A Fresh Look at Accounting Ethics (or Dr. Smith Goes to Washington)

In the history of the world, there has never been a country like the United States of America. Compared to other nations, America has more freedom, more wealth (more evenly distributed), and more opportunity. The accounting profession has played its part in America's success story. The profession has a long history of contributions to the efficient functioning of business operations, the capital market system, and the economy in general. In the wake of corporate scandals and a shaky stock market, Congress passed legislation that established a new board to oversee auditors of publicly traded companies and increased prison sentences for fraud. However, new laws such as the Sarbanes-Oxley Act, while helpful, will not restore confidence in the stock market. Confidence will be restored only by ethical leadership from the accounting profession, business community, and government. Shortly before Congress passed the new law, I was given the opportunity to testify at a Congressional Hearing concerning business and accounting ethics in Washington, D.C. The nation's leaders are seeking direction regarding ethics. What part can accounting professionals and educators play? This article is based on the opening statement I offered to the U.S. House of Representatives Subcommittee on Commerce, Trade, and Consumer Protection, Friday, July 26, 2002. Professional Ethics In his speech to the Yale Club in New York City on September 4, 2002, AICPA President Barry Melanchon stated that the accounting profession must restore its most priceless asset: its reputation. He said that the profession's leadership must act to preserve a legacy of honor and integrity for future generations of CPAs. The profession must build upon its traditional values such as rigorous commitment to integrity. Article III in the Principles of the AICPA Code of Professional Conduct states that "to maintain and broaden confidence, members should perform all professional responsibilities with the highest sense of integrity....integrity is an element of character fundamental to professional recognition. It is the quality from which public trust derives and the benchmark against which a member must ultimately test all decisions." The accounting professional must be skilled at implementing moral judgments so that he or she can consider the welfare of those affected by his or her actions. The Importance of Ethical Values Educators have struggled with the question: Can ethics be taught? If a student lacks personal integrity, can a faculty member make a difference in a student's perspective on ethics? Should an accounting professor even try to make a difference? American Accounting Association President G. Peter Wilson, in his August 2002 address to the Association, said that in the classroom, educators need to increasingly emphasize two values that have long been the mainstay of accountants' reputation: integrity and professional skepticism. Theodore Roosevelt, the 26th president of the United States, put it this way: "To educate a person in mind and not in morals is to educate a menace to society." Ethical values provide the foundation on which a civilized society exists. Without that foundation, civilization would collapse. On a personal level, everyone must answer the following question: What is my highest aspiration? The answer might be wealth, fame, knowledge, popularity, or integrity. Be on guard, if integrity is secondary to any of the alternatives, it will be sacrificed in situations in which a choice must be made. Such situations inevitably occur in every person's life. Many people think of fame and fortune when they measure success. However, at some point in life, most people come to realize that inner peace and soul-deep satisfaction come not from fame and fortune, but living a life based on integrity and noble character. President Lincoln put it this way: "Honor is better than honors." At the Congressional Hearing concerning business and accounting ethics, seated next to me was Truett Cathy, founder of Chick-Fil-A. …