January 2003

Ethically Speaking: Members in Industry Event Heats Up During Snowstorm

By Marietta E. Gentles

New York State Society of CPAs members last month braved inclement weather to participate in a spirited discussion on ethics and the profession at one of the year’s most successful evening technical sessions geared toward members in industry.

Despite a blinding snowstorm, “Ethics in the Business World” drew more than 40 members to the Society’s headquarters in Manhattan on Dec. 5. Eighty-five people had signed up and more were expected at the door, but the bad weather prevented many others from attending. Still, given the reaction of those who were able to participate, an encore presentation is planned for early 2003.

The session, sponsored by the NYSS-CPA’s Chief Financial Officers Committee, outlined professional ethics and its enforcement and how the rules specifically apply to members in industry. Guest speakers discussed legal and public and private regulation, including a number of scenarios that presented possible ethical conflicts.

“We know that there are 4,000 CFOs and controllers in the New York State Society of CPAs,” Committee Chairman Mark Ellis said. “We believe that there is a very large group of industry people who can benefit from getting involved in the Society. Our objective in having the ethics event was as much about getting to see how many people can come out and knowledge network as it was about the topic.”

Guest speaker Robert H. Colson, CPA Journal editor-in-chief, led the session by mapping out the groups of professional standards: legislation, rules, and professional ethics. The New York State Law of Professions and the recently passed Sarbanes-Oxley Act of 2002 were among the legislation reviewed. Government agencies such as the Securities and Exchange Commission, General Accounting Office, and Internal Revenue Service, as well as others, were discussed with respect to their rulemaking authority. Professional organizations such as the NYSSCPA and American Institute of CPAs have an ethics code that their members voluntarily agree to, to help protect the integrity of the accounting profession.

With professional standards being enforced either by the government or organizations, the accounting industry abides by a number of regulations to maintain a high standard of honesty and public trust. However, there is a clear distinction between voluntary behavior and behavior imposed by the law. Voluntary professional standards cannot be enforced by the government, Colson noted. This issue prompted a chain of questions by the attendees, who asked why the government does not get involved if it would help prevent dishonesty in the profession. Colson responded by pointing out that voluntary professional codes preempt legislation over professional behavior as long as the profession self-regulates and disciplines. However, the government can pass laws or adapt regulations to enforce a desired behavior if professionals are unable to self-regulate.

After Colson’s presentation, H. Stephen Grace Jr., president of H.S. Grace & Company, Inc. and vice chairman of Financial Executives International, examined ethics codes for CPAs in industry. He addressed common ethical issues that members in industry face, as attendees posed questions regarding their responsibilities as CPAs who do not work in public practice. Participants debated on issues including whether or not a member in industry should register with the New York State Education Department, sign a tax return as a CPA or take a continuing professional education course in taxation.

Recent corporate accounting scandals have put the accounting profession on watch since some now question the actions of CPAs. Now more than ever, the focus is on checks and balances and finding a better way to enforce the code of ethics, according to Grace, who further examined ethics by looking at the history of governance and human behavior, citing quotes from Aristotle, Taoism, Mother Teresa and Moses.

“We better be aware that there will be breakdowns in human behaviors in all sectors, including spiritual, governmental and corporations,” Grace said.

Grace went over a number of approaches that would set the framework for a better system of checks and balances. Some of his suggestions included making sure that corporate boards of directors are aware of what they should monitor and are insistent that management focus on ethical performance. Grace concluded his presentation by encouraging the CPAs to routinely consider the ethical component of their jobs so that the profession as a whole is even more inclined to uphold the highest ethical standards.

“I found the discussion very helpful and informative, and look forward to future events from the CFO Committee. I was quite surprised by the large turnout despite the weather,” said attendee Alan Goggins, of Barnes Richardson & Colburn.

The session went past the allotted hours as attendees, seemingly unconcerned by the time, had a number of questions for both Colson and Grace. In fact, many were eager to continue their conversations and didn’t let the bad weather stop them from proceeding to the cocktail party also held at the Society after the event.

“Although the weather was bad, almost everybody stayed and talked for hours. We plan to repeat the session and also see if we can hold it upstate sometime in January and February,” Ellis said. “I think that people definitely left the event really knowing what’s expected of them and that has never really been covered by the state, and if anything we urge the members in industry who didn’t attend to go to the next event.”