due now

ISSUES IN ACCOUNTING EDUCATION American Accounting Association Vol. 27, No. 3 DOI: 10.2308/iace-50150 2012 pp. 671–690

Improving Ethics Education in Accounting: Lessons from Medicine and Law

Chunhui Liu, Lee J. Yao, and Nan Hu

ABSTRACT: The purpose of this paper is to offer accounting educators additional perspectives for ethics education by considering teaching approaches from medicine

and law. It takes the form of literature review and argument. The paper finds that ethics

education in accounting shows deficiencies in terms of code-bound content, less

systematic formal training, less informal hands-on training, and less usage of partnering

in comparison to ethics education in medicine and law, thereby producing students with

higher moral cognitive capabilities. Based on these findings, the authors provide some

recommendations for improvement.

Keywords: ethics; accounting ethics education; ethics education methods; medical ethics education; legal ethics education; collaboration between the

academics and practitioners.

Data Availability: Data used in this study are available from the first author upon request.

INTRODUCTION

T he persistent rise of high-profile corporate accounting scandals and restatements of

previously issued financial results has generated intensified concerns for accounting ethics

education (Holder-Webb and Cohen 2007; Waldmann 2000; Yang and Wu 2009; Young

and Annisette 2009). Clear calls have been made for educators to increase ethics instruction to

students majoring in business and accounting in particular (e.g., Low et al. 2008; Massey and Van

Hise 2009; Mintz 2007). The National Association of State Boards of Accountancy (NASBA) calls

for altering the coursework requirements for Certified Public Accountant (CPA) candidates to

include six credit hours of coursework on ethics (Young and Annisette 2009). Recent legislation,

such as the 2002 Sarbanes-Oxley legislation (U.S. Public Law 107-204), or SOX, and a

reawakening interest in business ethics have prompted calls for more accounting ethics research

(Robertson 2008). This paper answers the call by ethics educators and accounting professionals to

research and explore alternative methods to enhance the effectiveness of the current ethics

curriculum in boosting ethical awareness and ethical reasoning abilities among accounting students.

Chunhui Liu is an Associate Professor at The University of Winnipeg, Lee J. Yao is a Professor at Loyola University New Orleans, and Nan Hu is an Assistant Professor at the University of Wisconsin–Eau Claire.

The authors are indebted to Bill Pasewark (editor), the anonymous associate editor, and two anonymous reviewers for their innumerable guidance, enlightening comments, and helpful suggestions.

Published Online: February 2012

671

Until recently, accounting, like medicine and law, has been considered a profession more

‘‘heavily influenced by the service motive than entirely by the profit motive’’ (Higgins and Olson

1972, 33). Ideally, a profession exists not to compensate its members more or less abundantly, but

to serve society (Mautz and Sharaf 1961). Ethics in accounting is conceived to be crucial to the

functioning of capital markets (Bean and Bernardi 2007). According to Egan et al. (2004),

professionalization typically starts in a professional school where students are trained with various

skills, oaths, codes, and rules developed to assure dedication to public service. Therefore, the

manner in which students are infused with the values of their profession has a crucial impact on

their future behavior as practicing professionals and their ability to fulfill social expectations that

support their profession’s status (Egan et al. 2004).

However, Fogarty (2011) argues that accounting faces the danger of deprofessionalization

when the culture of public accounting fails to advance the public interest. Some researchers

critically question the effectiveness of ethics education for business and accounting students to make

ethical choices after graduation (Fleming et al. 2009). The interests of non-equity stakeholders are

nearly disregarded in the accounting curriculum (Cohen and Holder-Webb 2006). The results of

some empirical studies reveal that conventional accounting education may obstruct the ethical

reasoning of accounting students and practitioners (Armstrong 1987; Ponemon 1993; Ponemon and

Glazer 1990), as they do not encourage the use of ‘‘principles-based’’ decision making.

Currently, the main concern of conventional accounting ethics education has been to enhance

the cognitive capability of students entering the profession (Jones et al. 2003). The accounting

profession, guided mostly by rules and regulations, restricts its members largely to the

‘‘conventional’’ level of Kohlberg’s (1984 ) cognitive moral development model or the

neo-Kohlbergian approach of maintaining norms schema (Rest et al. 1999a), thus hindering the

exercise of principled ethical reasoning advocated by recent developments in the accounting

standards. To overcome this problem, ethics education researchers (Haywood et al. 2004;

Hiltebeitel and Jones 1991; Jennings 2004; Langenderfer and Rockness 1989; Loeb 1988;

Ponemon 1993; Thomas 2004) have explored innovative methods and changes to ethics education

to instill better ethical values in students and professionals. This paper complements these

researchers’ efforts by exploring ways that accounting ethics education can learn from ethics

education for future lawyers and doctors, who tend to exhibit higher moral cognitive development

scores. Accounting ethics education can benefit from a broader view of accountants’ responsibilities

and accountabilities, more systematic formal training, more informal hands-on training, and more

usage of partnering that are available in ethics education in law and medicine.

The next section provides examples of serious ethical issues related to the accounting

profession. In the following section, the discussion focuses on whether ethics can be taught, why

the ethical standards of the accounting profession are drawing more close scrutiny by the public,

and how different accounting ethics education is from that of other professions such as medicine

and law (Sugahara et al. 2006 ). The paper concludes with a discussion of how accounting ethics

education can be enhanced with effective approaches of ethics education in law and medicine.

