They want to make sure that public con- ner. Hansen et. al. says that ‘tax profes-fidence on the profession remains high. sionals should be more concerned withCode of ethics by accounting profes- what is right than with technical compli-sional bodies have become a self-control ance with the law. Ethical standards andor self-governing mechanism of the ac- conduct should be above the self-servingcounting profession. Professional ac- action taken by those with a vested inter-counting bodies have introduced codes est in the outcome of a particular event .of conduct for their members. These are (1992:685-6).independent of contract or state law, andthese are self-enforced. These codes Tax evasion involves deliberate falsifi-demand more than conventional moral- cation of information and deceit,
D. Kannaiah, N.S. Kumar / Issues in Social and Environmental Accounting 1 (2009) 88-94 91whereas tax avoidance involves arrang- Ethics education is a journey of sensiti-ing events and transactions, in a certain zation and development. In this jour-time scale to secure a tax advantage. ney, a person becomes more aware ofThe ethical conflicts faced by tax practi- the ethical dimensions of a matter, de-tioners can be grouped into four areas: velops the capability to reflect on norms and values in order to differentiate rights the grey area governing tax avoid- and wrongs, and learns the means to ance and tax evasion reach a decision and the methodology the discovery of error made by tax for actioning such critical decisions. authorities which results in a under- (Steven Dellaportas, Berry J.Cooper, collection of tax or an over- Philomena Leung, Beverley Jacking, repayment of tax 2005). Ethics education should not only The discovery of an irregularity per- be taught, it should be reinforced by petrated by client business organizations, senior profes- Extent, manner and time of disclo- sionals and professional bodies. sure. (Catherine Pilkington, 1998) AICPA has clearly issued the stan- Ethics education can provide insights dards for tax services and expects it into how to adjudicate between conflict- members to follow these standards. ing principles and show why certain courses of action are more desirable than“Irregular auditing practices “are not others. Ethics education, as defined byuncommon in the profession. Pressure Langenderfer and Rockness, is moreupon auditors to meet time budgets ap- than studying the code of professionalpear to have grown, because of reduced conduct, but rather a process wherebyaudit fee resulting from keen competi- individuals become more consciouslytion in audit market. Those auditors involved in making ethical decisions.who manage to complete their work by Unfortunately, in the past, ethical as-whatever means, within the budget allo- pects of accounting have been accordedcation of time are much more likely to relatively little attention in accountingreceive favourable personal perform- courses run by universities.ance evaluations. The goal of teaching ethics is to helpEthics Education for Accounting Pro- students acquire skills to deal effectivelyfessionals with ethical challenges and to create a supportive ethical environment for theirFor many accountants – either profes- subordinates.sional or not – after university and quali-fication in many countries, on-the-job (Konrad,1978; Hansen,1987; McDonaldtraining has been only ethics education and Donleavy,1995). Ethical educationthat they been likely to get. (Hunt, should centre on thinking about ethical2000). issues and how the students as individu- als will face the issues before they areEnriching ethics in accounting education confronted with real world dilemmas.and improving the moral behaviour of its Business schools seem to be inadver-members is one way to restore the credi- tently overemphasizing technical train-bility of the profession. (Mchail,2001). ing for accountants and ignoring ethical
92 D. Kannaiah, N.S. Kumar / Issues in Social and Environmental Accounting 1 (2009) 88-94considerations. Educators teaching ethics will be increasingly be looked upon as roleObjectives of Ethics Education models by studentsThe common objectives of Ethics educa- Research has shown that students cantion are: improve their ethical reasoning ability Relate accounting education to moral through exposure and practice. (Rest, issues in business context 1986). The ethical curriculum helps stu- Recognise accounting decisions that dents develop a moral point of view. have ethical implications Develop a sense of moral obligation and social responsibility Summary and Conclusion Develop the abilities needed to deal with ethical conflicts or dilemmas What can be done in the future? Learn to deal with the uncertainties of the accounting profession Empirical evidence suggests that ethics education is now integrated into