‘It’s hard-skills that get you hired, and soft-skills that get you fired’. This saying is highly fitting when discussing ethics in accounting courses. Most students start their education journey believing that technical skills are most important for a long and successful career. However, it’s the non-technical skills that tend to quickly overshadow the technical – “none more important than ethics” contends Dr James Hazelton.
Embedding ethics into finance and accounting courses is crucial – it’s a key attribute we hope to see in our graduates. Students are taught technical skills and learn that accounting is a mechanism that supports business decision-making through the expression of financial data. These can be systematically taught. The dynamics of ethics lies in what’s hidden behind the numbers, as well as the choices made in conduct and integrity. This is much harder to teach.
“Ethical challenges are often quite difficult to recognise, let alone manage,” explains Dr James Hazelton, Associate Professor at the Macquarie Business School and member of the author team for Financial Reporting, 4th Edition. He continues, “Therefore it’s really important to have some kind of structure and framework to be able to respond to those challenges in a systematic and justifiable way.” This is what we need to impart on students.
Why is ethics so important?
Graduates are most vulnerable at the beginning of their career. “This is when graduates must be most vigilant,” says Dr Hazelton, “because it can be a slippery slope. If there is some level of corruption in the graduate’s workplace, once they have fallen into unethical practices, it’s very hard to get out.” When new graduates are faced with ethical challenges, they need to maintain their autonomy and willpower. We need to help students find the capacity to resist these external influences and follow their own moral compass.
In the business environment within which accountants work, decisions are most often being made to maximise profits. When accountants provide information within this environment there may be pressure to exercise professional judgement or discretion to produce the most favourable outcomes for a company.
To navigate this, students need tools in their soft-skill set and a broader awareness of a changing landscape of higher standards of integrity and regulatory compliance. Therefore, students need to develop a strong awareness and understanding of the role of ethics before they enter the profession. To help educators, Wiley’s suite of accounting titles such as Loftus’ Financial Reporting, 4th Edition have enhanced the coverage of ethical practices and decision making throughout the texts. Dr Hazelton explains,
“A financial calculation may tell you, for example, which decision will generate the most income according to a set of assumptions. But this cannot paint the whole picture.”
Dr Hazelton describes a scenario where a new grad accountant at a life insurance company is asked to review the following: is it more profitable to delay life insurance payments until the policy holder dies due to cost reductions in paying out to Estates? The assignment is a simple management accounting task – reviewing payment data.
But there is an ethical dimension to it. How should a student respond to this task? Is this line of enquiry consistent with the company’s code of conduct? If consulted, what would policyholders think? Are there hidden costs such as regulatory non-compliance or reputation? The accounting data may show profit results in black and white, but the ethical lens shows many shades of grey.
Approaches to teaching ethics in accounting
Teach in context
The more educators can teach ethics ‘along the way’ and integrate it with the content that’s being covered, the better. If ethics is taught in a stand-alone manner, the ethical dimension of topics being covered by educators in other weeks can be lost. Students also need a broader awareness of standards of integrity and regulatory compliance.
Use case studies and the experience of others
Educators can incorporate ethical questions as an addendum to technical questions in case studies. This is a way to knit the soft skills with the hard skills. It’s also beneficial to utilise the real-life experiences of colleagues who have industry experience and have seen ethical dilemmas in accounting first-hand.
Creative approaches
Educators can think creatively about how students examine ethics. Role-play; devil’s advocate; even the use of pop-culture. Dr Hazelton describes one innovative approach, “One academic took their students to prison and set up interviews with white-collar criminals who had transgressed in their ethical actions. There is nothing more real-world than this!”
Explore the ethical paradigms in making decisions covered in the textbook
Dr Hazelton has provided a straightforward explanation of four ethical paradigms in the chapter he authored in Financial Reporting. He says, “If students can understand different ethical perspectives on a dilemma or challenging decision, they can bring those perspectives to bear and determine the best way forward to get an appropriate outcome.”
Equipping our students with tools they need
Ultimately, ethics for our accounting students shouldn’t just focus on the integrity of data, numbers, and reporting systems. It is also about their conduct more broadly. Dr Hazelton recognises the challenges students may face: “The Code of Conduct for accountants says that accountants fundamentally exist to act in the public’s interest. However, the reality is that accountants are paid by their clients, not by the public. It can become a challenging road to navigate.”
This is where an ethical mindset is needed to consider right against wrong; permissible versus unacceptable; fair versus unjust. This is also the mindset that helps a good accountant sleep well at night – something that experienced company accountants can attest to, and graduates can look forward to.
About James Hazelton:
Dr James Hazelton, is an author on the fourth edition of Loftus’ Financial Reporting. He joined Macquarie University in 2001. Prior to his academic career, James was with Price Waterhouse Coopers, where he worked in audit and risk management consulting in Sydney, London and New York. James specialises in business ethics and sustainability and has consulted, researched and taught extensively in these areas.
More Information
We hope this post have provided you with some new insights about accounting and ethics. If you would like to know more about Financial Reporting, 4th Edition or any of Wiley’s titles, please reach out to your local Wiley Consultant or request a desk copy today.