ETHICAL ISSUES IN THE ACCOUNTING PROFESSION

In the contemporary literature, the problems that accounting professionals face daily in their

working lives have been attributed to a wide variety of pressures ranging from environment to time

and budget (DeZoort and Lord 1997; Lord and DeZoort 2001; Windsor and Ashkanasy 1995).

Cases like Enron and WorldCom are particularly alarming. However, these companies are not alone

in accounting malpractices. For instance, SK Global in South Korea overstated 2001 earnings by

$1.2 billion (Young 2003). Additionally, HIH insurance group in Australia failed with debts of $3.2

billion after consistently understating claims liabilities (Low et al. 2008).

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The U.S. Government Accountability Office (GAO 2002) compiled a sample of 919

restatement announcements between January 1, 1997, and June 30, 2002. The disclosure of

accounting scandals and such restatements has contributed to the passage of new rules such as the

2002 Sarbanes-Oxley legislation (Young and Annisette 2009) and the Public Company Accounting

Reform and Investor Protection Act of 2002 (Low et al. 2008). However, legislation alone does not

stop such restatements from reoccurring. The Huron Consulting Group has revealed increases in the

number of financial restatements: 233 in 2000, 270 in 2001, 330 in 2002, 323 in 2003, and 414 in

2004 (Flanagan et al. 2008). More recent high-profile cases include a disclosure by General Motors

of losses understated by more than $2 billion in 2005 and an understatement of a $32 million tax

obligation by H&R Block in 2005 (Flanagan et al. 2008).

According to Audit Analytics (2011), after its peak of 1,795 disclosures in 2006, the quantity of

restatements and non-reliance disclosures experienced a continuous decrease for the first time after

the passage of SOX for three years to 683 disclosures in 2009, with an uptick in the quantity of

restatements in 2010. Despite these changes, the number of restatements is still high and calls for

improvement in accounting ethics education and practice. Smyth and Davis (2004, 64) argue that

‘‘the widespread nature of the recently publicized scandals suggests that there has been a deterioration of ethical standards in the corporate workplace.’’ Amernic and Craig (2004, 343) argue

that ‘‘one of the causes of the seemingly never-ending parade of accounting scandals and unexpected

company collapses has been the inadequacy of university curricula and business education.’’ As

such, ethics education needs to address these issues to ensure positive results in practice. The next

few sections are devoted to discussion of the developments in ethics education.

THEORETICAL BACKGROUND AND LITERATURE REVIEW

The underlying foundation for much ethics research is largely influenced by the work of

Kohlberg (1969), who established a theory of moral cognitive development, and Rest, who

developed a model of ethical action, culminating in a neo-Kohlbergian approach (Rest et al. 1999a).

The Defining Issues Test (DIT) (Rest 1979) or DIT-2 (Rest et al. 1999b) is a popular survey

instrument that provides, among numerous other metrics, a measure for the highest order of ethical

reasoning (Bailey et al. 2010).

According to Kohlberg (1969), there are three levels of cognitive development: the pre-conven-

tional, conventional, and principled (or post-conventional) stages. At the pre-conventional stage,

actions are justified largely on the basis of pure self-interest. At the conventional stage, decisions are

made to ensure conformity to norms and standards prevailing within a person’s upbringing,

environment, or social community. At the principled or post-conventional stage, decisions are made

based on notions of universal fairness, as well as what the individual deems important and in the best

interest of others around him. The neo-Kohlbergian approach replaces Kohlberg’s stages with

schemas: a personal interest schema; a maintaining norms schema for maintaining the established

social order, such as law; and a post-conventional schema that appeals to sharable moral ideals for

organizing society and full reciprocity (Rest et al. 1999a). Behavior reflective of compliance with a

professional ethical code does not bring an individual to the principled or post-conventional stage or

schema (Lovell 1995). Post-conventional ethical reasoning can be measured by the popular DIT-P

(referring to ‘‘principled’’) score developed by Rest (1979, 1986, 1999a, 1999b) through computing

the proportion of ‘‘principled’’ items that the subject ranks as important.

‘‘Cognitive moral capability describes the most sophisticated cognitive moral structure one can

use to resolve moral dilemmas. That is, cognitive moral capability describes the degree to which an

individual is potentially capable of using principled considerations in the resolution of moral

dilemmas’’ (Thorne 2001, 106 ). Thorne (2001) classifies the research investigating measures to

improve an individual’s cognitive development into two streams. The first school of thought holds

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that cognitive development can be enhanced through educational interventions (Bernardi 1995;

Cohen and Pant 1989; Jeffery 1993; Langenderfer and Rockness 1989; Ponemon 1993; Ponemon

and Glazer 1990). The second branch of research is more concerned with the relationship among

demographic variables, such as gender, political orientation, or character, and how they influence

accounting students’ ethical reasoning capacity (Brady and Wheeler 1996; Gammie and Gammie

2009; Lampe and Finn 1992; Shaub 1994; Thorne 2001; Verbeke et al. 1996 ).

