8. Integrity

It contains values such as honesty, decency and respect to social norms. It implies being honest, upright and respectful.

Simply said, this is about combining how to be a professional who tries to earn his money with how to be at the same time an honest and decent human fellow. It also means trying to fulfill the expectations the stakeholders (customers, employees, partners, shareholders and society) have towards and from the company or the businessman. As for the Auditing practice, it means that the auditor must be prepared to lose the customer if the latter acts out of acceptable behavior standards or fails to correct his actions when these have been identified and denounced.

This principle applies in all spheres.

The expression “Think straight, talk straight” is possibly the most repeated motto in Arthur Andersen’s cultural language. This is the principle on which Arthur E. Andersen built his accounting practice. It seems his mother taught him that lesson. Furthermore, according to many witness testimonies, the sentence expressed very well the personal and professional behavior of the Firm’s founder. He always was direct and honest in his opinions and his acts.

Going a bit deeper into the meaning of this motto in terms of principles and values, we can break it down in two different factors: to act with honesty and rigor (think straight) and to speak clearly and aboveboard (talk straight).

Rigor, as the deep foundation of well done, independent, professional work, in order to:

• analyze relevant facts keeping the details but not letting them blur the picture;
• verify and check facts, assuming the responsibility for applying his own judgment;
• understand the context, not letting the superfluous intervene;
• give its relative importance to each fact and figure, after checking them, in order to obtain useful and practical conclusions; and
• submit our own judgment to somebody’s else analysis by means of revision, supervision and contrast procedures before making the conclusions final.

Rigor is always a necessary condition, but is not sufficient without taking into account the capacity to communicate effectively facts and conclusions, as much to the customer as to our own organization.

This effective communication implies:

• to explain clearly facts and opinions;
• to support the conclusions and the lines of argument;
• not to hide negative realities;
• to use precise written and spoken language; and
• to think before speaking

It is important to note that this Integrity principle is much related in its origin with the auditor’s public responsibility as the guarantor of the trustworthiness of relevant and important information. However, it also applies very well to a concept of excellence in any professional service: to lawyers, consultants and professionals in general.

The practical application of this way of understanding professional service was also acquiring singular features in the Spain of the 60s and 70s. It could be said that to work at that time under the principles of transparency and rigor was more or less a certain extravagance with a modernist streak. The Spanish business fabric in those years was not particularly positioned in this direction.

Furthermore, in those years, auditing was after all in essence a kind of professional service not much understood. It was difficult to think that Spanish companies (let’s leave aside the multinationals’ subsidiaries) were willing to pay money to get a report that, most of the times, was only marking the points where their financial statements did not comply with generally accepted accounting principles. Even more, on many occasions, with the final conclusion that it was not worth publishing the auditor’s report, what after all is an incongruity in terms if one considers the intrinsic value of the auditing service as a profession.

However this technical incongruity worked all right in benefit of those keenly committed to the application of the principle. In reality Arthur Andersen’s services were gradually settling in, and developing special formulations to make the most of the auditors work, as a tool to improve business management rather than just a mere verification of annual accounts.

Work done under headings such as “Diagnostic Analysis”, “Limited Revisions” or “Special Reports” was aimed at allowing time periods to adjust accounting information until a full audit could be done and, above all, to fill up the information-empty gaps that many companies presented in those days. Here it’s easy to find the connection from this audit business approach to the consulting activity and, more specifically, in the field of information systems.

In any case, additionally, the unredeemed auditors did not side with anyone and, in their arrogance, were not prepared to modify negative conclusions whatever the importance and relevance the client had.

This integrity concept showed also, beyond business meaning, in the daily professional behavior. The rigor, transparency and ethical standards criteria were weaved in many ways into the operating framework as a few examples can testify:

Already in the recruiting process candidates fresh from university were asked what their reaction would be to a hypothetical situation that would endanger their honesty or personal integrity. Any perceived reaction different of an outright rejection implied being ruled out of the selection process. A process that was much more attentive to the attitudes rather than the aptitudes of the candidates. The only aptitude required was a certain academic achievement in their certified records. Everything else was supposed to be learned at the Firm: accounting, auditing, consulting, programming, etc. That explained the Firm hiring engineers for auditing or geologist for consulting…No other firm was doing that. It was a way to enrich the Firm’s diversity, something that always worked well.

In order to properly document in working papers the analyses that have been done, each of the conclusions had to be signed for each revision domain; from the most junior professional (category A3) to the responsible partner, they all have to sign the different steps of the work plan, as an element of responsibility over the conclusions reached.

On the time report done every two weeks, each professional had to sign not only in recognition that his time allocations were true, but also that he knew all the implications in the work done. All professionals were periodically required to make explicit confirmations on their investments and financial positions in order to identify, and correct if needed, all possible limitative elements concerning the independence of personal interests in relation with the Firm’s clients.

The work done was submitted to different supervision levels, both in revision terms and in contrast terms, regarding the precision and neatness of the information given on each report (calling, footing, referencing…). That supervision was done by third parties alien to the work team.

All professionals were to periodically recognize to keep current with the Ethical Standards, that were “edited” in a Manual that had to be always up-to-date. Furthermore, in the case of the Spanish partners, one of the tax area partners had to go through their personal tax declarations to check that there were no elements that could question their independence of judgment or their position with the tax authorities.

In the end, these are only some examples that try to show how the integrity concept was not only a declared principle but was in fact developed through a full range of daily and specific procedures.

On this understanding, is there a dark side on this Integrity principle? It is truly difficult to see at first what downside the application of such a principle could have. However, it is possible to identify certain setbacks associated to its application, especially with the understanding that the effective implementation of any principle carries always the risk of an imperfect execution.

On one side, the Integrity principle may establish a climate of small tolerance with mistakes, in which any fault in matters of rigor or transparency is considered serious; this short tolerance of error can have negative effects on training and can also cut short the career of a good professional. On the other side, the excess of zeal with rigor and transparency can also move towards really obdurate positions: we are always right, whatever the others say.

But perhaps the weakest flank in the Integrity principle is its eventual contradiction against the practical application of another of the values described later on, that of talent and meritocracy. When growth and business development are the main incentives in an organization, it may happen that recognition and promotion of professionals is based primarily on the commercial success in the acquisition and holding of customers and fees are prized above the rigor and transparency criteria. They are not in principle contradictory objectives, but when results are measured with a short time vision, undesired deviations might appear.

It is not easy to maintain Integrity. In fact, in Andersen’s case, after the breach of Unity, next thing to break was Integrity, and hence the Enron episode that carried Andersen to its end.

In the short term, companies may think that integrity is not that important, but in the long term only companies faithful to this principle keep alive. The lack of Integrity sooner or later takes its toll.

All things considered, it’s easier to manage a company defending and respecting the Integrity principle than ignoring it.

Finally, it will be good to clarify that respecting integrity does not prevent to profit from the business opportunities that, legal and honestly, may come our way. Neither means to be inflexible. The worst enemy of Integrity is fundamentalism, or taking a supposed integrity to an unhealthy extreme, where one believes to be in possession of the one and only truth and despises everybody who does not share the same view.

To sum up, Integrity is an indispensable virtue that must be applied wisely with common sense.