Integrity: It’s Much More Than Just Lip Service

By Suvro C.K. Banerjee, Quality Assurance Manager, Ethics

How much of a role does ethics play in today’s business? It is tempting to ask this question in light of the major accounting frauds and financial restatements of the last several years. While we may never know exactly what the perpetrators of these scandals were thinking when they performed their actions, it does bring to mind a related and equally important question: Is anyone teaching or learning ethics today?

Attendees of the Society’s Anti-Fraud Conference recently received some insight into this subject. Keynote speaker Frank W. Abagnale, a renowned law enforcement consultant and reformed con artist who was the subject of the movie Catch Me If You Can, believes we live in an extremely unethical time. He pointed out that of his three college-educated sons, only one was ever required to take an ethics course, and that was only at the graduate level when he attended law school.

“We live in unethical times,” Abagnale said. “Ethics are not taught in the home, the school or the college system.”

David Callahan, Ph.D., author of The Cheating Culture, stated in his book that cheating has become routine in our culture; and that given a choice between integrity and financial security, most people will chose the latter. Callahan also noted that many students have a skewed understanding of integrity, citing a study that found that many high school students who have cheated in the past still perceive themselves as honest individuals.

If there is any merit to these claims, then they have serious ramifications for CPAs. Our success depends on our reputations. No matter the level of our technical proficiency, it’s the integrity we uphold that our clients seek first and foremost. Auditors have been referred to over the years as trusted professionals, but this title, as we have learned, is one which we must continually earn and re-affirm through our daily activities. It is not enough to tell the world that our work is governed by standards. Ethical behavior must be embraced by the members of our profession routinely and always.

One way to attain this standard of behavior is through a firm-wide “Code of Conduct” that emphasizes integrity as the guiding principal for all actions. Such is the case with the Society’s own Code of Conduct, Rule 102, “Integrity and Objectivity.” It reads: “In the performance of any professional service, a member shall maintain objectivity and integrity, shall be free of conflicts of interest, and shall not knowingly misrepresent facts or subordinate his or her judgment to others.” Members who are found to have violated this rule can face disciplinary action from the Society, including suspension of membership or expulsion.

But a Code of Conduct must be regularly adhered to in order to be effective. Chances are we have all heard at least one horror story about partners who created unrealistic budgets, or managers who altered workpapers, or staff who signed off on workpapers without actually performing the work called for in the audit program. All of these events have one common denominator: lack of integrity. Some firms may adopt a “go-along-to-get-along” attitude and decide that if other firms are cutting professional corners, they can too. But recent events have shown that the consequences of unethical behavior can be severe.

With studies showing that the number of students pursuing degrees in accounting is on the rise, we in the profession have an opportunity to instill a sense of integrity within those who will be our future peers. We must be careful, however, to make sure the correct message is being given.

In an article published in the May 2005 Issues in Accounting Education, Professor Sandra Waddock notes that a 1996 task force on faculty leadership launched by the Association to Advance Collegiate Schools of Business International (AACSB) found that business faculty at all levels lack sufficient real-world contact and do not possess a good enough understanding of the global or technological environment to sufficiently provide students with the tools they need to respond appropriately to the ethical issues they will face in the business world. Thus, the task of teaching ethics also falls to those of us already working in the field.

If we, as trusted professionals, do not conduct ourselves with integrity, then our licenses will become meaningless because our reputations will be severely compromised. Of the problems facing our profession today, this is one well within our power to resolve. The key is to remember what Professor Waddock calls our “public regulatory responsibility to help provide financial statement integrity,” and to adopt a mindset that, Callahan says, defined the 1940s: No one should go into business to win the lottery.

To remain trusted professionals, we must choose integrity over financial reward. Integrity is priceless.