A review of these studies indicates that moral development differs among individuals even

though they may have comparable backgrounds or social environments (Ponemon 1993), thus

leading us to an inevitable question that the accounting professional and academics must answer:

Can ethics be taught? The following sections address whether ethics can be taught and explore how

ethics education in accounting differs from that in the legal and medical professions.

Can Ethics be Taught?

Few would dispute the argument that ethics are learned (Geary and Sims 1994). Cognitive-

developmental researchers theorize that training and experience affect a person’s ability to identify

ethical dilemmas, or ethical awareness (Jones et al. 2003). Felton and Sims (2005) find that business

ethics education can expand students’ understanding of ethics. Rest argues that moral reasoning, the

process of assessing ethical considerations and determining the moral course of action, can be

taught (Armstrong 1987). A recent study finds that professionalism of surgical resident learners can

improve with a carefully crafted curriculum (Hochberg et al. 2010). Considerable research indicates

that ethics education at the university level can still influence individuals’ ethical reasoning (Eynon

et al. 1997; Leung and Cooper 2005; Park 1998). Researchers in other professions conclude that

formal ethics educational programs in law (Kelly 1980), medicine (Klingensmith 2008; Pellegrino

and McElhinney 1982), and dentistry (Bebeau 1985, 1991) help individuals to develop their

cognitive moral capacities to the ‘‘highest level.’’ Rest (1986 ) finds education to be the most

powerful predictor of a person’s ability to formulate ethical judgment. Kennedy and Malatesta

(2010) reveal that ethical assignments increase students’ appreciation of ethical analysis. Research

based on longitudinal analysis indicates that formal post-secondary education is strongly and

consistently correlated with an increase in cognitive moral reasoning (Blasi 1980; Rest 1986, 1988;

Thoma 1986 ). A meta-analysis of 55 studies, representing 5,714 subjects and 136 samples, finds

that the mean DIT P-scores increase about five percentage points for moral education interventions

(Dellaportas 2006 ). Lau (2010) finds from a sample of 707 undergraduate, business students that

ethics education improves students’ ethical awareness and moral reasoning. Bok (1976 ) believes

there is value to be gained from any ethics course that forces students to think rigorously about

complex human problems, regardless of measurable effects. Lawson (2002) finds widespread

acceptance for ethics education in a survey of business faculty at five institutions. A recent survey

by Fawzi (2011) reveals that only 2.6 percent of 100 randomly sampled medical students think of

the ethics course as optional in their curricula.

O’Leary (2009) finds teaching ethics to accounting students to be beneficial. Douglas et al.

(2001) find a positive association between training and auditors’ ability to identify ethical

dilemmas. Shawver (2006 ) reveals an impact from a capstone professional responsibility course on

accounting students’ ability to recognize ethical implications in accounting issues. The moral

reasoning of accounting students also increases with education level (Ponemon and Glazer 1990).

Hiltebeitel and Jones (1992) find that education indeed affects how accounting students resolve

professional ethical dilemmas, although not personal ethical dilemmas. Integrating ethics into

accounting and auditing courses is found to improve students’ ability to formulate ethical judgment

(Eynon et al. 1997; Saat et al. 2011; Sweeney 1995). Shaub (1994) shows that the completion of an

ethics course in college positively influences the ethical reasoning of accounting students and that

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the positive influence is retained when these students enter their profession. Many researchers

(Armstrong 1993; Hiltebeitel and Jones 1991; LaGrone et al. 1996; Welton et al. 1994) report that

ethical interventions foster the ethical decision-making abilities among accounting students. A

required and dedicated course in accounting ethics is found to increase DIT P-scores by 12.18

percentage points (Dellaportas 2006 ). Most schools agree that some ethics education should be

included in the accounting curriculum (Shawver 2006 ), and 84 percent of Financial Times Top 50 Global Business Schools require mandatory courses in at least one of the three topics: ethics,

corporate social responsibility, or sustainability (Christensen et al. 2007).

In addition to these accounting studies, there is also strong evidence from psychology literature

to support education as one of the more consistent and powerful agents for the development of

moral reasoning capabilities (McCabe et al. 1991; Rest and Thoma 1985). Gammie and Kirkham

(2008) find that university education plays a role in highlighting the importance of both high ethical

standards and acting in the public interest to the professional status of an occupation. Educational

programs designed to cultivate post-conventional ethical reasoning are found to be most effective

for college-educated adults in their 20s and 30s (Leming 1981; Rest 1986 ).

Despite some mixed results associating moral reasoning and ethical behavior, research findings

on average reveal that moral reasoning explains 10 to 15 percent of the variation in ethical behavior

(Thoma 1994). For example, Abdolmohammadi and Baker (2007) find that moral reasoning is

inversely and significantly correlated with plagiarism practice among students in accounting courses.

Krichbaum et al. (1994) find that DIT contributes significantly to predicting clinical performance of

nursing students. Arbuthnot and Gordon (1986 ) find that adolescents whom teachers identified as

aggressive demonstrate improved moral reasoning and behavior, subsequent to participating in a

cognitively based moral reasoning development program, and that moral reasoning change scores are

associated with behavioral change scores. As such, there is a good reason to believe that ethics can be

taught and ethics education does play a role in cultivating better ethical decision-making capabilities in

people (Ponemon 1993). Jackling et al. (2007) find strong support for ethics education at the pre- and

post-qualifying levels of education among professional bodies. Since accounting ethics education is

recognized as one prospective cure for the profession’s ethical collapse (Jackling et al. 2007), research

in accounting ethics education has been encouraged (Uysal 2010; Young and Annisette 2009).

