By Clare Levison, CPA, CGMA
You know what technically makes a CPA a CPA — passing the Uniform CPA Examination and receiving state certification to practice accounting. But this also includes passing an ethics exam, because CPAs also have an obligation, both as human beings and as professionals, to act in an ethical manner. In fact, the Virginia Board of Accountancy (VBOA) requires all state licensed CPAs to take an annual ethics CPE course.
What is ethics? Webster’s Dictionary defines ethics as a system of principles governing morality and acceptable conduct. “Honest,” “fair” and “law-abiding” may be a few words that come to mind when you think of someone who acts ethically. “Deceitful,” “unscrupulous” and “greedy” could define unethical actions. However, the trouble with ethics is that black-and white definitions and rules are sometimes hard to establish for difficult ethical situations.
Everyone knows you shouldn’t steal your employer’s inventory, visit pornographic websites on your employer’s computer system, or create fraudulent expense reports. When Bernie Madoff, the Ponzi scheme king, scammed thousands of investors out of billions of dollars, it was clear that his actions were unethical, and he ended up with a 150-year prison sentence. But many situations are not that black and white.
The CPA designation carries a value to each CPA. While the value is most obvious through its positive impact on professional careers, the CPA designation also brings opportunities for the professional to do things like serving in significant volunteer roles and obtaining a variety of valued financial positions. With the respect paid to CPAs comes an expectation of good judgment, integrity, quality of character, and other positive attributes. But to maintain the value of our credential and the respect of our profession, CPAs must obtain and maintain the public’s trust in our professionalism, judgment and skills.
When the profession falls short, in the eyes of the public, corrective action needs to be taken.
In large part, that is why an annual ethics CPE course is required for all Virginia CPAs. In response to accounting scandals like Enron and Worldcom in the early 2000s, the profession highlighted the need for ethics training. Prior to the ethics CPE requirement, CPAs still had many rules and regulations they were expected to follow. As with many professions, the world of CPAs has always been subject to many different rules, expectations and constraints.
With public expectations come laws that have been established by representatives of the general public. Our society quite often enacts legislation to either motivate proper behavior or punish improper behavior, but both perspectives seek to obtain the expected behavior. Thus, we are a society of laws. Frank Zappa is quoted as saying, “The United States is a nation of laws, badly written and randomly enforced.” Members of any profession — doctors, attorneys, stockbrokers — might agree with Mr. Zappa. Be that as it may, laws remain a constant in our society. It is difficult to consider the implementation of a principles-based approach to achieving the social good for society as a whole until we first implement a set of legal obligations. Perhaps it can be said that prior to attempting a higher level of ethical action, one must first avoid legal troubles. After all, failure to comply with the legal standards in Virginia can result in a CPA owing significant fines and losing his or her license.
In the United States, licenses for CPAs are regulated and controlled by state laws. While state boards of accountancy are established by law to govern the licensed activity of the profession, many states, including Virginia, also regulate the ethical conduct of the profession in part by the statutes or legal authority and in part by reference to other guidance for the conduct of CPAs, such as the American Institute of CPAs (AICPA) Code of Professional Conduct.
The interaction with society and the public perception referred to in the AICPA Code of Conduct denote an additional level of ethical behavior or ethical decision making, which is based on moral reasoning. This suggests that once legal compliance is met and actions are considered within the context of the code, CPAs often utilize other decision models to determine ethical courses of action. Because CPAs are valued members of society, the public does have an expectation that CPAs can make not only good decisions, but decisions that are morally acceptable.
In short, situations may arise that laws, codes of conduct, or rules cannot adequately, efficiently, or quickly address. Yet a CPA is expected to be a trusted advisor, so each professional should consider an approach or methodology for solving ethical issues. There certainly cannot be a one-size-fits-all solution, because the very nature of ethical decision making is based on the reality that each person is ultimately the final judge of his or her own moral decisions. However, CPAs must also make ethical judgments under the scrutiny and the opinion of the public.
Early in their careers, CPAs learn the general rules, pass the CPA Exam, and then learn an additional set of rules specifically related to their new jobs. Only after the rules base is established can the CPA move toward more effectively and more ethically meeting the needs of clients or employers. The entire development of ethical decision making through the various layers of ethical guidelines, from legal guidance to AICPA or professional guidance, to the use of moral reasoning, advances the CPA toward achieving a greater social good or providing a greater benefit for society.
This year, the VSCPA has created a brand-new ethics course as part of its Essential Ethics suite of offerings focused on ripped-from-the-headlines cases of corruption and their intersection with ethical principles (or lack thereof): “Tales of Corruption: Ethical Misdeeds.” There are courses tailored to your practices and interest areas — webcast, on-demand, in person and more — and can be delivered to you in the format that works best for you. Check out more on page 11 or visit cpaethics.com for more details.
Clare Levison, CPA, CGMA, owns Inspired Responsibility, a consulting company dedicated to delivering continuing education via positive messages and meaningful content that inspires change. She strives to help bridge gaps in continuing professional development with inspiring programs and meaningful experiences that deliver the message, as well as the WHY behind the message, to propel professionals from good to best. Clare spent more than 20 years in the aerospace and defense industry in management, project, and financial accounting, as well as government compliance.