Teaching ethics has become more important in the wake of the growing number of corporate failures.  
 
Story Melissa Wilkinson 
 
In the past, ethics education was typically treated as an add-on to the final chapters of a heavy going compliance module. Students perceived it as dry, dusty and difficult to navigate. However, it is now receiving significant attention as the accounting profession fights to regain the public’s trust after a series of high-profile corporate collapses. While it is not the only answer to restoring the profession’s standing in the community, increased emphasis on equipping professionals with practical ethical decision-making tools is a step in the right direction. 
 
Ethics And The Public Interest 
As professionals in society, Chartered Accountants take on a number of extra ethical responsibilities. They are traditionally regarded as the gatekeepers of truth in the professional world and are perceived to perform a very valuable function. In addition to providing technical expertise, Chartered 
Accountants have an obligation to the community to provide objectivity, integrity, trust and, most importantly, independence.  
 
They are placed in a position of trust by the society they serve, even if it comes at a personal cost. This notion of public interest is critical because it is what differentiates public accounting as a profession from a typical business occupation. 
 
Understanding what this concept means and knowing how to perform one’s duties while serving the public interest is fundamental to the accounting profession. The unfortunate part is that no system or regulation can provide a definitive or uncontroversial answer to ethical dilemmas. It is ultimately up to the individual to take responsibility for choosing the right path. While there has been much debate by accounting bodies about the definition of public interest, it broadly means the collective well-being of the community and institutions that members serve. 
 
The International Federation of Accountants identified a number of stakeholders including clients, credit providers, governments, employers, employees, investors, the business and financial community and others who rely on the objectivity and integrity of professional accountants to maintain the orderly functioning of commerce. The bottom line is that the public interest takes precedence where there is a conflict of interest. 
 
This means that every day accountants are under pressure to juggle the frequently competing demands of serving the community, meeting the needs of their clients and satisfying their own financial imperatives. Ethical dilemmas are not just about trust, honesty and dishonesty. They are often far more complex and messy. 
 
While rules and regulations provide a useful framework for black-and-white issues, they don’t immediately solve complex ethical issues. In fact, a number of industry participants believe that the tighter regulation introduced in the wake of Enron has been a bad thing for the sector. Dr Simon Longstaff, executive director of the St James Ethics Centre, says that increased forms of regulation and surveillance all work at some level to diminish the requirement for professional judgment. “The old test of something being true and fair actually required greater judgment due to the vagueness of the terms. Under a tighter regulatory environment, the burden of having to make our own decisions has been lifted. In a sense, we have become less responsible the more we rely on government regulation. I believe that the ethical heart of a profession can come under threat if its members do not regularly exercise judgment as a skill. 
 
“Ethics is simply about answering one fundamental question, ‘what ought one to do?’. One of the worst things that can happen is if professionals start to say ‘that’s just the way we do things around here’.” Feedback from a forum on ethics held by the Institute in 2006 confirmed the negative impact of regulation on ethical behaviour. One delegate was reported to have said, “one thing I have noticed over my career is it is easier to justify something you know deep down below is not right…the replacement of the Corporations Law by more prescriptive regulation has actually helped people lower their ethical standards.” 
 
The tighter compliance and regulatory environment has also meant that many firms are finding it difficult to attract candidates who appear to be put off by the volume of new laws. 
 
Solving Ethical Dilemmas 
Ethical dilemmas regularly come into playing a fast-paced business environment and accountants are under pressure to maintain independence, confidentiality and have the ethical courage to do what is right. This can be particularly tricky in the financial community, when unethical behaviour is often rewarded in the short term – especially during the reporting season. 
 
Other common ethical dilemmas for accountants crop up in audit situations where the client naturally wants to be presented in the best light. One accountant was reported to be under pressure from his CEO to massage financial reports so that an initial public offering could get off the ground and inject money into the business. 
 
The accountant had recently taken on a large mortgage and was forced to consider the impact on each stakeholder in this scenario: the client, the shareholders, his firm, his own position and the interests of the community. If the accountant refused to play ball, then the float would not proceed, the employees would probably lose their jobs, the firm would lose the client and the accountant would possibly lose his job. While codes of conduct and codes of ethics are useful frameworks to guide accountants during these situations, they cannot act in lieu of a conscience. If an accountant has not fully grasped the values of his profession, then formal codes will not cure cases of ethical blindness, recklessness or negligence. 
 