How is Accounting Ethics Education Different from That in Other Professions?

Ethics education in accounting, medicine, and law strives to raise ethical awareness or sensitivity

to ethical dilemma and moral reasoning. Policy of the Association to Advance Collegiate Schools of

Business (AACSB 2003) lists ethical understanding and reasoning abilities as key learning

experiences for undergraduate business students. Ethical sensitivity or awareness of ethical difficulties

is a goal often rated among the highest by ethics instructors in medicine (Gross 1999; Wichman and

Foa 1996 ). Moreover, Myser et al. (1995) stress the importance of a systematic approach to ethical

reasoning for medical students. The goals of traditional, formal ethics classes for medical schools in

the U.S. and other countries have been to provide students with skills to recognize ethical dilemmas

and to become more competent decision makers (Callahan and Bok 1980). Improving ethical

awareness and moral reasoning of students is also an important goal of ethics education in law school

(Schrag 2009). The aims of ethics education promoted in the medical and legal literature are

coterminous with the general objectives of ethics education for accountants (McPhail 2001).

Despite similar goals for ethics education, many studies using the cognitive development model

conclude that accounting students and practitioners generally exhibit lower moral development

scores than other college-aged students and other professional groups such as medicine and law

based on the DIT (Armstrong 1987, 1993; Armstrong and Mintz 1989; Bernardi and Arnold 2004;

Cohen and Pant 1989; Hiltebeitel and Jones 1991, 1992; Lampe and Finn 1992; Ponemon and Glazer

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1990; St. Pierre et al., 1990). The average score for accounting students from studies reported in

1990–2002 is 37.51 (Abdolmohammadi and Ariail 2009). Pharmacy students are found to have DIT

P-score of 42.5 (Latif 2000). Scofield et al. (2004) find that the DIT P-score for partners in law firms

(45.37) is significantly higher than the DIT P-score for partners in accounting firms (39.09).

Ponemon and Glazer (1990) find that students and alumni practicing public accounting who

graduated from a school offering a liberal arts curriculum tend to be more highly developed in terms

of DIT measures than those of the school with a more traditional accounting program.

Since DIT P-score computes the percentage of an individual’s ‘‘principled’’ reasoning preferences (Rest et al. 1999a), individuals who rank ‘‘principled’’ items as the most important receive a higher DIT P-score than individuals who rank non-principled items more highly.

Therefore, if an individual highly ranked items that are important but are considered to be at the

conventional stage of the cognitive development model, this individual has a lower DIT P-score

compared to those who rank the ‘‘principled’’ items more highly. Thus, it may not be a surprise that accounting students pay more attention to issues considered being at the conventional stage, since

they need to comply with rules and standards (Louwers et al. 1997). Abdolmohammadi et al. (2003)

find evidence that a selection-socialization effect exists in the accounting profession, resulting in

hiring accountants with disproportionately higher levels of the sensing/thinking (ST) cognitive style,

which is associated with relatively low levels of ethical reasoning.

However, in light of recent accounting scandals and the subsequent crisis in confidence for the

public accounting profession (Okike 2004), the Financial Accounting Standards Board (FASB

2002), International Accounting Standards Board (IASB 2002), and Securities and Exchange

Commission (SEC 2003) have advocated moving to a more ‘‘principles-based’’ financial reporting system that requires more professional judgment (Clor-Proell and Nelson 2007). For example,

International Financial Reporting Standards (IFRS) have been established to be a principle-based

set of standards to increase the quality of financial reporting (Liu et al. 2011). Such a regulation

change calls for accounting educators to develop more principled or post-conventional moral

capabilities among students.

Although some limitations have been found for using DIT scores developed with non-

accounting contexts (Conroy et al. 2010; Ponemon 1990; Shaub 1994; Shawver and Sennetti 2009),

Thorne (2001) finds that accounting students do not fully utilize their cognitive moral capacity even

when the hypothetical moral dilemmas used in the DIT are replaced with moral dilemmas that are

specific to the accounting domain. Gray et al. (1994) state that there is evidence accounting education

fails to develop students’ ethical maturity. A significant percentage of respondents from the

Australian Society of Certified Practicing Accountants think members have little or no knowledge of

ethical matters, such as public interest, integrity, and compliance (Leung and Cooper 1995).

Thorne (2001) indicates that the deficiency in accounting students’ cognitive moral capacity

can be seen as an opportunity for accounting educators to develop more effective ethics curriculums

when training accounting students to utilize more principled considerations in their decision-

making processes. However, Abdolmohammadi et al. (2009) find that the dominant cognitive

make-up of accountants has not changed significantly in recent years, despite increased attention to

accountants’ ethics. Analyzing the ethics education in other professions that produce graduates with

higher moral development scores, such as medicine and law, may provide a better understanding of

why accounting students are often accused of being less ethical and highlight ways for improving

ethics education for accountants.

