Ethical behavior is harder to teach to adults if they have not already been taught ethics as a child. I
find this is best taught to children when learning right from wrong. Building those roots for a child
to grow up and understand how their choices have consequences and what is morally right from
wrong. Hopefully that foundation is built strong in adolescence. Ethics can further be taught in
coordination with teaching proper business practices and accounting practices, but those who do
not have a strong moral compass, this may be lost on them.
Good ethical behavior is extremely important in the accounting profession. We work with
confidential and personal information each day. From having access to all financial information to
personal identification information, we should protect the security of our client's information.
Unfortunately, there are cases of accountants or other business employees abusing this power.
From theft to forging documents; having unethical behavior can be criminal.
Creating a code of conduct, having proper checks and balances, and hiring independent auditors
can help manage and protect your business from unethical behaviors. The hardest part is when the
top executives of a business are the ones committing the fraudulent acts. As investors, trust is put
into these executives that they will demonstrate ethical behavior and create a proper system to
make sure their employees are following the same code of ethics.
Some large unethical scandals:
Waste Management Inc (1998) - overreported earnings by over $1.7 billion. CEO, top executives,
and their auditors were at fault. Result: Shareholders filed a class-action lawsuit against the
company & those at fault were severely fined.
Enron (2001) - I think we've all heard of this one. CEOs of the company hid billions of bad debts
using "accounting loopholes" and pressured their auditing firm to ignore it. --- If you must use the
term "accounting loophole", you are probably doing something wrong. Result: Fines, imprisonment,
and over 20K employees lost their jobs.
WorldCom (2002) - Inflated their assets by billions using fraudulent asset/receivable accounts. The
internal auditor discovered the fraud. Results: CEO imprisoned, 30K+ employees lost their jobs, and
investors lost over $180 billion.
These are just a few examples of many. So many of the largest scandals took place in 2000-2003 -
do we think there is a reason for that? Why did so many of these long running scandals come to
light during that time? Did something change that made these scandals more discoverable?
Ethics are an essential part of an accountant’s profession, or anyone’s profession, as they deal with
client’s or a company’s private information. I personally would like to believe that people are
inherently ethical, as I think it would be a sad world to live in if that were not true. Practically,
however, there needs to be more awareness and emphasis on the ethical side of the accounting
profession. Every accounting system and website such as AICPA, has their own ethics standards in
which accountants are supposed to adhere. Though I have not taken the CPA exam yet, ethics are
part of two sections of the four-part exam, Regulations and Auditing (Boyd, 2019). I think it is a
great idea to teach ethics to accounting students and professionals through continuing education
courses and workshops. There also needs to be checks and balances and good internal controls to
encourage ethical behavior such as random checks and separation of duties.
One example of fraud and unethical behavior that comes to mind is the Wells Fargo scandal. Wells
Fargo and its employees were found to have created millions of fake and unauthorized credit card
and bank accounts for customers without their knowledge. 5,300 employees were fired in
connection with this fraudulent activity and Wells Fargo was ordered to pay over $185 million in
penalties and $5 million to customers who were forced to get fee-generating accounts that they
never wanted (Reuters, 2016). It is amazing how vast the unethical behavior spanned from the CEO
to the entry-level workers. John Stumpf, the CEO, created an environment where number mattered
more than anything, and it did not matter how you got to those numbers. This greatly affected not
only customers who had credit scores drop because of the fraudulent accounts being opened in
their name, but the employees who were fired and those who tried to report the fraud. According
to Egan (2016), employees who did report unethical behavior were retaliated against and fired
shortly after. “Bado not only refused orders to open phony bank and credit accounts. The New
Jersey man called an ethics hotline and sent an email to human resources in September 2013,
flagging unethical sales activities he was being instructed to do. Eight days after that email, a copy
of which CNNMoney obtained, Bado was terminated. The stated reason? Tardiness.”
References
Boyd, K. (2019). CPA Exam Sections. Retrieved from CPA Accounting Institute for Success:
https://www.ais-cpa.com/cpa-exam-sections/
Egan, M. (2016). I called the Wells Fargo ethics line and was fired. Retrieved from CNN Business:
https://money.cnn.com/2016/09/21/investing/wells-fargo-fired-workers-retaliationfake-
accounts/index.html
Reuters. (2016). Wells Fargo fined $190M to settle fraud case. Retrieved from CNBC:
https://www.cnbc.com/2016/09/08/wells-fargo-reaches-185m-settlement-to-settle-secretaccount-
fraud-case.html SOX Section 806. (2019, July 18). Retrieved from Sarbanes Oxley 101:
https://www.sarbanes-oxley101.com/sarbanes-oxley-whistleblower.htm
CFI Team (2022, December 11). Accounting ethics. CFI. Retrieved on August 24, 2023 from,
Accounting Ethics - Understanding Ethics in Accounting and Auditing
(corporatefinanceinstitute.com)
CFI Team (2023, March 13). Top accounting scandals. CFI. Retrieved on August 24, 2023 from,
Accounting Scandals - List of Top 10 Scandals in Past Decades (corporatefinanceinstitute.com)
