Teaching ethics

Honesty. The public good. Hot topics in today’s corporate world. In what ways do business schools teach the next generation of accountants the basics of professional integrity?

This fall, Volkswagen posted its first decline in quarterly profits in more than a decade — a direct result of its emissions-cheating scandal. Quebec-based Valeant Pharmaceuticals suffered a double-digit share price free fall after a research firm likened its accounting practices to those of Enron. Meanwhile, Starbucks and Fiat were told to pay tens of millions of euros in back taxes after the European Union determined the companies made illegal tax deals. And Toshiba disclosed it had overstated profits by more than $1.5 billion over the past seven years.

Small wonder that the big themes of morality, the public good and what it means to act with integrity are hot topics for business schools charged with teaching ethics and professional judgment to the next generation of accountants. The Sauder School of Business is in the process of recruiting an executive director for its new $7.5-million Peter P. Dhillon Centre for Business Ethics. 

So what is the next generation of business leaders being taught about ethics and professional judgment? Traditionally, at the undergraduate level, they were taught only what is required by the profession’s code of conduct. Newer courses at some schools involve critical/ethical decision-making frameworks; students learn what not to do using case studies of old and new ethical breaches that highlight what can happen when judgment/ethics is lacking; they learn about the pressures they’ll face to stay quiet and do nothing if they want to keep a job, protect a gold-standard brand or maintain a steady revenue flow for the company.

Is this enough, particularly when in many cases professional judgment and ethics don’t become a key focus until students have entered a master’s degree or a CPA professional education program?


Kyle Stevens-Cox, a third-year accounting and finance student at Ryerson University’s Ted Rogers School of Management, appreciates the new ethics course the school has introduced. “It puts the standards in context and it has allowed us to understand how our choices affect each segment of business,” he says. “I didn’t understand the importance of ethics until I took the ethics class. Now that I have, I wish I could have taken it earlier.”

There is certainly room for more and sooner, especially when it comes to how decisions are made, says Susan Wolcott, PhD, CPA (US), CMA (US). Wolcott is also an independent scholar with Wolcott Lynch Associates and a thought leader with CPA Canada professional education. “We get people to the point where they analyze pretty thoroughly but we don’t get them to the point where they can really think carefully about the decision criteria, including values.”

This is a problem, especially when you consider that up to 80% of audit work at the Big Four firms is done by people with fewer than five years’ audit experience, according to a 2014 report from the Canadian Public Accountability Board. The guidance they receive in school, then, is the touchstone for making those decisions. “If they don’t have the courses and they have to wait until experience waves a magic wand over them then the profession is at risk. The public is at risk,” says Len Brooks, professor of business ethics and accounting and the director of the Master of Management and Professional Accounting program at the University of Toronto Mississauga.

CPA Canada’s new education program features a competency map that includes both technical and enabling competencies such as professionalism and ethical behaviour. “CPAs draw on their ability to act with honesty, integrity, credibility, professional confidence and independence, while coping with ambiguity, conflicts of interest and the need to protect the public interest. That is the expectation,” says Tashia Batstone, vice-president, education services, CPA Canada. “When you look at the unique value proposition a CPA brings to the table, it’s the ability to utilize professional judgment and an ethical framework. It’s our mandate to protect the public. If the public loses confidence in our ability to act in an ethical manner, we have lost all credibility and value.”

Sam Zhu, a fourth-year accounting student at York University’s Schulich School of Business, admits he hadn’t thought much about ethics other than with an eye to acting in a way that would keep him out of any scandalous headlines. But that has changed. “It’s not just about public perception but more about the choices I make and the reasons behind those choices.”


A little background: the Enron, WorldCom and Arthur Andersen scandals back in 2001 and 2002 triggered a lot of concern in the professional accounting community and in the university programs related to professional accounting in Canada and the US. In June 2004, the Association to Advance Collegiate Schools of Business (AACSB), the US-based body that accredits business and accounting programs, published its education task force report directing business schools seeking accreditation to bolster their courses on corporate governance, ethical decision-making, ethical leadership and the responsibility of business in society. Eleven years later, the AACSB’s guidelines have slowly taken hold to lesser and greater degrees.