The practice of ethics education in medicine and law may be transferrable to ethics education in

accounting, not only because of their similar educational goals, but also because of their similar

obligation to provide quality service (e.g., auditing and tax or management consultation by

accountants, medical consultation and practice of medicine by doctors, consultation for litigation

and litigation avoidance by lawyers). Therefore, malpractice, code of ethics, formal and informal

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education, as well as partnership in law, medicine, and accounting are compared in the following

sections.

Differences in Law, Medicine, and Accounting Malpractice

Unethical decisions or malpractice in medicine, law, and accounting may all lead to tort

litigations. More people die in a given year as a result of medical errors than from motor vehicle

accidents, breast cancer, or AIDS (Kohn et al. 1999). Sixty-three percent of responding urologists in a

survey report being named in a medical malpractice lawsuit (Sobel et al. 2005). Direct premiums

written for doctors in the U.S. were more than $10 billion in 2008 (Hunter et al. 2009). To prevail in a

medical tort lawsuit, a plaintiff must prove that the defendant has breached a duty of care owed to the

plaintiff and thus caused an injury to the plaintiff (Studdert et al. 2004). Direct losses paid for medical

malpractice in the U.S. have increased at least 23 times from 1975 to 2008 (Hunter et al. 2009).

Five to six percent of practicing, insured lawyers see a malpractice claim each year (Wells

2006 ). The elements of a claim for legal malpractice include employment of the attorney, failure by

the attorney to exercise ordinary skill and care, proximate cause, and harm to the client (Kevin

2003). Lawyers’ professional liability insurance business gets about $1.5 billion to $2 billion worth

of annual premium (Wells 2006 ). Even ethical lawyers get sued routinely (Wells 2006 ).

Lawsuits against auditors are less frequent. Palmrose (2000) documents about 1,000 lawsuits

against large national accounting firms during 1960–1995 in the U.S., with an average of less than

28 lawsuits per year. Yet, the impact of accounting malpractice is not limited to clients but affects a

broader range of stakeholders. For example, audit claim holders consist of clients, shareholders

seeking to recover lost investments, and lenders seeking to recover losses when a client business

fails (Wolfe 2002). Auditors are often sued for the entire cost of a company collapse because they

are seen as the only ones left with deep pockets (Croft 2010). For example, KPMG was sued for $1

billion by the liquidators of New Century (Gittelsohn 2009). The aggregate liability exposure of big

auditing firms was estimated to exceed $30 billion in 1993, while net direct legal costs of insurance

recoveries were about 13 percent of accounting and audit revenue in 1993 (Mednick and Peck

1994). The increase in legal claims against auditors leads to higher professional liability insurance

costs (Stice 1991). As a result, accountants are reported to be cancelling insurance policies in favor

of self-insurance through strategies such as documented work papers, increased audit steps, and

stringent peer review to limit risk exposure (Thompson and Henry 1991).

The impact of accounting malpractice discussed above and the lower DIT P-scores for

accounting students highlight the importance of improving accounting students’ cognitive moral

reasoning skills. Examining what makes the members of the other professions (law and medicine)

more sophisticated in their moral reasoning capabilities may provide insight into improving ethics

education for accounting students.

McPhail (2001) is among the first to identify the value of incorporating what is considered

important in ethics education of other professions into ethics education for the accounting

profession. Other researchers (Sisaye 2011) have also come to recognize that ethics education in

accounting can benefit from methods used in other disciplines. Based on what is suggested for a

better ethics education in law, engineering, and medicine, McPhail (2001) proposes that the most

important objective for business ethics education is to develop empathy. Sisaye (2011) suggests

using experiential teaching methods that are used in engineering and educational psychology.

This paper extends previous studies and contributes to the literature by highlighting the actual

differences in ethics education practice in medicine, law, and accounting for accounting educators

to consider in their efforts to improve ethics education. Ethics education in medicine, law, and

accounting is compared next in terms of the role of ethics code, content delivery methods, and

contributors.

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Differences in Codes of Ethics

A code of ethics plays a more prominent role in accounting and law than in medicine. Medical

ethics is based on the Hippocratic Oath created by a Pythagorean sect of physicians about 2,500

years ago. The American Medical Association (AMA) Code of Medical Ethics was generated in

1846. The Nuremberg Code and the Declaration of Geneva were created in the 20th century.

Philosophical inquiry and principles-based moral theory were developed subsequently (Egan et al.

2004). According to the code, a physician must recognize responsibility first and foremost to

patients, as well as to the society, to other health professionals, and to self. The AMA Code of

Medical Ethics is seldom used as a primary text, but often thought of as a set of aspirational

professional guidelines (Egan et al. 2004).

The adoption date of the first code of professional ethics by the American Bar Association

(ABA) was 1908 (Backof and Martin 1991). The ABA code is based on Judge George Sharswood’s

‘‘Legal Ethics’’ (Backof and Martin 1991). In contrast to medical ethics education, legal ethics education relies more on a professional ethics code. According to the code, a lawyer has the

responsibility as a representative of clients, an officer of the legal system, and a public citizen

helping the legal profession to regulate itself in the public interest.

