Understanding Accounting Ethics

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Understanding Accounting Ethics

• Chapter 7
• Can Accounting Ethics Be Taught?

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Can Virtue Be Taught?

• Virtue is important, but we are not born with it.
  
• How, then, can we acquire it? 

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Socrates  469-399 BC
Plato 428-348 BC

• Aristotle 384-322 BC

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Platos Question in the Meno

• Can you tell me, Socrates, whether virtue is
  acquired by teaching or by practice or if
  neither by teaching nor practice, then whether it
  comes to man by nature, or in what other way?

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Five Reasons Why People Think Virtue Cannot Be
Taught

• You cant become ethical by taking a class!
• Sometimes the best (smartest) students are the
  most unethical persons.
• A persons character is fixed already by the time
  he or she is studying to become an accountant. 
  Then its too late to teach ethics.
• People have freewill.  No matter how much you
  teach them about ethics, they are always free to
  act unethically. You cannot stop that.
• We already know what we should do.  (Who doesnt
  know that fraud is wrong?)  Thats not the hard
  thing.  But thats the only thing that can be
  taught.

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Five More Reasons

• Ultimately what we do is determined by
  non-rational motives.  Teaching cannot affect
  such things.
• You can only teach a theory of ethics.  But a
  theory of ethics only makes explicit what we
  already believe.  So nothing new can be taught
  about ethics.
• Everyone does what promotes his own interests. 
  That never changes.  You cant change that by
  trying to teach ethics.  (You need to make it in
  someones interests to act ethically.)
• If virtue could be taught, then there would be
  recognized experts in ethics.  But there are no
  such experts.
• If virtue could be taught, then people would
  succeed in imparting it to their children.  But
  often the children of ethics teachers are not
  ethical.

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Three Preliminary Replies

• First Reply
• Accounting can be taught.
• But accounting is inherently ethical (as we have
  seen). 
• Thus, accounting ethics can be taught.

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Second Reply

• To be ethical at an accountant is to do what an
  accountant does, and to do it well.
• What an accountant does can be taught.
• If something can be taught, then doing it well
  can be taught.
• Thus, doing well what an accountant does can be
  taught.
• Thus, being an ethical accountant can be taught.

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Third Reply

• Praise and blame, rewards and punishments, would
  be pointless unless they influenced behavior.
• These things are not pointless.
• Thus, these things can influence behavior.
• But to influence behavior for the good simply is
  to teach ethics.
• Thus, ethics can be taught.

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Four factors involved in acting well

• 1. Understanding.
• 2. Idealism.
• 3. Character.
• 4. Culture.

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Understanding

• A familiarity with, and understanding of, the
  principles of accounting and the rules which are
  meant to express and safeguard these
  principlesin particular, an understanding of how
  the rules depend upon the principles.

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Idealism

• The aim or resolve, which consists in placing
  the ideals of the profession of accounting over
  ones own interests (which we identified,
  roughly, as integrity).

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Character

• Having the virtues of character.

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Culture

• A workplace in which it is easy to do what is
  ethical.

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Understanding Can Be Taught

• Case studies
• Instruction
• Discussion

What else?
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Idealism Can Be Taught

• Stories
• Anecdotes
• Personal Example

What else?
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Character Can Be Taught

• Acting well in small things.
• Acting well in first things.
• Avoiding the first small steps of corruption.
• Avoiding circumstances in which one can be led
  astray.
• Practicing habits contrary to your faults and
  weaknesses.

What else?
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Culture Can Be Taught

• The tone at the top.
• Enforced code of ethics.
• Good incentive structure.
• Weeding out bad apples.

What else?
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Why the Apparent Difficulty?

• Most problems arise from a failure to appreciate
  the distinction between
• Intellectual Virtue
• Virtue of Character

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• For instance
• The 1st Objection-
• You cant become ethical by taking a class!
• This is true about the virtues of character, but
  it is not true (entirely) of intellectual virtue.
  
• Also, the 2nd Objection-
• Being good and being smart are different.
• There are two kinds of being smart.
• The second kind involves being good.

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Answers to the Other Objections

• 3rd- Our upbringing determines our character.
• Ans Character becomes settled, but not
  unchangeable.
• 4th- There is freedom of action.
• Ans Freedom does not mean unpredictability.

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Continued

• 5th- People often do what they know they should
  not do.
• Ans This one, like the 1st and 2nd, confuses
  intellectual virtue with the whole of virtue.
• 6th- Whether we act well or not depends upon our
  likes and dislikes.
• Ans Yes, but our likes and dislikes are
  malleable through repeated action.

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Continued

• 7th- Teaching ethics only makes what is implicit
  explicit, therefore one cannot teach ethics to
  someone who isnt good already.
• Ans Most people are good already to a great
  extent.
• 8th- Everyone is self-interested at the deepest
  level.
• Ans It is clear from observation that people
  can act altruistically and therefore not always
  selfishly.

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Continued

• 9th- There should be recognized teachers of
  virtue, if it can be taught.
• Ans But there are teachers, in fact everyone
  can be a teacher of virtue insofar as he
  recognizes vice in others.
• 10th- Virtuous men should have virtuous
  children, but they often dont.
• Ans This objection equates having virtue with
  having the ability (virtue) to teach it.

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Two Analogies

• First analogy
• Can accounting ethics be taught?
• This is analogous to
• Can medical ethics be taught?

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Second Analogy

• Can accounting ethics be taught?
• This is analogous to
• Can society succeed in getting tough about
  drunk driving?