INTRODUCTION

“Ethics” and “morals” are two terms about which there is ambiguity. Some scholars consider the terms to be synonymous. Others make a distinction that ethics pertains to right conduct vis-à-vis others, while morals pertains to one’s personal sense of right conduct; still others reverse that distinction. Philosophers tend to regard the distinction between “ethics” and “morals” to be that ethics pertains to a centuries-old conversation about how we decide what is good and bad, right and wrong, while morals is the content of good and bad, right and wrong. The perspective on “ethics” taken in this book is this latter sense; thus the title Companion to Accounting Ethics. The book’s purpose is not to be a handbook of accounting rights and wrongs but rather a collection of conversations employed by educators to assist students of accounting to become more attuned to accounting’s ethical aspects and to become more critical thinkers about the ethical complexities of the function of accounting in human society.

As a social science, accounting is the creation of people, for the purpose of accounting for transactions (generally monetary) between and among groups of people. Accounting does not exist without people, and its rules of the day are determined by people; it is mutable and wholly dependent on both the decisions made by people with economic power and acceptance of those decisions by those same people. Similarly, ethics are enacted by people, and the ethicality of an action is determined by the individual affected by the action, as well as by the collective societal acceptance or rejection of an action.

Accounting, because it is people driven, inherently has an ethical component. Every decision about how to account for a transaction at some point affects an individual, either directly or indirectly. For example, decisions about recording revenue affect those whose income is commission-based. Decisions about recording an expense affects taxes paid (and received by the government for the benefit of society). Our primary goal with this book is to call attention to the intersectionality of accounting and ethics and to encourage students and researchers to consider the ethical implications of accounting decisions.

The book contains a diversity of perspectives within which discussion of accountants’ and accounting’s ethical responsibilities may occur. We deliberately chose authors for their diverse perspectives on from where moral guidance for accounting may come. Each chapter stands on its own and represents the thinking of its authors. We divide the book into six sections representing various perspectives, for example, religious, practice area, etc. Within each section there are chapters that focus on specific elements within a perspective; for example, within the religious perspective we have chapters on Judaism, Islam, and Christianity.

We recognize that not all perspectives are included and not all that are included are complete. We view this book as a place to spur the conversation along and look forward to reading about advancements that come.

This section is devoted to providing a historical context for accounting ethics. In the first chapter, Professor Roberts provides a general history of the development of accounting ethics. As business became an academic discipline within universities, the ethical missteps of business and accounting became a subject of concern and a subject of study. She explains the course that history took to bring us to the current ethicality of accounting in the form of a code. Professor Baker follows up in Chapter 2 with the history of the accounting profession’s code of conduct. Rather than a code of ethics, as many professions have, the accounting profession has evolved a lengthy code of conduct. Baker chronicles the historical development of the current code of conduct and provides an analysis of the shortcomings of a code of conduct in guiding genuinely ethical behavior on the part of professional accountants. Chapter 3, written by Professor Fogarty, is a provocative essay about the lack of progress accounting has made in improving the ethicality of the practice. He attributes this lack of progress to the zeitgeist of the historical era in which we find ourselves – the period of “modernity.” Modernity has enticed accounting scholars to seek answers to ethical problems in accounting via practices of the social sciences to little avail. Fogarty argues that improving the ethicality of accounting practice requires discourses other than those provided by positive social science.

The basic accounting equations – Assets = Liabilities + Owners’ Equity and Net Income = Revenues − Expenses – reflect the predominant mode of ethical reasoning in Western capitalistic societies, which is utilitarianism. Accounting is a technology that assists in making the utilitarian calculations that provide the net “good.” Because accounting implicitly contains utilitarian ethical reasoning, accountants may remain desensitized to the fact that there are alternatives to a utilitarian calculus when thinking about accounting ethics. Part II of the book provides the reader with some prominent alternative perspectives on ethics. Professor Neri explains virtue ethics in Chapter 4. Accounting is a practice, and the primary aim of the practitioner is that of perfecting the practice. For any practice to strive toward more perfect practice necessitates that participants in that practice possess certain virtues, and through the continuous exercising of virtuous behaviors one can strive to perfect the practice. Neri explains how virtue ethics pertains to a practice like accounting. What are the virtues people who choose to practice accounting cultivate, in order to improve their practice? Neri addresses that question by suggesting what those virtues might be.

