The important questions to be addressed are taken from the "…business ethics/corporate social responsibility literature, oriented towards business enterprises but also of relevance to professional bodies: whether being ethical 'pays' in financial terms; and whether formal codes are useful in promoting ethical behavior…" (Cowton, 2009, p. 177).
Accountants are charged with carrying out ethical and moral decisions in their everyday work, but judging from some of the scandals in recent years (Enron, WorldCom, the Anderson Accountancy, etc.) not all accountants are up to speed with those ethical and moral decisions. This paper reviews the judgments that accountants should be making based on morality and ethical values, whether the accountant is working for a multinational corporation or for a small business with only half a dozen employees.
Accounting Students and Moral Decision-Making
Deborah Leitsch writes in the Journal of Business Ethics that auditors are being "turned into (financial) enablers," simply because there is "enormous pressure" placed on those accountants doing auditing work to "produce earnings growth" (Leitsch, 2004, p. 313). That situation is not acceptable from a moral or ethical standpoint, Leitsch explains. And notwithstanding numerous studies of ethics vis-a-vis accountants that examined "moral sensitivity," "moral judgment," and "behavioral intentions," there is an ethical aspect that has not received adequate attention. That aspect is the "moral issue itself" and the "moral decision process" (Leitsch, 314).
Leitsch clearly has great regard for the research of T.M. Jones; among Jones' findings is that moral intensity influences moral judgment, and that moral issues with "high intensity" will be recognized more often than "low intensity" issues (314). In other words it can be said with a degree of certainty that the moral decision process will be greatly influenced by the moral intensity of the issue before the accountant. And, according to Leitsch's ability to reference Jones' theories, moral "intentions" will be present more frequently when issues of high moral intensity are presented to that account. To verify her findings, Leitsch surveyed 110 accounting students in a college in the Northeast U.S. The students were between 21 and 30 years of age. The four scenarios given to the students "…depicted a different ethical accounting issue found in the workplace" (Leitsch, 315).
The issues were: a) approving a "questionable expense report"; b) "manipulating company books"; c) "bypassing company policy"; and d) "extending questionable credit" (Leitsch, 315). Through the survey she had set up, Leitsch basically was measuring three values; moral sensitivity, moral judgment, and moral intentions. The results showed that Jones' hypotheses could be backed up by students' responses to the questions. The students viewed the 1st Scenario (approving a "questionable" expense report) as the most unethical action an accountant could take (of the four). Scenario 2 (manipulating company books) and Scenario 3 (violating company policy) were seen by students as "more intense than Scenario 1" and more intense than the 4th Scenario (extending "questionable" credit).
Leitsch was pleased that the results back up Jones' theory that individuals tend to perceive some situations are more morally intense than other situations. The author of this article stated that because of the publicity surrounding the scandals (Enron, WorldCom, et al.) the students were expected to find Scenarios 2 and 3 "more unethical" than Scenario 4, which was just a matter of giving credit to a customer when it was questionable as to whether he actually qualified for that line of credit.
Ethical Guidelines for Accountants
Experience certainly helps university students learn hands-on about ethical accounting practices. Helen Brown-Liburd and Barbara Porco explain in Issues in Accounting Education that their study showed "…undergraduate accounting students who have interned with a public accounting firm," or otherwise who have participated as volunteers or members of "Beta alpha Psi," demonstrated "higher levels of cognitive moral development" (Brown-Liburd, 2011). Given the results of this research, it is clear that students learn more about ethical behavior when they are out in the community actually engaging in hands-on accounting realities, rather than simply sitting in a classroom listening to lectures.
Kendra James writes in the Houston Chronicle that the main reason for presenting ethical guidelines for a company or in a university classroom is "…not to provide an exact solution to every problem," but rather to simply "…aid in the decision-making process" (James, 2010). When there is a solid, established set of guidelines that gives the accounting professional "a compass to direct him toward ethical behavior" (James, p. 1). There are always codes of ethics that major companies and organizations create -- an example is the American Institute of CPAs (AICPA) -- and they lay out in specifics the responsibilities of an accountant. However, a person in the accounting industry should be familiar with the dark side of the industry simply by having an ethical approach to every task that he or she takes on.
And moreover, many companies try to curb any possible desire on the part of their accountants by insisting their accountants complete "…continuing education courses on ethics" (James, 1). Also, many companies now establish "…whistleblower hotlines to encourage employees to demonstrate honesty and integrity in the workplace," James continues. There are of course accountants who don't wish to take extra courses in ethics, and the reason they resist is generally because they believe "…ethical behavior is not taught, but it is inherent in an individual's personality" (James, 1). It would seem that these accountants resist learning more because they are perhaps from the old school that knows everything there is to know about the business and the ethics of the business.
What are the Causes of Ethical Lapses in Accounting?
Jagg Xaxx writes in the Houston Chronicle that there are no set or exact answers as to why certain people try to cheat on their customers or their companies, or why certain people are drawn into illegal practices. However, Xaxx believes that at the root of the issue is the fact that "…Some people enjoy having lots of money and will break the law to get it" (Xaxx, 2010, p. 1). Accounting offers those unscrupulous people with the opportunity to "cook the books," which means taking more for yourself "…without actually pointing a gun or breaking into someone's house" (Xaxx, 1). This is called "white collar crime" and it has a kind of appeal because "nobody seems to be getting hurt"; indeed, the presence of a large amount of money "…activates the greed centers in some people's brains" and hence, unethical behaviors may follow.
Perfectly sane, normal people who have never even fudged on their taxes may "succumb to temptation when an opportunity is offered," and when huge sums of money are involved, "some of which can be easily hidden, siphoned off or removed with little chance of detection," the temptation is sometimes too great to ignore for some individuals, Xaxx continues (1). In instances where the accountant being tempted happens to be in financial trouble on a personal level, the temptation can be even greater to "cook the books" in his or her favor.
Islamic Values for Accounting
Accountants searching for good ethical values to emulate would do well to study Islamic ethical accounting practices. According to an article in the peer-reviewed journal Issues in Social and Environmental Accounting, professors and instructors at the college and university level should implant "moral commitments" in the students majoring in accounting. Islam emphasizes the "…unity of God, the accountability to God and the concept of & #8230;public benefits to be the foundations of ethics" (Yunanda, 2011, p. 124). The author posits that the ethical breaches seen in the behavior of Enron -- along with the "fraud, falsification and deliberate overstatement of companies' accounts" -- result from a lack of education in the ethical and professional duties and responsibilities of accounts (Yunanda, 125).
Simply put, the lack of ethics as perceived by the public as "…a severe threat to the accounting profession," Yunanda continues, and when these kinds of unethical activities receive publicity the public loses confidence in corporations and in the educational system that is supposed to be training young people to be upstanding, honest accountants to be trusted (126).
The author mentions that ethics goes well past any Code of Ethics designed to create honesty and forthrightness; the issue of ethics actually comes down to the idea of "moral reasoning," Yunanda comments (127). When higher levels of moral reasoning go into decision making (in the accounting profession) then a "higher level of ethical practices" follows naturally. Studies show that a person's ethical ideology will have a significant impact on his or her actions and decisions, and a "lower level of religiosity" has been associated with an "inclination to engage in unethical behavior," Yunanda continues (128),
Meanwhile, as to Islamic ethics, the concepts of "justice and balance, trust and benevolence" are linked to "tawhid," which is related to spiritual accountability (Yunanda, 130). Tawhid is also linked to the "unity of God" in the sense that Allah observes the acts of His servants and expects obedience therein. The…