The Role Of Education  
The chair of the International Accounting Education Standards Board, Henry Saville, says that the accounting profession’s ability to meet its public interest responsibilities rests largely on each professional’s values, ethics and attitude. 
 
As a result, the profession is beefing up its ethics training so that its members are equipped with the necessary skills to make tough ethical decisions, particularly those which could negatively impact their own careers. 
 
According to a discussion paper, Values, Codes of Ethics and the Law prepared by Professor Jack Flanagan from the University of Notre Dame, there are three key aspects of preparing professionals for work in society: thinking like a professional (training the head), performing like a professional(training the hand), and acting with professional integrity (training the heart). The Institute has been working closely with the Australian business community to revamp its ethics training after candidates generally failed to connect with the module. Sheena Frenkel, general manager for the Chartered Accountants Program and Admissions at the Institute, says that although ethics has always been part of the foundation year of the Chartered Accountants Program, candidates were too inexperienced to relate to it. 
 
“We found that candidates who were recent graduates were simply too junior and didn’t have enough work experience to really understand the ethics module. The results of the training weren’t coming through in the workplace. As a result, we undertook a six-month review of the program and redesigned the ethics component to make it more relevant and engaging for candidates.” 
 
The revamped ethics and business application (EBA) module was launched in February this year and so far it has been well received. By the end of the year, approximately 1500 people would have completed it. Ethics now plays a much more dominant role in the entire program. EBA is now the final module and is only undertaken by candidates who are in the final year of the three-year practical experience program. EBA focuses on ethics and corporate governance and is designed to equip candidates with the skills to identify and evaluate ethical situations and draw on values, principles and strategies to make informed judgments. 
 
Taken over four months and equivalent to 140 hours, the module has been re-jigged to consolidate and integrate the learning from the previous four technical modules. These include audit and assurance, financial accounting and reporting, management accounting and analysis and taxation. Candidates are required to analyse information from case studies, identify issues, interpret data and make decisions. This change in the program can only be good news for the profession. According to the St James Ethics Centre, anecdotal research suggests that younger people are particularly cynical about the prospects of success through ethical means. 
 
Formal professional training will certainly help address these kinds of perceptions and equip young Chartered Accountants with a practical ethical toolkit to act in the best interests of the community. However, it is not the only answer. 
 
Accounting practices and corporations also have a responsibility to embed ethical values into the culture and core business processes of their organisations. Employees will quickly acknowledge that unless the senior leadership team is walking the talk, no amount of formal or informal training will stick. As one accountant put it: “It’s not regulation, but an ethical culture that safeguards against bad behaviour.” 
 
Bill Edge, lead partner, Risk and Quality Group at PricewaterhouseCoopers, says that the ultimate success or failure of an organisation’s code of conduct and business ethics program rests upon the values and culture created by the board or directors and the extent to which it is embraced by its people. 
 
“Ultimately, the responsibility for encouraging ethical behaviour comes back to firms, not the industry body. Firms are more familiar with the day-to-day issues that accountants face. Industry bodies only seem to find out after the event. 
 
“We do lots of training on ethics and business conduct and have also set up a whistleblowers hotline so that staff can report circumstances that come to their attention. These might be internal people issues or client issues,” says Edge. 
 
The Role Of The Industry Body 
Simon Longstaff believes that a profession’s industry body has a role to play in supporting its members to wade through the ethical landscape. He says most professions are reasonably good at disciplining their members but are not good at providing institutional support. 
 
“I think it would be a glorious day if the accounting profession were to stand behind one of their members who has acted with moral courage during an ethical dilemma such as being bullied by a powerful client. If a profession can demonstrate that it is guided by strong ethical commitments, it is a good way to build some social capital around its brand. 
 
“A profession needs to have a robust sense of identity so that its members can withstand any forms of inducement. It also needs to be credible to its own members and have the internal strength to apply rules that even its own members might find challenging. 
 
“I believe that ethics education needs to be taken out of the ghetto of compliance. Unfortunately, these are usually linked together. It’s more important to equip people to make better decisions so they can be really competent in thinking about ethical questions,” says Longstaff. 
 
Lindsay Maxsted, CEO of KPMG, agrees. “There needs to be a constant reminder that being a member of a profession is different. We have obligations over and above our clients. We have to serve the public interest and I think we should do more to remind the more established members of the profession. It’s easy to forget the training. That’s why there’s scope for more continuing education and making sure that the good stories get out to members.”