Accounting Education and the Development of Ethical Maturity - Essay Example

Accounting Education and the Development of Ethical Maturity Introduction: Corporate scandals such as the collapse of Enron invariably turn the attention of the public to the ethical stance of accountants and the ethical values of financial analysts and evaluators as also their claim to professionalism. Professionalism is clearly associated with ethical integrity and this is especially true on the case of financial reporting and accounting. This is where the role and inclusion of ethics education in accounting becomes important. This discussion draws on the connection between accounting education and the development of ethical maturity and suggestions to possible alternative approach to traditional accounting education are also evaluated considering the work of pioneering authors in the field. Research Findings: There has been substantial research on accounting education and ethical development and how one could be related to the other. In a latest release by the International Federation of Accountants (IFAC), the importance of ethics education has been highlighted. Academic institutions use different methods and levels of ethics education and place varying degrees of emphases on ethics teaching when students take courses in accounting. Adkins and Radtke (2004) discuss the difference between student perceptions of business ethics and how they are fundamentally different from perception of accounting faculty members. The advantages or disadvantages of teaching business ethics to final year accounting students have been examined by O'Leary (2008) who reports data on a class of 155 students who were given five ethical scenarios on which to make ethical decisions and the students were then subject to different methods of ethical instruction. Some weeks later, the class students were again given the original ethical scenarios and in all cases, the mean responses were more ethical after the ethical instruction when compared with scores obtained prior to the ethics education. It seems the combined effects of ethical instruction have positive impact on ethical decision making and in general, ethics education could be highly beneficial. The goals and effectiveness of business ethics have been studied effectively although there have been controversies as to how far accounting faculty members are committed to accounting ethics education and how far accounting institutions are interested in adding ethics modules in business courses. Smith and Smith (2005) described the ethics presentation to accounting and business students and highlighted the fact that the major corporate failures of Enron and Worldcom as a result of questionable accounting practices led to the necessity of ethics as important in the working of business and accounting. Financial statement analysis and regulatory requirements are central to doing business and Smith and Smith described the development and assessment of one approach to presenting ethics with a computerized slide show. The show was aimed to increase students' understanding of the role of ethics in accounting and business practice and following the presentation, the students reported a better recognition of the importance of ethics in accounting and business. Education in ethics teaches student to practice actions that are morally correct and this helps student not juts in school but also later in life while they work in corporations. There are claims that accounting education fails to adequately equip students to deal with ethical issues and accounting education in general is incomplete for the overall moral development of students. Thus there is a need to add business ethics as a module in accounting education. An information paper was released by the International Accounting Education Standards Board (IAESB) in 2006 and this paper was based on a global research project on education of ethics in accounting and stimulated discussion and debate on the values of an ethics education in the accounting profession. The paper tried to answer questions on the use of ethics, and why ethics should be taught, the type of ethics interventions within the accounting coursework and issues that could arise in teaching ethics to accounting students (Cooper et al, 2008). The ethical issues associated with university accounting education have been explored by Gray et al (1994) and they emphasize that despite definite progress in incorporating ethics in accounting practice, there is also evidence of ethical and intellectual failure in accounting and business education. Some researchers might refute this claim and some others might consider it exaggerated yet according to Gray et al, any ethical failure in accounting practice lies in the way accounting education is imparted. In most cases according to the authors, accounting education fails to develop students' ethical and intellectual maturity and this has been argued as a moral failure of educators in accounting who are unable to provide a comprehensive holistic education in accounting. The authors argued that the core of accounting knowledge could be associated with superficial learning strategies and this represents ethically immature learning strategies (Gray et al, 1994). According to the recommendations by the authors, social and environmental accounting could challenge much of the traditional approach to accounting education and new methods of accounting teaching could provide opportunities for an ethical approach to accounting education. Gray et al (1994) have been among the pioneers who emphasized on the need to include ethics modules in business and accounting courses. As a result there has been a lot of interest in ethics education and ethics in accounting in the last few years. Despite this, there have been certain flaws in accounting education and rules and principles in accounting and ethics have not been presented in a structured manner. The practical reasoning in accounting and the role of the accountant's ethical values in financial reporting have been systematically considered only by a few authors and this is a recent phenomenon especially after the demise of major corporations following financial and accounting scandals. The importance of ethical values in accounting has not been grasped before and it is only recently that authors have noted the necessity of adding ethics modules to regular business and accounting courses. Even now after such addition, the use of ethics in accounting is debatable as many educators and authors are skeptical or non committal about the importance of ethics in accounting. Yet the addition of ethics classes in accounting is not only justified but