The code of professional ethics for the accounting profession was developed in 1907. There

have been many updates since then (Backof and Martin 1991). According to the code, an accountant

has a responsibility to serve the public interest (Wayne 1996 ) in addition to his/her specific

responsibilities to clients or employers associated with the area of practice. The code of ethics is a

part of Uniform CPA exams (Fisher et al. 2005). However, codes of ethics and codes of conduct in

themselves are unlikely to prevent unethical conduct because they make little difference to the actual

or intended actions of students (Fulmer and Cargile 1987). These codes are also unlikely to prevent

fraudulent reporting (Brief et al. 1996; Dellaportas 2006 ). Teaching the code as an end in itself may

invite a rigid understanding of professional responsibilities devoid of professional judgment

(Armstrong et al. 2003). Educators must encourage students to recognize the broader social and

political context within which their profession practices (Low et al. 2008). Since ethics education is

often code bound with a focus of rule conformance in accounting (Kerr and Smith 1995), unethical

judgments and fraudulent financial reporting may recur due to limited coverage of underlying ethical

issues addressed by the code (Dellaportas 2006). Boyce (2008) calls for thinking beyond codes of

ethics. Ethics education in accounting needs to provide students with a deeper and more contextual

understanding of the codes of ethics (Dellaportas 2006; Everett 2007; Fogarty 1995).

Differences in Formal Education

Formal ethics education in accounting is less systematic than formal ethics education in

medicine and law. Formal ethics teaching mostly takes place during the first two years of medical

school in pre-clinical settings using four popular teaching methods: discussion/debates, readings,

writing exercises, and lectures (DuBois and Burkemper 2002). All U.S. law schools require their

students to take a mandatory one- or two-credit course in professional responsibility during upper-

class years (Cramton and Koniak 1996; Dark 2003–2004). The course focuses on the ABA Model

Rules, which are tested on the Multistate Professional Responsibility Examination (MPRE) for

licensure in all states (Rhode 1995).

In contrast to the fields of medicine and law, ethics training of accounting or business students

is not always systematic (Loeb and Bedingfield 1972), with well-documented lack of ethics

coursework (Breaux et al. 2010). Willen (2004) finds that only 33 percent of accredited business

schools require an ethics course. A recent study shows that only four states (Maryland, Nebraska,

New York, and Texas) have added prerequisite requirements of an approved three-semester-hour

college course for CPA licensure (Hurtt and Thomas 2008). Most schools still do not require

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accounting students to take discrete ethics courses (Frank et al. 2010). The requirement in most

states for CPA candidates to pass an ethics exam for licensure has been met with a pervasive

method for covering ethics in a variety of core accounting courses utilizing lectures as the dominant

approach (McNair and Milam 1993). Blanthorne et al. (2007) find that less than 25 percent of

accounting educator survey respondents agree or strongly agree with the statement that ‘‘ethical

coverage is sufficient in the accounting department where I teach.’’

Researchers like Swanson (2005) criticize AACSB’s failure to require a stand-alone ethics

course. Blanthorne et al. (2007) find that only about one-third of AACSB-accredited business

schools offer a stand-alone ethics course. The current accounting ethics curricula lack a systematic

ethics education with at least one stand-alone ethics course. A stand-alone ethics course signals to

accounting students that ethics matters (Fisher and Swanson 2005), ensures ethics coverage

(Jackling et al. 2007; Low et al. 2008; Williams and Elson 2010), and improves integration across

the curriculum (Loeb 1998). Researchers like Dellaportas (2006 ) and Shawver (2006 ) show that a

required and dedicated course in accounting ethics can significantly increase students’ cognitive

levels of ethical reasoning. A capstone course devoted to accounting ethics may be included in

accounting curricula to allow more focus on accounting issues (Shawver 2006 ). A study shows that

merely adding a general ethics course to the current pervasive method is effective in developing

accounting students’ ethical reasoning (Armstrong 1993). Thus, ethics education in accounting

needs to be replaced by a systematic training, with at least one formal course that fosters the highest

order of ethical reasoning (Ponemon 1992).

Differences in Informal Education

In comparison to ethics education in medicine and law, ethics education in accounting is short

on informal hands-on training. In medicine, formal ethics education is only a supplement to

informal influences outside the traditional lecture setting in the context of patient care, achieved

through practical clinical education (Colby and Sullivan 2008; Egan et al. 2004). In law, informal

influences from practical experiences play an important supplementary role in legal education

(Colby and Sullivan 2008). Students can participate in moot court teams, edit legal journals, or

learn how their decisions affect real lives through legal clinical programs available in virtually every

U.S. law school or by externships under the supervision of an attorney (Dark 2003–2004; Egan et

al. 2004). However, few informal influences from practical experience exist in accounting ethics

education, due to a focus on traditional classroom settings (Wilkerson 2010) and weak business

school links to practice and practitioners (Parker and Guthrie 2010). However, hands-on active

learning in ethics training is desirable according to AACSB (Laditka and Houck 2006 ). Many argue

that ethics can only be learned by doing, because the question of what is right or wrong is too

abstract without the challenge of actual consequences (Petrecca 2002; Sossin 2007). Researchers

find a positive association between auditors’ ethical sensitivity and work experience or regular

encounters with ethical dilemmas (e.g., Hill et al. 1998; Karcher 1996 ).

One possible way to provide accounting students with a better understanding of ethics practices

in their real-life context (Argyris 2004) is to incorporate real-world stories or cases in lectures

(Coyne et al. 2005). Legal ethics education uses trial practice and advocacy courses to simulate

practical experiences, and involves cases for discussion and writing assignments (Egan et al. 2004).

