Exploring links between education and ethical maturity in accountants

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The work of Gray et al (1994 p.51) concerning the link between accounting education and ethical maturity focuses predominantly on the ethical and intellectual failures that occur amongst established accounting practitioners. The literature suggests that a crucial factor responsible for such failures is the inability of methodologies and techniques within contemporary accounting education to supply accountants with the necessary intellectual and ethical maturity to function in the real world. This amounts to suggesting that whilst accounting education provides accounting students with a thorough knowledge of treatments and calculative techniques, little clarity is assigned as to how individuals should respond in situations which may lead to the creation of controversy. In the case of Enron which has often been cited as the largest audit failure in recent history (Bratton, 2002, P.61), it could be suggested that while Arthur Andersen as the auditors carefully followed technically precise accounting procedures, ethical maturity was distinctly lacking leading to the manipulation of sound procedures to mislead investors. Gray et al. (1994, p.51) propose that the solution to such problems exists within social and environmental accounting however, the nature of this argument is not supported with the presence of conclusive evidence. As a result, this work will focus upon the specific nature of ethics and ethical maturity; the interaction between ethics and accounting; and the potential future developments in accounting education that could aid new graduates in becoming more ethically conscious.

Over the past decade, a surge in both interest and investment in developing moral education programs has occurred in the aim of facilitating the characteristic of moral judgement. Moral judgment concerns how people define one or another course of action in a situation as morally right (Schlaefli et al, 1985, p. 319.) Moral judgement as suggested by the work of Kohlberg (1969) and Piaget (1965) has been shaped and has evolved through the development and understanding of justice, and as this level of knowledge deepens, an individuals' method of assessing a situation will change. Institutional educators who believe in the ethos of such theories have aided the succession of moral judgement development by offering numerous educational experiences. Studies that have reviewed moral education programs (Enright, Lapsley, & Levy, 1983) have indicated that such programs are influential in the promotion and development of moral judgement. The work developed by Kohlberg (1969) entitled the 'theory of moral development' suggested a stage sequence model, which defined a series of reasoning levels and development stages (Ponemon, 1993, p. 187). The model was responsible for proposing that individuals will progress upwards through three sustained levels. The initial level was termed "pre-conventional morality", with progression to the second level termed "conventional morality" and then finally to the third stage of "post-conventional morality" (Kohlberg, 1984, p. 824 - 839). Since the formation of the above stage sequence model, a number of researchers have attempted to construct dependable psychometric instruments to evaluate an individuals' level of ethical reasoning (Colby and Kohlberg, 1987; Rest 1979a). Based upon these constructs, studies have examined accounting professionals in terms of ethical and moral development. An example of such work is that of Ponemon (1990) who carried out a cross-sectional and longitudinal study, concluding a strong negative link between accountants' position within the firm and the level of ethical reasoning possessed. The findings suggest that "differences in ethical behaviour are likely to reflect differences in socialisation; thus different positions in a firm's hierarchy are likely to engender different ethical proclivities" (Ponemon, 1990, p. 206). This was further enhanced with the suggestion that "ethical values that are encouraged by the CPA are inconsistent with higher levels of ethical reasoning". It may therefore be inferred from this that level of ethical development within those that enter the accounting profession is hindered (Ponemon 1990). An explanation provided to justify this conclusion is that moral development places far too much of a strain on present accounting education techniques for students. A solution therefore proposed is that ethical education within accounting should be substituted by "formal courses and proponents that foster the highest level of ethical reasoning" (Ponemon, 1992a, p. 32).

