By Stephens, William; Vance, Carol A.; Pettegrew, Loyd S.
The CPA Journal , Vol. 82, No. 1
An Analytic Essay for the Accounting Profession
In this era after the financial and accounting failures of Enron, WorldCom, AOL, Global Crossing, Tyco, Lehman Brothers, Washington Mutual, and AIG, the discusión concerning the root causes of such failures must be redoubled - and the accounting profession stands at the center of this discourse. Were the failures due to incompetent accounting and auditing practices? Did the profession provide inadequate accounting and auditing rules for a complex business environment? Was there too much emphasis on short-term results and performance rewards at the expense of sound accounting principles? Could the failures have resulted from the profession's reluctance to take responsibility for detecting fraud? Or was it simply what baseball philosopher Yogi Berra once said when asked to explain his team's lack of success, "We made too many wrong mistakes" (Yogi- It Ain't Over, Md3ww-W&, 1989)?
In this article, the authors join analysts like Paul F. Williams and submit that the underlying explanation for these accounting failures was a moral and ethical problem and that to ignore this underlying issue is to seriously miss the point ("You Reap What You Sow: The Ethical Discourse of Professional Accounting," Critical Perspectives on Accounting, voL 5, no. 1, pp. 995-1001, 2004). If the accounting profession is willing to settle for a rules-based approach of legislative fixes, without looking at a failed moral and ethical underpinning, any efforts to regain a preeminent professional status will fail. The authors offer a prescription that the accounting profession can use to regain its moral foundation and reestablish ethical practices.
Reasons for Decline
The etiology of the profession' s problems is more systemic than the factors that many analysts have cited - such as the growing pains from the expansion of consulting over auditing, the emerging demands of revenue growth (Patrick T. Kelly and Christine E. Earley, 'Leadership and Organizational Culture: Lessons Learned from Arthur Andersen," Accounting in the Public Interest, vol. 9, no. 1, pp. 129-147, 2009; Stephen A. Zeff, "How the U.S. Accounting Profession Got Where It Is Today: Part I," Accounting Horizons, vol. 17, pp. 189-205, September 2003; Stephen A. Zeff, 'How the U.S. Accounting Profession Got Where It Is Today: Part ?," Accounting Horizons, vol. 17, pp. 267-286, December 2003), the cognitive development and socialization of new accountants into the profession (Lawrence A. Ponemon, "Ethical Judgments in Accounting: A Cognitive-Developmental Perspective," Criticai Perspectives on Accounting, vol. 1, pp. 191-215, 1990; Lawrence A. Ponemon, "Ethical Reasoning and Selection Socialization in Accounting," Accounting Organization and Society, vol. 17, pp. 239-258, 2006), and the change in the educational foundation of accounting from principles-based to rules-based standards (Terri L. Heron and David L. Gilbertson, "Ethical Principles vs. Ethical Rules: The Moderating Effect of Moral Development on Audit Independence Judgments," Business Ethics Quarterly, vol. 14, no. 3, pp. 499-523, 2004; David Satava, Cam Caldwell, and Linda Richards, "Ethics and the Auditing Culture: Rethinking the Foundation of Accounting and Auditing," Journal of Business Ethics, vol. 64, pp. 271-284, 2006; Paul F. Williams, "Accounting and the Moral Order: Justice, Accounting, and Legitimate Moral Order," Accounting in the Public Interest, vol. 2, no. 1, pp. 1-21, 2002).
The authors argue that the decline in ethics is largely cultural and appears to be as closely associated with a failing system of morality as it is with the profession's ethical rules. The discussion below is divided into two sections that contend that 1) the attitudes and behaviors of today's youth toward ethics and morality are an important detriment to the profession doing the right thing both now and the future, and 2) in the profession should adopt a morality-based approach to the development of its ethical codes and standairis. …