Early and Kelly (2004) find empirical evidence that case studies regarding ethical issues are

effective in improving students’ context-specific moral reasoning in classroom settings. Shawver

(2006 ) finds that case analyses enhance students’ ability to relate accounting education to moral

issues. Cases are believed to offer the most effective method for ethics education among accounting

educators (Blanthorne et al. 2007; Boyce et al. 2001; McNair and Milam 1993).

Improving Ethics Education in Accounting: Lessons from Medicine and Law 679

Issues in Accounting Education Volume 27, No. 3, 2012

Differences in Partnership

Ethics education in accounting involves fewer partnerships in comparison to ethics education

in medicine and law. In medicine, 79 percent of the responding schools in a survey report using a

formal ethics course usually taught by non-physicians (Coulehan and Williams 2000; DuBois and

Burkemper 2002). Many law schools maintain relationships with the bar in their jurisdictions and

invite members of the bar to participate in academic programs as speakers (Dark 2003–2004). A

survey reveals that accounting faculty members rate themselves as the most appropriate source of

ethics education (Blanthorne et al. 2007). Given the limited training in ethics discipline and up-to-

date handling of ethics issues in the field, many researchers question the appropriateness of solely

relying on accounting faculty for ethics education (e.g., Gunz and McCutcheon 1998; Oddo 1997).

Breaux et al. (2010) reveal that current ethical coverage in accounting programs is not considered

an important factor in recruiting decisions for entry-level accounting positions. Properly selected

partners from accounting practice can make significant positive contributions to ethics education

(Geary et al. 2010) valued by the accounting profession. Even though academics and practitioners

may have different views on the necessary changes (Hulme and Ehrenreich 1994) and the best

approaches for ethics education (Nielsen 2010), cooperation between the two groups is necessary to

ensure the enhancement of the profession’s ethical reasoning (Frank et al. 1990). Accounting firms’

initiative led to the formation of the Accounting Education Change Commission in 1989, which

united efforts from academics and practitioners to make its mark on accounting education as a

catalyst for change before handing off its activities to the American Accounting Association in

1996 (AAA 2011). Cooperation between leading academics and practitioners in accounting has also

led to the AAA ethics casebook (Gunz and McCutcheon 1998). Levitt (2004) indicates that

accounting firms can help improve education and recruit a new generation of auditors and

accountants by funding academic chairs at leading institutions. By encouraging an ethical focus,

accounting firms can ensure the coverage of a full range of viewpoints on key issues and the

importance of ethical standards in future job performance. Geary et al. (2010) reveal that properly

selected professional partners can make significant positive contributions to accounting ethics

education.

The comparison with medical and legal ethics education uncovers deficiencies in coverage of

ethical issues, systematic formal training, informal hands-on training through practice, and partnering

in ethics education of accounting students. These deficiencies may have partially contributed to their

lower DIT P-scores.

DISCUSSION AND RECOMMENDATION

As the quality of corporate disclosures has drawn increasing levels of criticisms (Holder-Webb

and Cohen 2007), scholars like Fogarty (1995, 2011) believe that accounting faces the danger of

deprofessionalization. Ethics education is called upon to serve as a counterbalance to the

deprofessionalization by resisting trends that would squeeze out ethicality, and to improve the moral

development of future accountants (Fogarty 2011). According to Kohlberg (1969) and Rest et al.

(1999a), the post-conventional stage or schema is the highest level of cognitive moral development.

Moral development level can be measured with tools like DIT P-scores (Rest et al. 1999b).

Many studies conclude that accounting students generally exhibit lower moral development

scores than other professional faculties (e.g., Bernardi and Arnold 2004). Such findings are

alarming because both moral development and moral reasoning are associated with ethical behavior

(e.g., Abdolmohammadi and Baker 2007). It has become a pressing matter for accounting educators

to improve accounting students’ development of moral reasoning.

Researchers (e.g., Gammie and Kirkham 2008; Klingensmith 2008; O’Leary 2009) in

accounting and other professions find that formal ethics educational programs in accounting, law,

680 Liu, Yao, and Hu

Issues in Accounting Education Volume 27, No. 3, 2012

and medicine can help individuals to improve their cognitive moral capacities and play an important

role in highlighting the importance of high ethical standards. Although the scope of responsibility

varies among professions, improving ethical awareness and advancing moral reasoning are

considered important goals of ethics education in all three fields. For instance, a physician is

responsible to patients, to society, to other health professionals, and to self; a lawyer is responsible

to clients and the public interest; and an accountant is responsible to serve the public interest.

Accounting ethics educators can benefit from transferable practices and ideas from ethics education

utilized by other professions such as medicine and law (e.g., Sisaye 2011). The comparison of

accounting ethics education with medical and legal ethics education highlights some major

differences.

In terms of content, a code of ethics plays a more prominent role in accounting and law than in

medicine. The scope of ethics education needs to cover more than the discussion of codes of ethical

practice (Boyce 2008). Developing a broad view of the profession is critical in ethics education for

medical, legal, accounting, and engineering professions (McPhail 2001). A clear understanding of

the broader social and political context, as well as the noble purpose behind the codes, is critical for

the proper development of ethical reasoning among accounting students (e.g., Everett 2007).

