Ethical Issues in Accounting

• Discussion Based; not Lecture Based
• Focuses on the Application of Philosophical
Ethics to the Accounting and Business
Environments; NOT Professional (CYA) Ethics

The Lecture
(The Sage on the Stage)

D.P. Tegarden all materials made available for educational purposes only not to be used for commercial purposes without written permission

Rote Learning (Memorization) vs.
Meaningful Learning

• Learning occurs when new knowledge is added to an existing knowledge structure
• Knowledge is constructed; NOT discovered
• Three requirements
– Relevant prior knowledge
– Meaningful material
– Learner must choose to learn meaningfully

• Tool for organizing and representing knowledge
• Directed Graph-based Knowledge Representation
– Concepts
• a perceived regularity in events or objects, or records of events or objects, designated by a label
– Propositions (Linking Words)
• statements about some object or event in the universe, either naturally occurring or constructed
• contain two or more concepts connected with other words to form a sentence

Perceived
Regularities
Are
Concepts
IS
Combine to Form
Are
Concept
Maps
Represent
Knowledge
IS
Propositions To Aid
IS
Context
Dependent
Teaching
Are
Hierarchically
Structured
May
Be
Learning
Aids
Labeled
With
Crosslinks
Symbols Words
To
Show
In
Is a Basis For
Creativity
Objects
Events
Needed to Show
Interrelationships
In
A concept map showing key ideas and principles exhibited in a good concept map.
Based on Figure 3.9 from Joseph D. Novak, Learning, Creating, and Using
Knowledge: Concept MapsTM as Facilitative Tools in Schools and Corporations,
Mahwah, NJ: Lawrence Erlbaum Associates, Publishers, 1998, p. 32
Different Map
Segments

Meanings
Derive From
Comprised of
Our Cognitive
Frameworks
Concepts
Combined to Form
Propositions
Personal
Our Actions
Are
From Our
Our Emotions
Idiosyncratic
Related To
Experiences
A Concept map showing that our meanings are a product of our idiosyncratic sequence of experiences. Based on Figure 4.1 from Joseph D. Novak, Learning, Creating, and Using
Knowledge: Concept MapsTM as Facilitative Tools in Schools and Corporations, Mahwah,
NJ: Lawrence Erlbaum Associates, Publishers, 1998, p. 36.

Earning
Power &
Solvency of the Firm
Showing
Accounting
Is A
Financial
Information
System
Which
Produces
Financial
Statements
That Impact
Which
Helps
Stock & Bond
Markets
That May
Influence
Investors
Determine
Creditors
Determine If
Managers
To
Resource
Allocations
In Return
For
Dividends and
Capital Gains
Loans Should be Made
In Return
For
Interest and
Repayment of
Principle
A Concept map that could be used in an introductory accounting course. Based on Figure 3 from Bruce A.
Leauby and Paul Brazina, Concept Mapping: Potential
Uses in Accounting Education, Journal of Accounting
Education, Vol. 16, No. 1, pp. 123-138, 1998.
Manage
Operations
Leading
To
Performance
Evaluations
Which
Influence
Compensation
Contracts
Society
Evaluate
Public Needs
Impacting
Investors',
Creditors' &
Managers'
Decisions

This accountancy is a noble profession, and most of those engage in it are good men. Indeed good preponderates everywhere – overwhelmingly in accountancy. After all the argument and disputation, after all the theory and doctrine, after all the study and analysis, the conclusion of the whole matter is that, that a professional man does not live unto himself alone, and what he does carries an influence far and wide. Every unworthy deed is a power for evil. Every good deed helps the world.

Throughout his entire professional life the accountant has to bear in mind the general nature of his relationship with all clients, and many a question of ethics will engage his attention. It is quite impossible to foresee all the intricate problems which may arise. The best that can be done is to describe as clearly as may be the fundamental principles which leaders of the profession think should underlie all practice.

Accountants and the accountancy profession exist as a means of public service; the distinction which separates a profession for a mere means of livelihood is that the profession is accountable to standards of the public interest, and beyond the compensation paid by clients.

In order to tell the truth there must be some detachment from one’s immediate environment; from the opinions of neighbors; from ambition, money, power, fame, comfort, security and ease. Have we the courage to proclaim the truth, or do we shrink from the struggle?

The Lawyer’s duty is first of all to his client, and that duty frequently compels him to avail himself of technicalities and other means of enabling that client to evade the Law and its penalties; but the Public Accountant has only one duty to his client and to the Public, and that is to disclose to him or for him ‘the truth, the whole truth, and nothing but the truth,’ so far as his abilities and special training to that end enable him to ascertain it.

If the accounting profession is to fulfill its public interest responsibilities, its own credibility must be restored. This is essential not only for the survival of the profession, but also for our free enterprise system itself.

1. Rules give only necessary, not sufficient conditions.
2. Rules contain terms that require interpretation.
3. We must appeal to idealizations in order to apply a rule.
4. Rules cannot supply the motivation for following a rule.
5. Rules on their own are unmanageable.
6. Due diligence is needed for checking that we have indeed followed a rule.

• Ethics R U: Finding Your Moral Compass
– Due Thursday
• Saving Adam Smith
– Due 9/3
Reminder: Email concept map to me before class and bring a copy with you to class.