Teaching ethics within the accounting profession is extremely important. It should start with
accounting student and continue through professional careers. Accountants should routinely be
trained and educated in regards to ethics in the accounting and business world. I do not believe
ethics in the accounting profession should be "buyer beware". In accounting we have access to
clients personal and confidential data, these things require cautious handling. Accountants are also
required to follow many laws and codes of conduct. Therefore, it is extremely important they are
educated on ethics to make sure this information and these documents are being handled and
prepared as they should.
In 2013, Wells Fargo was involved in a scandal where employees at one of their Southern California
locations were opening unauthorized accounts in issuing debit and credit cards in order to meet
their cross-selling quotas (Tayan, 2019). 30 employees were involved in this scandal, who felt
pressure to meet their goals. If goals were not met, they would be added on top of the next day’s
goals. Over a five-year period, 2 million unauthorized accounts were opened and 5,300 employees
were fired. The company paid $185 million to settle the lawsuits and refunded a total of $2.6
million to customers for fees paid in association with the opened accounts. The company also saw a
stock price drop of 2% after the incident.
Wells Fargo had many controls in place to try and avoid issues like this, such as employee
handbooks that specifically state, “splitting a customer deposit and opening multiple accounts for
the purpose of increasing potential incentive compensation is considered a sales integrity
violation," (Tayan, 2019). They also maintained and ethics program and had a place for people to
report any violations. They also incentivized following company policy by providing bonuses to
those who complied. However, the checks they had in place were not enough to prevent such
incidents from happening. An independent investigation revealed many issues within the company
in its staff. After the incident, the company ensured to take the necessary steps to recover from the
scandal and ensure their customers and the public they were working to remediate the situation.
Wells Fargo made sure to fire any employees involved, they hired and independent consulting firm
to review any accounts that were opened, they removed the product sales goals and reintroduced
branch level incentives, and they introduced additional training and controls regarding account
openings.
The company could have requested and audit to be done so they could analyse their internal
controls and staff and make up to date changes in the necessary areas. They could have also
focused more on company policy and ethics by having mandatory training sessions and ensure
employees were up to date on the code of conduct. They could have also worked to remedy the
stress a lot of employees had regarding meeting their goals, by implementing office outings or
breaks throughout the day. They could have also removed the goals or extended deadlines, if they
saw employees were struggling to meet them as anticipated.
I agree that accounting students and professionals should be taught ethics and theories to become
and stay an accounting professional. Ethics are so important since so much relies on an
accountant’s information. For example, a CPA firm who issues financial statements for a company
needs to make ethical decisions when determining certain figures. Even though they can get
pushed by one department, a board of directors, an investor, etc. It is only fair that the CPA compile
and issue fair and unbiased financial statements. Ethics are so valuable that classes are taught, tests
are designed, and treasury regulations are issued. Circular 230, which constitutes Part 31 of the
Treasury Department Regulations, is designed to provide protection to taxpayers and the IRS by
requiring tax practitioners to be technically competent and adhere to ethical standards (Swayers &
Gill 2021).
The effects that can happen to a company, their financial situation, employees, board of directors,
high level personnel and accounting professionals can range from small to having a huge impact. A
small impact of making unethical decisions could be letting an employee go or putting a new
internal control in place. Larger impacts can be huge fines by the SEC, companies shutting down
and prison sentences. I advocate more towards checks and balances over financial practices, buyer
beware just does not seem to be a strong suggestion when it comes to accounting professional and
ethics. Some individuals are just unethical by nature and even those people get into positions
where they make decisions that can have large effects. Buyer beware is not beneficial in these
situations.
One example of unethical behavior I can remember is the Wells Fargo case where employees were
making millions of fake accounts to dupe investors. I went to look this up on the SEC website and
found a new article on Wells Fargo! Issued on May 30, 2023 - The Securities and Exchange
Commission today announced its settlement with the former head of Wells Fargo & Co.’s
Community Bank, Carrie L. Tolstedt, in which she has agreed to pay a $3 million penalty stemming
from charges brought in 2020 for her role in allegedly misleading investors about the success of the
Community Bank, Wells Fargo’s core business (SEC 2023). Tolstedt’s charges come from the same
time period and a little after the former CEO Stumpf got charged for the creation of the fake
accounts.
The one thing I enjoy about reading these articles is you can find out if they admit or not to the
allegations. Tolstedt agreed to her judgement for a total of $1,906,950. Tolstedt allegedly knew that
fraudulent and unethical activity was going on and did nothing to stop or prevent it. She did not
strengthen her internal controls, she did not remove people that were causing the problems, she
did nothing but let fraud and unethical behavior continue to make the company look better. This
situation could have been avoided if stronger internal controls had been implemented and if the
company had a better ethics policy put into place. The company structure for Wells Fargo during
2014-2017 was obviously suffering if the CEO and senior executives both resigned and paid fines to
the SEC.
References:
Sawyers, Roby B. PH.D., CPA and Gill, Steven L. PH.D. (2021). Federal Tax Research. 12th Edition.
Cengage Learnings, Inc. Boston, MA.
Security and Exchange Commission (SEC). (May 30, 2023). Former Wells Fargo Senior Executive
Carrie Tolstedt Agrees to Settle SEC Fraud Charges for Misleading Investors About Abusive Sales
Practices to Inflate a Key Performance Metric. https://www.sec.gov/news/press-release/2023-99
Tayan, B. (2019). The Wells Fargo Cross Selling-Scandal. Harvard Law School.
https://corpgov.law.harvard.edu/2019/02/06/the-wells-fargo-cross-selling-scandal-2/