In Chapter 5, Professor Killian explains the ethical theory of the famous philosopher and sociologist Jurgen Habermas. Discourse ethics is based on Habermas’s theory of communicative action. Killian presents Habermas’s theory and then relates the theory to explain the capacity of people to reach ethical consensus. She then elaborates upon the relevance of discourse ethics for accounting, noting that stories are a central way for people to teach important lessons. Story-telling is central to a peoples’ understanding of their culture and their place in the world. In Chapter 6, Professor Reiter continues in this vein by explaining how important stories are for human understanding and particularly how the stories we tell as accountants affect our ethical understanding. Just as Aesop told stories with a moral, accountants tell stories about themselves, too, to help communicate what is good or not good behavior for an accountant. Professor Lehman, a prominent feminist scholar in accounting, writes the final chapter of Part II. Utilizing feminist theory and the research in accounting deploying feminist theory, Lehman illustrates how the seriousness of the problem of violence against women may be understated via the measures we use to “account” for it. Accounting has considerable power to shape society’s perceptions of things based on how we account for them. Lehman gives us a profound appreciation for this fact through her feminist analysis of “measuring” the violence done to women in our society.

Academic accounting literature written from a religious perspective is not often found in publications today. However, a consideration of religions, from which many people derive or attribute their ethics, is relevant to a compilation of accounting and ethics knowledge. In Part III, we focus on three major religious influences in the United States and Canada, recognizing that this is a very short list and provides a limited set of perspectives. In the Judaic tradition, Professors Fisher and Friedman present a value-driven approach to ethics rooted in the guiding principles of Judaism, as found in the Torah and Talmud. They provide examples of Talmudic stories that recount how individuals go beyond the law to act ethically, placing others’ interest above their own. They also explain the concept of lovingkindness, at the intersection of form and substance. In the next chapter, Professors Stuebs and Thornton explore accounting ethics from a Christian perspective, which places God at the center of aspirational human behavior. Accountability for behavior rests within a person’s heart, and people should be guided by service to God rather than fall to the temptations of human nature. Finally, Professors Al-Adeem, Curtis, and Murtaza present an Islamic understanding of accounting and ethics, providing examples from the Qur’an that relate to business ethics. They also explain the concepts of Riba, Zakat, and Hisba and link them to accounting-related ideas.

This section takes a discipline-specific approach similar to the structure of an undergraduate curriculum. In these chapters, experts in their fields focus on a particular aspect of accounting and relate how ethics is evident in that area. We begin with ethics in auditing, since auditors are the regulated members of our profession and must abide by a code of professional conduct to maintain their government-issued licenses. Professors Papachristou and Bekiaris make the case that an auditor’s obligation to the public welfare interest requires them to be transparent and objective. They provide a listing of auditor independence research that academics can rely on to gain an understanding of what we have learned about this concept.

In their discussion of management accounting, Professors Olczak and Roberts point out the shortcomings of management accounting ethics research, lamenting its narrow focus on economic outcomes rather than on ethical implications. They argue that management accounting holds much potential for enacting ethical practices and for examining how decisions made by management accountants affect individuals rather than the company alone. They apply a six-question framework to analyze existing research with respect to topics, research paradigms, theories, viewpoints, and ethical perspectives, concluding with an exploration of ways to increase the ethical focus on management research.

Professor Bloom’s chapter examines efforts to measure and report on an organization’s efforts toward sustainability, an area that continues to challenge conventional accounting standard setters. He evaluates and compares three models for sustainability reporting. The focus on measuring how an organization’s actions affect humans, as well as the viability of the planet itself, is a critically important opportunity to apply an ethical lens to accounting.

