Focus on ethics in accounting seems to be a growing trend in America. The blog article, "The Lying Culture," written by the Grumpy Old Accountants, two associate accounting professors, talks about the reason they believe these ethical violations are still so prevalent despite new regulations that attempt to discourage these practices. Their theory is that it is our lying culture in society and the self-serving nature of our business leaders that is blocking progress. They may be grumpy, but these two accountants have a point and the business leaders are not alone when it comes to dishonest leadership. To see how deeply ingrained it is in our society, we merely have to look at our government, legislature, education system, and even some of the most respected accounting agencies to see that self-preservation and keeping up appearances seems to blur the ethical line.
Banks are one of the biggest violators lately. After going into detail about the banks excuses for holding on to toxic assets and how they report them, the Grumpy Old Accountants conclude, "banks are lying about asset values and really are not well capitalized." A great example of this is Bank of America and the Country Wide loan fiasco they are currently facing. Not only did they approve loan applications where applicants had lied about their income, indicating they failed to use due diligence in the approval process, they also face fraud charges from HUD, a government housing program. The government has their own ethical accounting issues though.
Government leaders are also liars according to these accountants. Ethical questions arise by the government accepting banks accounting standards because of its own incentives to hide the truth, citing the January 6th changes to the Federal Reserve accounting policy. This change eliminates the Fed ever having a negative capital situation and insolvency similar to what many banks are facing now by reporting what should be reductions to capital as negative liabilities instead. This move by the Fed boils down to politically motivated policy change that hides the truth and enables them to risk even more money. In addition to the Fed reporting change, state and local governments also fall into the category of liars who, according to the Grumpy old Accountants, are not required to report their pension funds on their balance sheet like other businesses because those obligations constitute liabilities. This makes me wonder, is it really alright to change reporting standards to fit your situation, regardless of truth, as long as you are the government and it is "in the best interest of the economy?" Would these ethical issues get better if we increased ethics education requirements? Not necessarily.
The education system, with its ethics courses and professional certification requirements, although providing a partial solution, is also lying to itself. The article reads, "Perhaps well intentioned, most are simply revenue generating ploys by organizations to make a "fast buck" by offering new courses that have little or no impact on behavior." I agree with this statement not because of the part about the fast buck, but because of the observation that they have little or no impact on behavior. While not all ethics courses are pointless, the curricula must foster introspective changes within the student not just passing the test or memorizing the material. The second reason I support their statement is because when we send students out into the workforce, they see unethical behavior by leaders and professionals in their field and many assume that kind of behavior is simply the norm and is acceptable.
It has become quite evident that ethical problems are everywhere, even in some of the organizations we are supposed to trust the most. While we thought new reforms would help, clearly they haven't. The one thing that we can conclude from all of this is that if we expect change it has to come from the top. Our leaders must abandon appearances for once and try complete truth and disclosure, otherwise even our attempts at educating our future leaders will fail.
Works Cited
Catanach, Anthony H. Jr, and Ketz, J. Edward. "The Lying Culture." Grumpy Old Accountants. Smeal College of Business, Pennsylvania State University. 27 April. 2007 Web. 9 October. 2011
http://blogs.smeal.psu.edu/grumpyoldaccountants/archives/13
No comments:
Post a Comment