necessary considering the fact that all financial reporting, whether major or minor require extreme integrity and strong ethical values on the part of the accountants and financial analysts. From a general economic downturn to a major collapse of a corporation, the central role of the transparency of financial accounting and reporting finally depends on the ethical values of those involved in the reporting. Considering the importance given to ethical development of accounting students, there has been an increase in interest in incorporating ethical values in accounting and Mele (2005) writes, "ethical education in accounting has to simultaneously include the knowledge of proper rules and principles and their correct application; values (understood as moral goods) and virtues, whose acquisition. should be encouraged" (Mele, 2007, p.2). Mele also emphasizes that character and personal attributes of the accountant along with values and practical reasoning are essential features of business ethics. The factors that influence ethical decision making and behavior in accountants are important considering the concerns of the public and the legislators about the ethical attributes of an accounting role. Along with legislative changes following corporate scandals there are now structural and organizational changes in accounting and business organizations and according to Buchan (2005) it is important to understand the personal and contextual factors that influence ethical decision making. The individual and personal factors in ethical decisions could be attitudes and behavioral control, sensitivity to professional and ethical issues, the ethical climate of a organization and the subjective norms that individuals follow (Buchan 2005). In Buchan's study professionals from accounting firms completed a survey and the survey measured ethical dilemmas suggesting a strong relationship between personal and professional attitudes and ethical intentions. The study suggests that ethics and other social factors tend to affect attitude formation giving credence to the fact that attitudes are formed by underlying ethics so ethical development is an important aspect of attitudes and behavior. Chan and Leung (2006) discussed the importance of four basic psychological processes including moral/ethical sensitivity; moral/ethical judgment; moral/ethical motivation; and moral/ethical character. The authors suggest that research in accounting has focused primarily on ethical judgment, although a focus on ethical sensitivity is also necessary. In their study, 156 accounting undergraduates investigated ethical sensitivity of the students and studied the effects of ethical reasoning on ethical sensitivity. The accounting students seem to vary in their perception of ethical issues in professional scenarios although there may not be any difference in ethical sensitivity and ethical reasoning of the students. Intervention with accounting ethics in accounting courses could be positively related to the development of ethical sensitivity in accounting students and students taking these courses are ore able to recognize ethical issues than students who do not take these courses. Chan and Leung suggest that even though all individuals may have an inherent ethical judgment and differentiate the right and the wrong, they may not behave ethically in all situations as they may simply not have the ability to detect the ethical issues and this is a problem with ethical sensitivity rather than judgment and can be improved with training. Along with ethical reasoning and education, it is important to understand ethical sensitivity in accountants and accounting students as this is an important ingredient in ethical development. The need for a comprehensive cognitive model of ethical decision making has also been highlighted. Along with the role of ethical decision making and ethical judgment and sensitivity of accountants, the ethical attitudes of accountants seem to be important as after the ethical breaches of companies such as Enron and Worldcom, the focus has shifted to personal ethical attitudes and attributes of accountants. Emerson et al (2007) used sample responses from accounting practitioners and students and found that students and professionals do not show significant difference in their perception of accounting tricks and unethical behavior. However as long as certain practice remained legal, irrespective of the ethical values, the practice was considered acceptable by professionals. The study also found no difference in attitudes between auditors and practitioners and suggested that accounting practitioners do not significantly differ in their ethical attitudes and perception of behavior. This suggests that there might be something of common ethical attitudes among practitioners and this would support the thesis that training of ethical issues and responses could also bring in similar changes in attitudes among accountants. The relationship between the accountants' personal values and moral reasoning could also be relevant here although a study by Abdolmohammadi (2006) suggested that too much emphases on conformity with rue based standards in accounting could lead to lower scores in moral reasoning a in this case accountants and professionals would be more concerned about conforming to certain rules and standards rather than using their own reasoning and judgment on whether certain activity is morally or ethically right. In their study, Abdolmohanlmadi et al. administered the Rokeach Values Survey (RVS) and the Defining Issues Test (DIT) to 164 graduating accounting students who were enrolled in capstone courses at two universities in the United States. Their moral values and reasoning and attitudes and behaviors at the workplace suggested an inverse relationship between conformity values and principled moral reasoning and the results also indicated lower preference for conformity values and higher preference for idealism and self actualization with positive relationship between self actualization, idealism and moral reasoning (Abdolmohammadi, et al. 2006). The perceived importance of an ethical issue that in turn affects ethical decision making for accounting students was measured to generalize the decision making process and the role of ethics in decision making (Guffey and McCartney, 2008). Inferences were also drawn on the ethical decision making construct and it was suggested that the 'perceived importance of an ethical issue' measure could be related to behavior, intention and ethical judgment. So if an issue s perceived as of ethical importance by practitioners then it is more likely that the issue will be examined on the basis of professional or personal