In terms of formal delivery method, formal ethics education in accounting is less systematic

than formal ethics education in medicine and law. A stand-alone ethics course may help ethics

education in accounting to become more systematic. Formal training with specific ethics courses is

available to both medical and legal students, but accounting students have limited access to it.

Evidence is found that a required and dedicated ethics course increases cognitive level of ethical

reasoning among accounting students (e.g., Dellaportas 2006 ). The dedicated ethics course can be

either a capstone course devoted to accounting ethics (Shawver 2006 ) or a general course in ethics

taught elsewhere in the university (Armstrong 1993). For instance, the majority of medical schools

surveyed use a formal ethics course taught by non-physicians.

In terms of informal delivery method, ethics education in accounting is short of informal

hands-on training in comparison to ethics education in medicine and law. Practical experience

opportunities abound in medical and legal ethics education, and expose students to the real-life

pressures and consequences of the service they provide, thereby introducing the endless variables in

individual cases and offering a clear understanding of the role students will play after graduation

(Egan et al. 2004). Therefore, practical experience opportunities such as internship should be

generated to help students absorb the values, culture, and behaviors of supervising practitioners, the

experienced professionals who are role models critical to professional education. In addition, a

case-based method may be used to simulate practical experiences when real-life practical

experience is difficult to obtain.

In terms of major contributors of education, ethics education in accounting involves fewer

partnerships in comparison to ethics education in medicine and law. Practical clinical education

from supervising physicians plays a critical role in ethics education of medical students. Many law

schools invite members of the bar to participate in academic programs as speakers (Dark

2003–2004). Increasing accounting students’ hands-on practical training necessitates stronger

partnership with practitioners in ethics education. Accounting faculty can include properly selected

practitioners as speakers on ethics issues and cases, so as to cover most of the practical ethical

concerns faced by accountants in their daily work.

CONCLUSION

Accounting students show lower cognitive levels of ethical reasoning with lower DIT P-scores

when compared with other professional students. In comparison to ethics education in medicine and

law, ethics education in accounting shows deficiencies in terms of code-bound content, lack of

Improving Ethics Education in Accounting: Lessons from Medicine and Law 681

Issues in Accounting Education Volume 27, No. 3, 2012

systematic formal training, a deficit in informal hands-on training, and too little usage of partnering.

Recommendations are made for accounting ethics education to advance students’ level of ethical

reasoning, as summarized in Table 1. Future studies may contribute through the exploration of

differences in actual ethical behavior among professionals, and the causes, if any, of such

behavioral differences.

TABLE 1

Summary of Transferable Practices from Medicine and Law to Accounting

Differences from Medicine and Law Recommendations

DIT Scores Accounting students and practitioners

generally exhibit lower moral

development scores than other

college-aged students and other

professional groups such as medicine

and law (e.g., Abdolmohammadi and

Ariail 2009; Armstrong 1987;

Bernardi and Arnold 2004; Gray et al.

1994; Latif 2000; Ponemon and

Glazer 1990; Scofield et al. 2004).

Accounting ethics educators may benefit

from transferable practices and ideas

from ethics education in other

professions such as medicine and law

(e.g., McPhail 2001).

Differences in Content A code of ethics plays a more important

role in accounting and law than in

medicine (Egan et al. 2004; Fisher et

al. 2005; Kerr and Smith 1995).

Ethics education in accounting needs

to broaden students’ view of

responsibilities and ethical practice

(e.g., Armstrong et al. 2003; Boyce

2008; Dellaportas 2006; Fogarty 1995;

Low et al. 2008; McPhail 2001).

Differences in Formal

Delivery Method

Formal ethics education in accounting is

less systematic than formal ethics

education in law and medicine (e.g.,

Cramton and Koniak 1996; Dark

2003–2004; DuBois and Burkemper

2002; Loeb and Bedingfield 1972;

Willen 2004).

A stand-alone ethics course may establish

a more systematic ethics education

system for accounting students (e.g.,

Armstrong 1993; Dellaportas 2006;

Ponemon 1992; Shawver 2006;

Williams and Elson 2010).

Differences in Informal

Delivery Method

Ethics education in accounting is short

on informal hands-on training in

comparison to ethics education in law

and medicine (e.g., Colby and

Sullivan 2008; Dark 2003–2004;

Egan et al. 2004; Wilkerson 2010).

More hands-on active learning in ethics

training is desirable (Laditka and

Houck 2006), with more practical

contexts (e.g., Argyris 2004; Egan et al.

2004; Sossin 2007) or case studies

(e.g., Coyne et al. 2005; Early and

Kelly 2004; Egan et al. 2004;

Klingensmith 2008; McNair and Milam

1993; Shawver 2006).

Differences in Major

Contributors of

Education

Ethics education in accounting involves

fewer partnerships with practitioners

in comparison to ethics education in

medicine and law (e.g., Blanthorne et

al. 2007; Coulehan and Williams

2000; Dark 2003–2004; DuBois and

Burkemper 2002).

Properly selected partnership with

practitioners can make significant

positive contributions to accounting

ethics education (e.g., AAA 2011;

Frank et al. 1990; Geary et al. 2010;

Gunz and McCutcheon 1998; Levitt

2004).

682 Liu, Yao, and Hu

Issues in Accounting Education Volume 27, No. 3, 2012

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