Values and Ethics for CPAs in a Changing World

By J. Hall C. Thorp

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AUGUST 2005 - Enron, MCI-WorldCom, Tyco: these and many other familiar names have been tainted by allegations of ethical misconduct. CPAs are held to very high standards of ethics, and hear various definitions of values. What do personal values have to do with ethics? How do they affect accountancy? Values and ethics are often used synonymously and simultaneously, but what do they have in common, and how do they differ?

Values are core principles that define for individuals what are ideal personal standards. Values are in hierarchies that are unique to each individual and culture. As a result, values are personal standards that help people determine the relative value, worth, and importance of standards to their lives.

Because values have to do with ideals, we often develop values from something outside of ourselves. For example, religious standards or cultural ideals often define for individuals what a desirable state is. From such ideals, mankind has developed values to reconcile the variance between an ideal state and a current condition. Differing ideals explain why values are in unique hierarchies across various cultures.

The word “ethics” is derived from the ancient Greek “ethos,” meaning moral character. A related term, “mores,” from which the word “moral” is derived, means social guidelines. Ethics, however, is the implementation of what a group’s value system defines as good or bad, and the behavior necessary to fulfill ideal states. When an individual’s conduct is consistent with her group’s values, then she has acted ethically. Being ethical is not about acting out of one’s own values. The values of a group to which the individual belongs define whether she has acted ethically. As such, ethics arise out of societal values.

According to David Malloy, the fundamental question of what individuals require from themselves in ethical dilemmas is “What should I do?” Malloy further states, “While ethics tells us what we ought to do, it does not explain why we do it. Why we behave … is based upon what we value.”

Academic researcher Ronald Scott emphasizes that ethics is typically discussed in three areas of investigation: metaethics, normative ethics, and applied ethics. Each area has a unique perspective on ethical applications, and each discipline assumes that a consistent and fair application of authority is possible, and that an individual’s judgment is required. Scott provides a comparison of man versus machine by placing both in the midst of an ethical dilemma. The results reveal that robots, when placed in changing circumstances, can never be trained to act in an ethical manner. Even robots with artificial intelligence have no values.

Values and ethics are similar in that they complement each other. Because ethical behavior flows out of values, when a person’s ethical behavior is rewarded externally or by internal satisfaction, the values of that person are confirmed. Such confirmation further solidifies the value as a desired state, in turn further compounding the relative hierarchy of that particular value. Ethical behavior is then solidified as a given value’s hierarchical position is confirmed or elevated.

Lawrence Kohlberg’s research of values and ethics development proposes that values and ethics are developed from a person’s interaction with the environment. He further proposes that people continually construct their own interpretations of values because their interaction with a changing environment results in changes over time. This is an important thing for CPAs to remember: As they are exposed to a work environment, they must be aware that they are bringing in their value system, while simultaneously exposing themselves to a different, perhaps conflicting, value system.

Values and ethics are dissimilar in that ethics has to do with behavior and values have to do with beliefs. Ethics are public while values are private; ethics are seen by others, while values are only perceived by others based upon a person’s ethics. Values are the cause, while ethics are the effect. In this manner, values and ethics are very distinct from each other. A person’s ethical behavior may actually be in conflict with his values, creating what psychologists call cognitive dissonance. While this incongruence results in discomfort to the individual, others witnessing unethical behavior may conclude that the behavior is reflective of the person’s values.

Distinguishing between values and ethics is important for CPAs because merely trying to influence ethical behavior in others, without considering the importance of consistency between values and ethics, may produce results inconsistent with the cause. Eventually, values and ethics become aligned again, with values creating good or bad ethical behavior. Even when an individual’s unethical behavior stops, one must be careful to realize that the underlying values of the person may or may not have changed. If the underlying values have not changed, then the unethical behavior is likely to repeat itself.

Because values can change over time, and values provide the basis for ethical behavior, it is clear that achieving and sustaining ethical behavior can result only when consistency between values and ethics is developed. CPAs facing ethical dilemmas should be very aware of the important relationship between values and ethics, and strive for continual improvement.

J. Hall C. Thorp, a partner of Trinity Research, LLC, a working-capital consulting firm with offices in Raleigh and Rocky Mount, N.C., is also a doctoral student at Regent University, Virginia Beach, Va.




















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