ethical judgment of the accountants. This highlights the role of an attribute of accountants and that is related to 'ethical perception' or understanding which issues in a scenario requires ethical consideration. This is again based on ethical judgment and one's intentions, so finally ethics is intricately related to how situations are perceived and what underlying intentions guide this perception. It is important to understand the ethical judgment dimension of decision making as without an underlying ethical consideration of all scenarios, all decision making will be flawed and could even run the risk of being skewed and unethical. Ethical decisions could be associated with moral conflict and influence by moral judgment. Then there are degrees to which ethical values are perceived as stealing a huge sum of money in millions could be more unethical than checking someone else's emails. The moral issues in our daily lives could affect the ethical decision making process in accounting students and moral judgment and intentions are some of the elements of ethical decision making. The importance of moral intensity could be understood on the basis of perceived corporate concern and involvement effect (Leitsch, 2006). When these dimensions were combined with moral sensitivity, moral judgment in students was predicted according to the results of the study. According to Leitsch's inference, "moral judgment and the dimensions of moral intensity significantly predicted accounting students' moral intentions" (Leitsch,2006, p.144). According to the results of the study, moral decision making process could be largely influenced by the other moral components of judgment, intentions and sensitivity and according to the author, the findings could be used successfully to enhance coursework and training programs in accounting ethics. The question naturally arises on how professional accounting bodies perceive ethical issues and how much importance they give to ethics education in accounting. Jackling and Cooper discussed the ethical issues that are important not just to students and professionals but also to accounting bodies. Their study uses an online survey of 66 professional accounting bodies and the perceptions were noted in regard to the ethical issues and the causes of ethical failure as also the need for an ethics education. Some of the challenges identified are ethical perception and management related to conflict of interest and financial management and the need for ethics education was also strongly supported in all situations. In the study 41 per cent of member bodies of the International Federation of Accountants (IFAC) provided feedback to the requirements of ethical considerations in management and accounting (Jackling and Cooper, 2007). According to the authors, the implications of their study have been expressed as such "findings demonstrate that professional bodies support ethics education at the pre- and post-qualifying levels of education and a willingness to take an active role in promoting ethics education to their members".(Jackling and Cooper, 2007, p.939). The study is significant as it has successfully demonstrated the values placed on ethics education by accounting bodies and institutions and goes beyond studying only student or practitioners' attitudes. The role of professional accounting bodies in promoting accounting education is significant and these professional institutes play a central role in enhancing accounting education through the inclusion of ethics consideration. For a comprehensive understanding of the role of ethics in accounting education, it is important to consider opinions of students, practitioners and professional accounting bodies The study by Adkins and Radtke (2004) uses a survey to elicit student and faculty responses to various questions concerning the importance of business ethics and accounting ethics education and their results indicated that comparatively students are ore concerned about ethical issues in accounting than the faculty members. This may not be a very ideal situation as this questions the faculty and practitioner commitments to impart education that would focus on ethical values. It is important to question how far accounting bodies and professionals are interested in promoting a culture of ethics among the younger generation of accountants and students and how seriously they considered ethical issues when planning a curriculum in business coursework. Thus apart from the ethical issues in business there are issues regarding perception and use of ethics in educational environment as a culture of ethics in educational settings could be extrapolated and carried over to the larger business settings and determine how ethical consideration in the classroom could be applied in organizational scenarios. Conclusion: The conclusions could be drawn and discussed at many levels suggesting the need for ethical development and maturity within an accounting educational context. This is primarily supported by the fact that ethical judgment and ethical sensitivity are enhanced with ethics education and such judgment and sensitivity are central to decision making in any management process. This discussion also highlights the fact that the need for an ethics education or an ethic module in business and accounting education should prompt accounting bodies, professional, accounting practitioners and students to support and promote the inclusion of ethics education in regular business and accounting coursework. Ethics research and the value of ethics in business and education should be based on individual perception, attitudes and intentions although all these factors are in turn affected by inherent ethical considerations and social conditioning. Yet studies have largely proven the benefits ethics education as even if individuals have inherent ethical judgment abilities they may not develop keen ethical sensitivity without some training that could help them to identify ethical scenarios. In general it has been found that students who attend ethics classes are better equipped to understand the significance of ethical situations in business settings than students who do not attend such course. This highlights the importance and almost central role of ethics education in business and accounting studies. Future accounting professionals with ethical sensitivity will not only be able to identify and avoid ethical shortcomings but could also help to prevent the future occurrence of ethical scandals and disasters such as the Enron and Worldcom. Works Cited Abdolmohammadi, Mohammad;Baker, C.(2006) Accountants' Value Preferences and Moral Reasoning. 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