There is a Difference between Knowing What to do and Doing It

As a professor who teaches ethics to accounting students, I’m always interested in learning whether accounting firms view ethics differently than professional staff. It’s important for me to know this because of the advice I provide to my students about socialization in the accounting profession. For example, if the firm has a relatively low set of ethical standards and the professionals’ is high, then conflicts are bound to occur when ethical dilemmas exist. The professional wants to do the right thing – i.e., report financial wrongdoing – while the firms’ expectations in a particular matter may be to let it go. The firm may reason that the situation is one where an exception to ethical standards should be made, a situational ethics approach to ethical decision-making. The problem here is unethical behavior accepted in one situation can create a culture where it is accepted in other situations. An accounting professional with high ethical standards may get disillusioned with the firm and look for a job elsewhere. What’s worse is that the professional may be fired for not being a ‘team player.’

As I did an Internet search for research on the dissonance between individual accounting professionals’ ethics and firm ethics, I came across a study by three colleagues, Amy Hageman, Donna, Bobek and Robin Radtke, that addresses whether accounting firms view ethics differently than professional staff. The study suggests that if an accounting firm wants to maintain a strong ethical environment from top to bottom, the firm's environment must be viewed the same from bottom to top.

"The Influence of Roles and Organizational Fit on Accounting Professionals' Perceptions of Their Firms' Ethical Environment" will be published in the Journal of Business Ethics' special issue on accounting ethics and tone at the top. It is co-authored by Kansas State University's Amy Hageman, assistant professor of accounting; Donna Bobek, University of Central Florida; and Robin Radtke, Clemson University.

Their paper is one of the first research studies to empirically test potential reasons why firm leaders and non-leaders—or professional staff—can have contrasting perspectives of the firm's ethical environment. They tested their research using a questionnaire that was completed by 139 accounting professionals employed at certified public accounting firms.

In previous studies, Hageman and her fellow researchers demonstrated that leaders and non-leaders at public accounting firms have different perceptions of their firms. They found that while most accounting professionals perceive the ethical environment of their firm as quite strong, the firms' leaders—partners, principals and directors—perceive the ethical environment as even stronger than the other staffers.

"We found that when non-leader accounting professionals believe they participate in shaping and maintaining the ethical environment and/or have a strong organizational fit with the accounting firm, they are more likely to view the ethical environment as strong and to view it similarly to firm leaders," Hageman said.

The message seems to be that a professional accounting firm should be all-inclusive in setting ethical policies and involving professional staff in the process. The authors believe that if ethics education were absent from the college curriculum, it could severely impact the ability of these non-leaders to be aware of the importance of ethics in accounting and business.

While I support the finding and certainly try to teach ethics to my accounting students to help them transition to a highly-ethical firm environment, I still wonder whether when push comes to shove the firms hold to their ethical standards or err on the side of making the client happy and accepting overly-aggressive accounting techniques that lead to materially misleading financial statements.

I’m also concerned that when we teach ethics to accounting students we miss the mark if we only focus on ethical decision-making and not the internal value system and principled behavior so essential to carrying out decisions in accordance with ethical standards. In other words, there is a difference between knowing what is the ethical thing to do and being able to do it by holding true to one’s values.

Blog posted by Steven Mintz, aka Ethics Sage, on January 28, 2014