Professor Kelly takes on the vast, varied, and often overlooked area of governmental accounting, emphasizing the underlying importance of integrity as a necessary trait for those entrusted with public resources. He provides a helpful summary of key US ethical principles and independence guidelines, and shares examples where government accountants have failed to meet those guidelines. The chapter concludes with a discussion of the COSO integrated framework for internal control and how it can be applied in a governmental setting.

Chapters 15 and 16 focus on accounting information systems and ethics. First, Dull and Schleifer trace the roots of ethics in accounting information systems; then they examine the relevance of ethics to specific accounting-related technologies, including big data, privacy, the Internet of Things, cloud computing, and blockchain. In Chapter 16, Professor Pennington provides a deeper examination of blockchain, noting that decisions made about blockchain design and implementation can result in unethical behavior. She describes the following areas of concern: confidentiality versus transparency, design choice issues, and governance. Blockchain is used for many traditional accounting transactions, and the ethical implications of its use are widespread.

The final two chapters in this part are tax-related. Professors Goldman and Lewellen explore corporate tax decisions from various corporate stakeholder perspectives, noting that the decision to avoid tax is a complex one, with corporations obligated to pay only what the law prescribes, leaving the ethicality of avoidance, a consideration of who may benefit. They conclude that avoidance benefits a wide variety of stakeholders. Professors Farrar, Massey, and Thorne examine individual taxation, which in the United States and many other nations is based on the honor system, bringing into sharp focus the importance of personal ethics. This chapter provides a review of the individual tax literature and focuses on three areas: tax return reporting compliance, tax amnesty declarations, and tax whistleblowing.

Chapters 19–22 examine accounting ethics and education, specifically higher education. In Chapter 19, Professors Mintz and Miller share their concept of how educators can help students develop practical wisdom, which will enable them to act ethically in the face of ethical dilemmas. They begin with a discussion of Rest’s Model of Moral Development and then introduce experiential learning using Gentile’s Giving Voice to Values. In Chapter 20, Professors Cheng, Schenck, and Flasher describe how the profession was instrumental in motivating universities to add ethics education to the accounting curriculum. They then provide an overview of the accounting ethics education literature, followed by a discussion of how more recent accounting frauds have renewed interest in ethics in accounting education. They conclude with an analysis of current education methods, student perspectives of ethics education in accounting, and a guide for publishing accounting ethics research.

Professor McKenna, in Chapter 21, takes on accounting ethics education from a critical perspective, addressing the question of whether advanced degrees have increased ethical professionalism for auditors and concludes – not necessarily. In Chapter 22, Professors Alles and Kraten provide an innovative method, based on Location Maps, to assist practitioners in resolving moral dilemmas.

In this final part, we include chapters that address specific challenges in promoting ethics in accounting. Chapter 23, written by Professors Kelly, Louwers, and Thornton, provides examples of role models in accounting. From these exemplars, readers can begin to learn how ethics can be accomplished in the field and better understand the challenges that must be overcome. Chapter 24, by Professors Davis, Donnelly, and Radtke, continues the practical discussion by focusing on whistleblowers, specifically those in accounting roles. They provide a comprehensive review of the literature and offer a snapshot of current policy and outcomes in the United States. They conclude by discussing ethical implications of whistleblowing, both for the whistleblower and for the organization.

In Chapter 25, Professor Moore undertakes a critical analysis of certain taken-for-granted premises in accounting. She particularly points out how truly problematic is the notion of a boundary that separates a business from the rest of society. We teach every novitiate to accounting about the entity assumption but provide little regard for how uncertain we can be about identifying what the boundaries of that entity are. She provides us with an excellent example of critical thinking by explaining how those misunderstood premises affect the way accounting does or does not contribute to the good of society. This issue is particularly critical now, as society moves deeper and deeper into a digital environment where data about the individual are more extensive and commodified.

Finally, no volume would be complete in this time without including a discussion of diversity. In Chapter 26, Professor Lenk makes the case for diversity and documents the actions being taken by the largest public accounting firms in the world to address systemic and persistent inequality and lack of fair representation by diverse groups in the profession. She makes clear that although large firms have implemented policies, programs, and strategies, the profession has much work to do to create a true environment of inclusion.