Despite these findings however, the individuality of each student may be overlooked. In accordance with the theories established by Kohlberg (1969), some students may possess an ethical obligation to their fellow peers or educational institution and as a consequence will choose to cooperate disregarding the economic incentives to do so otherwise. The moral development by students may however be more intricate than suggested by Kohlberg (1969) as demonstrated by the model of ethics and morality as formed by Rest (1979, p.18). The basis of this model rested on the notion that ethical behaviour was comprised of four characteristic psychological processes. This included: moral sensitivity; moral judgement; moral motivation and moral character. Moral sensitivity is concerned with the interpretation of a situation and the consciousness regarding relevant moral factors and there possible implications. This particular construct also analyses the effect of various possible actions and the effect that such actions would have on the relevant parties involved. Moral judgment entails reflection in regards to the various possibilities relevant to different courses of action and making a judgment regarding which of the available actions would be the most morally justifiable. The construct of moral motivation incorporates the prioritisation of particular moral values over other directly competing concerns whilst taking responsibility for the outcome that arises from taking the moral course of action. Finally, moral character is the strategies that aid moral choice and includes characterological dispositions that engender effective action (Walker, 1953, p.553). Most of the accounting regulations to date have had the tendency to focus strongly on moral judgement and moral motivation and thus provides the basis of most accounting education curricula. The reasoning cited behind this is that if accountants can be given an absolute scale on which to judge morality, combined with the appropriate motivation to do the right thing for the investors that rely on them, then they will have the ability to behave ethically. This is however criticised by Chan and Leung (2006, p.436) suggesting that moral character and moral sensitivity, which are just as crucial in ethical behaviour are ignored. Moral sensitivity in particular is crucial when accountants are operating in environments that may lead to the creation of complex or controversial circumstances. Indeed, Chang and Leung (2006, p. 436) confirmed that accounting students possessing a strong level of both moral and ethical sensitivity were better placed to identify ethical issues and classify the key ethical dilemmas they were presented with. This research is also responsible for highlighting the nature of interventions within accounting ethics as a means of enhancing moral and ethical sensitivity and hence ethical maturity. The implication therefore is that the link between accounting education and ethical behaviour concepts as defined by Rest (1979, p.18) are strong.

Another ethical conceptualisation that is of crucial importance in trying to understand the nature of ethics and ethical maturity within accounting is Pincoffs (1986) work on the virtue theory. This particular work provides the suggestion that virtues are attributes that provide sturdy grounds on which to base ethical judgements, and hence define the set of standards that govern ethical behaviour. In accordance with Mintz (1995, p.247), despite the nature of accounting itself being both conceptually neutral and objective, the need for virtues and ethical maturity is crucial due to the potential client and commercial pressures that are capable of creating a conflict of interest for the accountant. In order to abstain from such conflicts of interest whilst maintaining the ability to focus attention on the responsibility towards investors and the public, accountants require several virtues including honesty, impartiality, integrity, reliability, faithfulness and trustworthiness. These virtues are however unlikely to be adopted once the account is qualified and leaves the classroom, with professional firms placing greater emphasis on obtaining and keeping clients rather than the strict compliance with ethical virtues. As such, an accounting firm will often support an individual who chooses to make an ethical decision that may inconvenience a client but will not actively encourage them to do so. Unless accountants therefore learn the virtues required within a classroom environment, they are unlikely to ever learn them at all.

Buchan's (2005, p.165) supports the case further for the importance of ethical behaviour and ethical maturity amongst accountants with the discussion of the theory of planned behaviour and its impact on the behaviour of accountants. The results of this literature signify that the attitudes, subjective norms and moral sensitivity of accountants had a strong influence on their response to ethical dilemmas experienced during their line of work. in particular, the attitudes of the accountant in regards to the importance of ethics had a significant impact on both their ethical and behavioural intensions. Accountants who possessed an attitude that placed ethics as a relatively minor concern were far less likely to make objectively ethical decisions in comparison to those who viewed ethics as a fundamental part of accounting. This again emphasises that even in a notionally objective and neutral profession such as accountancy, the attitudes and subjective norms possessed by accountants are highly important in ensuring that efficient decision making is occurring. In addition, the importance of moral sensitivity helps to support the results of Chang and Leung (2006, p.436), and lends support to Gray et al (1994, p.51) surrounding the importance of ethical maturity for accountants.

