The State of Ethics in Business and the Accounting Profession

By Mastracchio, Nicholas J., Jr.; Jiménez-Angueira, Carlos et al. | The CPA Journal, March 2015 | Go to article overview

The State of Ethics in Business and the Accounting Profession


Mastracchio, Nicholas J., Jr., Jiménez-Angueira, Carlos, Toth, Ildiko, The CPA Journal


In Brief

The public's trust in accounting professionals is critical, and ethics education is one way to strengthen that trust. Since the audit failures of the early 2000s, there has been an ongoing discussion about how to teach ethics in college and in continuing education for CPAs.

However, only five states require a course in ethics for college students. Just as few call for ethics education, while three other states mandate ethics education either through integration in courses or other means. As for continuing education for CPAs-most states have some ethics requirements, but many just require a periodic review of state and AICPA rales.

Tins article looks at the state of ethics in busmess and the accounting profession, reviews ethics education requirements in the United States, and questions the framework of what constitutes an ethics course.

The accounting profession has frequently debated the issue of ethics education. Questions pondered by academics and practitioners alike have revolved around three key questions: Whether we are teaching enough ethics; how we should integrate ethics education into existing models; and if ethics can even be taught. When Socrates debated his fellow Athenians about the latter question ages ago, he took the position that ethics can be taught. More recently, Michael Levin, a City College of New York philosophy professor, notoriously dismissed ethics education ("Ethics Courses: Useless," New York Times, Nov. 25, 1989, p. 23). Today, accounting academics and practitioners generally agree that ethics can be taught and that it should have a more prominent role in accounting curricula and professional education.

Ethical standards in accounting are established by the profession in order to define expected norms of professional conduct. Ethics are not necessarily the same as morals: morals are personal in nature and, as such, often differ between individuals. Ethical standards, however, must apply equally to every member of a profession. The nature of the work performed by CPAs requires the highest level of ethics, as the users of financial statements rely on the judgment of the accountants who prepare the statements and the opinion of the auditors who audit them.

Yet the popular press constantly exposes one etlucal lapse after another, such as the many recent corporate accounting scandals, cheating scandals in academic research, or organized cheating on college campuses. There is no question that etlucal failures are all around us. What are the ethics issues in business and accounting?

Are There Ethical Problems in Business and Accounting?

The 2014 report from the Edelman Trust Barometer trust and credibility survey concludes that, although the public's trust in business is showing signs of stability, the public does not trust business to self-regulate. The report further finds that only 43% of respondents indicated trust that CEOs provide reliable information about their company. In addition, the survey indicated that only one in five respondents trust business leaders to make ethical and moral decisions. In general, the public believes that businesses, together with the government and other stakeholders, should take part in talks about regulation.

The 2013 National Business Ethics Survey (NBES) indicates that, although observed misconduct (or unethical behavior) has been declining steadily in the past few years (from 55% in 2007 to 41% in 2013), there is still much room for improvement. The report indicates that the level of ongoing unethical behavior within an organization is at 26%. Such a trend seems to be driven from the top down by people with managerial authority (from supervisors to top managers), with workers reporting 60% of observed misconduct involving someone in management. Indeed, the report indicates that 24% of observed misconduct involved senior managers.

The 2013 report also indicates that only 37% of employees report observed misconduct-this figure has remained essentially the same since 2011. …

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