CPAs across the country are required to sit through various amounts of ethics training every two years. I sat thought mine on Friday. Inevitably during these sessions, the question comes up, “Can ethics be taught?” My own answer to this question has fluctuated since it was first posed to me as a graduate student. Could more effective ethics training have prevented the major accounting failures of the last 10 years? I am, by nature and temperament, a realist. (That probably also describes 80% of the accounting profession). If you need an upbeat pep talk, I’m probably not the guy you want to call. This tendency in my own makeup caused me in the past to answer the title question with a resounding “No.” If people are going to lie, cheat and steal, it’s in their nature and all we can do is work to limit opportunity. You remember the fraud triangle.
If you have never seen this chart, it’s really useful when thinking about the elements that drive people to commit fraud. Individuals have external and internal events (divorce, gambling problems, greed, sick child, etc.) that create pressure. This pressure, when strong enough, leads to rationalization: “They won’t really miss the money. I’m underpaid anyway. In fact, I deserve it. I’m just borrowing it, and I’ll pay it back.” The last step, opportunity, is the only one that management can control. If the three are present together, misappropriation of assets or fraudulent financial statements are soon to follow. I have always been pessimistic of individuals’ ability to resist these temptations. Will a single mother with a mountain of debt really not take the cash when it’s sitting right there? Will a controller facing earnings pressure really be able to say no to backdating a journal when the company’s future is on the line? When the question of whether ethics can be taught was posed on Friday, a participate gave such a good answer that I think he may have actually succeeded in changing my mind. (A small miracle, no doubt). I’m paraphrasing but they said something to the following effect.
“Ethics is the framework by which individuals make decisions. Frameworks and situations can be taught, so that when they are encountered in real life, individuals have already had a chance to decide what they would do in advance. This increases the likelihood they will act ethically.”
I liked this so much, that a colleague and I looked at each other, surprised, and she said, “That’s the best answer to that question I’ve ever heard.” So ethics training, when done correctly, is really a role playing game in your mind. You get to visualize yourself as the criminal without committing the act and resolve not to make the same mistakes. So, kudos to that participant, whoever he was, for wording his answer so well that he changed my mind on an issue that is ever present in our profession.