Teaching virtues and values to accountants

Business schools and professional training organisations are stepping up the teaching of ethics in accounting, after a series of high-profile financial scandals have highlighted audit failings.

These include the collapse of British outsourcer Carillion, fraud at German payments group Wirecard, and a corruption scandal at the Brazilian oil company Petrobras — despite all their accounts being signed off by one of the so-called “Big Four” audit firms.

At the same time, in-house management accountants face growing scrutiny over non-financial reporting amid claims of ‘greenwashing’, or the misstating of environmental credentials — as happened at the German asset manager DWS Group.

These scandals have intensified concerns that a poorly developed approach to teaching behavioural, as opposed to technical, skills is reducing ethical standards and professional independence. Failings have included auditors not testing assumptions or the accuracy and completeness of management reports. Company directors have also been accused of prioritising their own financial rewards over transparency.

Training organisations and academic institutions note that they are not responsible for the decisions made by their graduates, but say they do want to help restore faith in accounting.

Many are bolstering the ethics component of the accounting curriculum with practical simulations, so that students can practise making ethical decisions. Even so, some critics argue they should go further and rethink their approach, if they are to make the financial world a safer place.

Berend van der Kolk, associate professor at the School of Business and Economics of the Vrije Universiteit (VU) Amsterdam, says one reason companies present misleading figures is that teaching practices decouple ethical considerations from the technical aspects of accounting. He says ethics is usually an “add-on”. The result is that students treat ethics as an afterthought when making accounting decisions. “We need to integrate ethical considerations into core courses, to make sure students see the trade-offs between economic and moral reasoning,” says van der Kolk.

We need to . . . make sure students see the trade-offs between economic and moral reasoning

Following the recent scandals, regulators plan to revamp UK auditing and corporate governance by making company directors more responsible for internal controls and requiring the Big Four to share audits with smaller firms.

But the regulation of behaviour is “the missing element”, says Giulia Redigolo, assistant professor of accounting at Esade Business School in Barcelona — underlining an opportunity for training providers to fill the vacuum.

“We need to reshape and reimagine the education that we are offering in business school”, she says, adding that this can mean taking an interdisciplinary approach and applying social psychology. For example, Redigolo says students must be aware of the corporate cultures and equity incentives linked to accounting measures that can lead to unethical behaviour.

“Business schools often prioritise performance over purpose,” she points out. “We need to offer a more nuanced definition of success that is not only about profitability and personal gain, it is also about the impact on stakeholders and the environment.”

New York University’s Stern School of Business has offered the Professional Responsibility course since 1994. It used to focus on the regulatory and legal requirements of business but now explores its role in society, too.

“It is difficult, today, to teach accounting as a technical discipline without exploring the underlying assumptions about what is perceived to be financially material,” says adjunct instructor Alison Taylor, referring to pressure on companies to share non-financial data.

She adds that accounting students have been a powerful driver of the shift to a more holistic teaching of ethics. “We recently had some partners from a Big Four accounting firm in our office who were extremely anxious about young recruits grilling them about why they were working for oil and gas firms but, also, how they treat financial value.”

Students now want hands-on tactics they can apply at work. As part of the ACCA accountancy qualification (provided by the Association of Chartered Certified Accountants), candidates take an interactive online module that tests their responses to ethical dilemmas.

“Rather than being able to recite the code of ethics and conduct, everyone must be able to apply the theory,” says Helen Brand, ACCA chief executive.

The professional body is “unbundling” its content so businesses can ensure the ongoing professional development of their ACCA-qualified staff.

Demand is high for short courses on sustainability reporting, too, following allegations of corporate greenwashing. ACCA is placing a greater emphasis on “digital ethics” as well, including data privacy, as accountants automate routine processes.

Privately, some academic institutions cite a tension between the need to teach “soft” behavioural skills alongside “hard” technical abilities when there is limited space in the curriculum. However, Brand warns: “The ethics and professionalism piece is something we would never dilute to fit into another module of some technical nature.”