These theoretical arguments surrounding the importance of ethics and ethical maturity for accountants is favoured by Eynon et al's (1997, p.1297) empirical findings surrounding "the need to maintain the public trust in the integrity of the accounting profession". More specifically, Eynon's et al's (1997 p.1297) survey of practicing accountants illustrated that accountants require the need for a high level of moral reasoning abilities in order to be effective. Such moral reasoning abilities can be seen as a combination of the moral judgement and moral sensitivity abilities in Rest's (1979, p.18) model of both moral and ethical development. Eynon et al. (1997, p.1297) also demonstrated that many accounting practitioners and particularly those working in small firms had lower moral reasoning abilities than could be expected for other professionals. Furthermore, the literature also showed a direct link between the completion of ethics courses at universities (and other learning environments) and the depth of moral development and ability possessed by the accountants. This in combination with evidence in regards to the importance of ethical maturity leads us to question why accounting courses do not include mandatory ethical training for all prospective accountants.

The answer to this may be seen in Baker's (2006, p.663) discussion in regards to some of the key terms that are used in accounting including concepts such as "economic reality" and "neutral representation". These particular concepts mentioned are key to the approach taken by most recognised standard setting institutions including the International Accounting Standards Board and the Financial Accounting Standards Board. Their particular stance suggests that financial accounts should offer a neutral illustration of the actual and objective economic reality that an organisation may find itself in when it is preparing the accounts. This however fails to notice that the notion of economic reality is in itself highly subjective with diverse investors viewing a company's economic situation in many different ways. Indeed, Baker (2006, p.263) argues that currently used economic based accounting regulations are often implemented using a subjective reasoning by the standard setting bodies, depending on what they see as their regulatory purpose. This may leave accountants in positions when a company is following the letter of the accounting standards, but arguably flouting their spirit.

This issue suggested above does not seem to be a recent manifestation, but rather appears to be an outcome of the decision by the IASB to 'professionalise' accounting around the world (McKinnon and Janell, 1984, p 19). As a part of this, the International Accounting Standards Board has continued to seek to harmonise global accounting regulations and create global, objective and neutral methods of accounting, allowing for the greater comparison of investments across countries. In the aim of creating professionalisation within accounting, both the standard setters and accounting institutions have continuously argued the case for serving the public interest and behaving in a manner that is both ethical and impartial in their activities. These claims are however somewhat undermined by "the educational processes and the socialising experiences of successive generations of accountants who are not encouraged to reflect upon the profession's social obligations" (puxty et al, 1994, p.77). More specifically, most approved courses within accounting and the textbooks used to aid the learning within these courses fail to explicitly consider the ethical responsibilities of accountants, and tend towards simply mechanically following the accepted ethical guidelines without question. According to Puxty et al (1994, p. 77) this approach taken towards accounting education fails to provide accounting students with the necessary degree of ethical maturity to truly judge complex situations that fail to fit precisely into the agreed guidelines.

In addition to this, Sikka et al. (2007, p. 3) note that the standard setting bodies have been slow to respond to the various number of corporate scandals, such as WorldCom and Enron, suggesting that accountants can play a highly partisan role within some companies. The failure to adequately educate students around the importance of ethics and social responsibility means that standard setters fail to deliver on their promise, and their ethical responsibility to serve the public interests (Needles, 1989, p. 23). Sikka et al. (2007, p. 3) claim that this is largely in part due to the failure of present accounting education and accounting practices to move beyond the relatively dry technical and instrumental view of accounting. This implies that a new form of accounting education is required that is based on concepts and theories within social accounting in order to produce ethically and socially reflective accountants.