ac- (Adaptation of Loeb’s (1988) goals counting curricula mainly in auditing for accounting education) courses. Entry level accountants will only make morally dependable decisionsEthics education helps accountants iden- if the business environment and univer-tify the basic ethics principles that can sities support ethics education. Stu-be applied to action. Ethical reflection dents should be first taught general busi-can make accountants more knowledge- ness ethics. Accounting ethics topicsable and conscientious in moral matters. must be integrated into each and every accounting module through out the pro-The authors concur with the findings of gramme. Universities must develop aOwen (1983). Cohen and Pant, 1989 and capstone course that deals with complexBok (1976) about the problems facing issues of business social responsibilityethics education. The authors have and professional responsibility for senioradded their views to these findings: professionals. Accounting firms need to evaluate periodically the design and Lack of sufficient training for busi- operating effectiveness of the organisa- ness and accounting teaching staff to tion’s compliance and ethics pro- properly teach ethics as a subject grammes and to assess their overall ef- Teachers feeling uncomfortable fectiveness. teaching ethics in the class room Teachers reluctant to display their Teachers teaching ethics courses must personal values in the class room. undergo training in ethics education. Reluctance of universities to treat ‘ They must be trained to use a combina- accounting ethics’ as a separate sub- tion of teaching methods that make ject in their curriculum teaching of the subject interesting and Few ethics case studies in account- effective. Interactive learning, group ing and finance learning, real life case studies, role- Accounting text books are too phi- plays, reviewing of literature and films losophical in their approach to ethics are the ways through which students
D. Kannaiah, N.S. Kumar / Issues in Social and Environmental Accounting 1 (2009) 88-94 93interests can be sustained to learn more Referencesabout ethics. Bok,D.C., (1976) “Can Ethics beA simple six-part ethical decision- Taught?” Change, October 26-30.making model suggested by LaRue Hos- Callahan, D., (1980) “Goals in themer of Michigan Business School would Teaching of Ethics”, Ethicsbe useful in ethics training. Teaching in Higher Education,The questions to be answered are: Editors: Callahan and Bok, S:61- 80, New York: Plenum Press. What is the moral issue? Clarke, P.Hill,N.T, & Stevens K.,1996 : Who has been harmed? “Ethical Reasoning Abilities: Ac- In what ways? countancy Practitioners in Ire- What are the alternatives that exist? land”, IBAR, Vol. 17, pp. 94-109. What facts need to be known to Coffee, J.C.,Jr.(2006) Gatekeepers: The make a reasoned decision? Professions and Corporate Gov- What are the personal impacts on the ernance. Oxford: Oxford Univer- person making the decision? sity Press. Engle T.J, & Smith, J. L, (1990) “TheA profession’s ability to self-regulate Ethical Standards of Accountingmay be ineffective unless individual pro- Academics”, Issues in Accountingfessionals understand and apply their Education, Vol. 5, Nol. 1, Springprofession’s ethical standards in actual 7-29.practice. If professionals do not exercise Fleming, A.I.M, (1996) “Ethics and Ac-self-regulation, then governments will counting Education in the UK – Ahave to intervene. Ethical education has Professional Approach”, ASc-to be kept up-to-date as knowledge counting Education, Vol. 5, No. 4,about specific tax laws or auditing stan- pp. 207-217.dards. Gandz, J & Hayes, N (1988) “Teaching Business Ethics”, Journal of Busi-The authors are happy that attitudes to ness Ethics, Vol. 7, pp. 657-669.ethics education are changing. Aca- Hanson, K.O, (1987) “What Good aredemic institutions and professional bod- Ethics Courses?”, Across theies are of the opinion that ethics should Board, September 10-11.be taught as a dedicated unit within pro- Karnes, A & Sterner, J (1988) “The Rolefessional programmes and degree of Ethics in Accounting Educa-courses. This is a good sign and we be- tion”, Accounting Educator’slieve that the goals of ethics education in Journal, Fall, pp. 18-31.creating an awareness of ethical dilem- Luetge,C (2005) “Economic ethics, busi-mas and providing methods of resolution ness ethics and the idea of mutualwill be soon achieved throughout the advantages”, Business Ethics: Aworld. Ethics education for accountants EuropeanReview, Vol. 14, No. 2,should be a life-long learning commit- pp. 108-118.ment that might begin early in-a-pre- Mackie, J.L. (1977) Ethics: Inventingqualification programme and can con- Right and Wrong, Harmondworth:tinue throughout his or her career. Penguin.
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