Understanding Accounting Ethics

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Understanding Accounting Ethics

• Chapter 2
• Fundamentals of Accounting Ethics

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Ethics is practical

• "Our task here is not to know what goodness is,
  but to become good.
• Aristotle
• A practical study is different from a speculative
  one.
• Practical studies aim at knowledge that can be
  used to guide action.
• Whereas, a speculative study desires to know
  something for its own sake.

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Three Stages of a Practical Study

• Find out what you need to learn.
• Learn it.
• Use what was learned to guide your action.

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Two Consequences

• It is assumed that you, the learners, already
  desire to be ethical people.
• The Methods of Ethics approach is rejected.

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Criticisms of Methods of Ethics

• Does not work.
• Encourages ethical relativism.
• Encourages using ethics as a rationalization.
  
• Misconceives what theorizing about ethics means.

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The methods of ethics approach

• Relatively late in the history of thought (late
  1800s).
• Distinguish
• Utilitarianismthe right action of those
  available to an agent is that which leads to the
  greatest balance of good over evil.
• Deontologythe right action is that which
  conforms to a maxim which one can consistently
  will to serve as a general law for everyone.
• Intuitionismwe can rationally see (intuit)
  axioms of morality (roughly, the Ten
  Commandments).

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Problems with utilitarianism

• It justifies bad social structures.
• It does not distinguish between intention and
  foresight.
• It does not consider 'backward-looking'
  justifications.
• It is inadequate in dealing with interior acts.

John Stuart Mill
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Problems with Deontology

• The maxim of an action is indeterminate.
• It tells us only how to treat strangers, not
  friends.
• Its complete formality lacks necessary substance.

Immanuel Kant
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Problems with Intuitionism

• Ethical 'intuition' is a vague concept.
• No obligation comes from simply knowing
  something.
• It does not allow for rigor.
• It does not explain cultural variations in
  ethics.
• It seems to beg the question.

Plato
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Protreptic to Virtue

• Protreptic-
• An exhortation to turn away from things that do
  not deserve our attention, and to turn toward
  things that do.

Exhortation Turn away from false goods toward
the best good.

• False Goods
• Money
• Pleasure
• Prestige
• Power

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The Falseness of False Goods

• Money
• Its for the sake of something else.
• It has value only when it is spent.
• It is sought for the sake of self-sufficiency,
  but it creates as many needs as it fulfills.
• If sought as an end it itself, it is expansive
  and self-destructive.
• Its acquisition and preservation depends upon
  chance.

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The Falseness of False Goods

• Pleasure
• To take pleasure in something depends upon a
  prior desire for something besides the pleasure
  (it is a side-effect).
• Pleasure is a state of oneself, and ones highest
  aim cannot be some subjective condition of
  oneself.
• A life of pleasure without intelligence (a happy
  pig) would be undesirable.
• A life in the experience machine (Nozick) would
  be undesirable.

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The Falseness of False Goods

• Prestige
• It is ambiguous.
• Is only desirable if one is already good.
• Makes bad people anxious, dissatisfied, and
  unhappy.
• Cannot be used well if not founded upon
  competence and excellence.

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The Falseness of False Goods

• Power
• Power is desirable only if unbounded, but it is
  always bounded.
• People with power are paradoxically extremely
  vulnerable.
• True power is the ability to achieve what is
  really good, so if you lack knowledge of this,
  you fail to have power.

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Virtuous action can be the highest good

• Its something that is intelligibly sought for
  its own sake.
• It is inherently pleasant.
• It requires knowledge.
• It does not create new needs (self-sufficient).
• Its satisfaction is lasting (noble).

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General Nature of Virtue

• Distinctive task--
• The task which either can be done only by this
  thing or can be done best by this thing.

To have a virtue is to do your distinctive task
well.
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Important Ideas about Virtue

• The word comes from Latin word for 'man' (vir).
• A Virtue is relative to its distinctive task.
• It is something long lasting and inherent.
• A thing is called 'good' by having its virtue(s).
  
• A thing is most itself when it acts in accordance
  with its distinctive virtue(s).

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The Virtue of Man

• The virtue of man is related to his distinctive
  task, which has to do with reasonability and
  truth.

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But there are different kinds of truth

• Speculative -
• Our mind conforming to reality.
• Practical -
• Our making reality conform to our mind.
• Thus, there are two different
• kinds of human virtues
• intellectual virtues
• virtues of character

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Intellectual virtues

• Traits which enables us to know that which we
  think we should know.
• Classically
• Wisdom
• They attain speculative truth.
• Acquired by instruction, reflection, experience.

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Virtues of character.

• Traits which enables us to carry out well what we
  think we should do.
• Well easily, promptly, thoroughly.
• Classically
• Courage
• Self-Mastery
• Justice
• They attain practical truth.
• Acquired by practice in small and analogous
  things.

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The Four Cardinal Virtues

• Wisdom - (Speculative)
• Justice - (Practical)
• Courage - (Practical)
• Self-Mastery - (Practical)

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But Accounting is a profession of humans

• Therefore, the virtues of an accountant should be
  both according to his distinctive task and
  analogous to the four human virtues.

Luca Pacioli
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The Accountants Cardinal Virtue Analogues

• Cardinal Virtues
• Wisdom
• Justice
• Courage
• Self-Mastery

• Accountants Analogues
• Technical Mastery and commitment to some things
  over others.
• Lively appreciation of duties
• Due-Diligence
• Resistance to Greed.

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But how do we Acquire them?

• It has been shown that
• Ethics is Necessary for Accounting.
• What the Virtues of an Accountant are.
• So, how does one get these virtues?