The argument proposed above has been recognised by a number of authors and has received a level of much greater exposure in mainstream accounting literature following the collapse of Enron and its auditors, Arthur Andersen. Molyneaux (2004, p. 385) discussed the various potential methods in which ethics and morality could be successfully integrated into accounting education in order to provide accountants with the necessary level of ethical maturity to avoid these problems in the future. The discussion by Molyneaux (2004) specifically focuses attention on the need to integrate ethical teachings into the entire course, rather than the addition of a standalone ethics course to existing curricula, which would give the impression that ethics is somehow optional or does not play as much a key part as the technical aspects within accounting.

It is worth noting however that the IASB and the International Accounting Education Standards Board, IAESB, have started to make progress within this area. Their achievements to date are however somewhat limited, with the main focus being on the release of various information papers and consultative documents that are intended to stimulate debate on the inclusion of ethical considerations and courses in the current accounting curricula (Cooper et al, 2008, p. 405). This must be considered as an important step to take and provides evidence that the inclusion of ethical considerations is a must within accounting education in order to create effective and ethically mature accountants. Failure however exists with the inadequacy in addressing the fundamental problem surrounding the lack of integration existing between the technical and the ethical sides of accounting.

Another key issue that is hindering the inclusion of ethics in accounting curricula and also preventing the development of social accounting education methods is the lack of objective resources that accounting lectures and educators are able to devote to including ethics in their accounting courses (Frank et al, 2010, p. 132). As the teaching of ethics do not form a necessary requirement in most accounting courses, most institutions fail to have professors dedicated to teaching this particular area, leading to variances in teaching on a course by course basis. Despite the vast array of illustrative material that is available for professors who wish for the inclusion of ethics within their courses, the lack of uniformity makes it harder for the profession as a whole to develop a certain level of ethical standards. This arguably creates an almost circular problem in which the lack of ethical awareness amongst accounting graduates hinders the development of sufficient momentum to agree in what ethical topics and considerations should be integrated throughout the curriculum.

Indeed, Jennings (2004, p. 7) argues that the move towards social accounting is the only method of providing the ethical maturity and awareness required to prevent against the recurrence of the corporate scandals witnessed. This is based upon the claim that without a strong ethical education, both accountants and auditors will be unwilling to challenge inaccuracies in reporting decisions and unfair interpretations of companies. Jennings (2004, p.7) furthers this by suggesting that there is no need for any greater delay to exist, given the sufficient volumes of material on social accounting that could be utilised for the creation of social accounting training courses. As discussed above, as soon as such courses become implemented, they will become self reinforcing as fresh graduates entering the workplace will not only support their spread but will also become demonstrations of their effectiveness. It may therefore be inferred that what is required is for a standard setting body, government or legislative authority to make a move towards social accounting education. Once such a move has been made, the concept will gather momentum and will consequently become the new accounting standard.

In conclusion, the evidence listed clearly supports the argument provided by Gray et al. (1994) in regards to the links between accounting education and the ethical maturity possessed by accountants. This link has been clearly demonstrated through the three separate models and theories identified: Rest's (1979 p. 18) model on moral and ethical development; Pincoffs (1986) work on virtue theory and Buchan's (2005) discussion implementing the theory of planned behaviour. All of these particular approaches lead to the indication that accountants must develop their level of ethical maturity in order to be successful, with full ethical maturity only occurring when ethical concepts are included within the accounting curriculum. Unfortunately however, the literature also highlights that the ongoing "professionalisation" that is occurring within accounting combined with the quest for neutral representations of economic reality are preventing the inclusion of ethics within accounting education. Furthermore, this adds to the risk of accounting crisis. It appears that social accounting is a highly relevant method when it comes to raising the level of ethical awareness and could consequently solve many of the problems that are associated with the lack of ethical maturity amongst accountants. In addition to this, the self reinforcing nature of social accounting education could help it to spread very quickly once it has been formally introduced. Unfortunately however, in spite of the growing level of demand by academics and practitioners, there are still little or no signs of any attempts to adopt social accounting, nor of any significant attempts to include ethical considerations in formal accounting curricula.

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