“If a school has a one-hour session on corporate governance in a four-year undergraduate program, then it can truthfully say it includes the material in its program, but it falls well short of the expectation in the guidelines,” says Brooks. “New scandals put more pressure on those universities that don’t have significant education in these areas to do more. Part of this exercise in my view is to teach students how we got where we are in corporate governance. We got Sarbanes-Oxley because of the Enron, WorldCom and Arthur Andersen scandals. The subprime crisis of 2008 resulted in the Dodd-Frank Act. I think it’s helpful for students not just to start out memorizing codes of conduct or statutes but to have an understanding of the history so that we don’t have to repeat it.”

Wolcott, who designed the CPA Way, the professional judgment model of the new CPA Professional Education Program, agrees. “I feel confident in saying virtually everyone who graduates with an accounting degree has had to learn and make sense out of the code of ethics but that only gets you so far. WorldCom is a good example. The fraud was a basic accounting issue where profits weren’t where the managers wanted them to be, so they found an accountant who would ‘adjust’ the numbers. From a code of conduct perspective, making those entries is a violation. The problem is, what do you say if you’re a junior person and the managers are putting pressure on you? If you refuse to make the journal entry and someone else does, do you still have a responsibility? Do you keep quiet or leave the company? We want students to be able to communicate and to figure out how to handle and to practice dealing with those dilemmas so they aren’t confronted with them for the first time on the job. That’s what the CPA Way addresses.”


The most common ethical dilemmas in public accounting involve conflicts of interest, such as whether or not to accurately report your time when your performance evaluation is based on keeping to a budget, or turning a blind eye to anomalies when your client is a friend. This involves integrity and honesty and a willingness to pay a personal price for your values. “We adopted language called the CPA Mindset that focuses on values and how to apply them in making decisions,” says Wolcott.

Business schools take their marching orders from the big themes that underpin CPA Canada’s competency map and the provincial codes: being objective, competent and independent. They are doing this in part by incorporating ethics informally throughout their undergraduate courses and often by offering stand-alone ethics courses. The goal is to provide students with the vocabulary to discuss ethics, to understand what it means to behave ethically, to have an understanding of ethical decision-making frameworks and then to employ stakeholder analysis and critical thinking to encourage different viewpoints, assess how decisions impact all stakeholders and come up with alternative actions.

“For example, as a CFO, you may wish to push for an accounting treatment that will maximize your compensation. That’s not how we would train a CFO at our school,” says Cameron Graham, accounting professor at the Schulich School of Business. “They are going to learn to take other perspectives into account and to realize in the long run [that] balancing those interests against your own is fundamentally necessary; otherwise there’s no reason for anyone to trust you. We’re teaching students to make those kinds of contradictions explicit, to talk about them and get them on the table. I want to see students come out of our program not afraid of ethical dilemmas and contradictions and ambiguity because they know how to get other people involved in coming to a shared understanding of what the problem is and to a decision that is acceptable to everyone. That’s when you have graduates who can add value.”


The University of Waterloo’s School of Accounting and Finance has adopted some of the doctrines from Mary Gentile’s book Giving Voice to Values to help students do the right thing. “How can you become an advocate for the right choice and use your skills of persuasion to change the minds of people pressuring you?” asks Krista Fiolleau, an assistant professor of assurance and ethics at the school. “We spend a lot of time on strategies to help students live their values.”

That can only happen if graduates are comfortable with ethics and their own values and understand the barriers to ethical decision-making. “I get my students to engage in enough conversations about ethics so they don’t feel like it might be impolite to question someone else’s values,” says Chris MacDonald, director of the Jim Pattison Ethical Leadership Education and Research Program at the Ted Rogers School of Management. “You don’t want the moment of crisis to be the first time you’ve tried to put words around what it is you value as an individual and as a company. In most cases, we are training future managers, not just future professionals. What sort of example are they going to set? The way they shape those teams and the structures and incentives they put in place will make it either harder or easier for individuals to feel empowered to do the right thing and raise their hand when they see signs of trouble; to create an ethical culture or not.”

Brooks sees a void in business that CPAs can address. “The objective is to make professional accounting students aware of ethical issues and failures so they can advise colleagues and executives on these matters and how to use ethical decision-making in other areas of the organization. They don’t teach business ethics in law school; they don’t stress it in marketing or anywhere else. Because the profession is based on ethics and because CPAs are preparing financial statements and auditing them, they have a lot at stake or should. If you want a culture of integrity, the profession has a big role to play.”


This fall, CPA Canada launched the Advanced Certificate in Accounting program for people interested in midlevel accounting roles. The program’s first course offers a foundational knowledge in ethics: what it is, the types of ethical dilemmas accountants are likely to face and a five-step problem-solving framework called the ACAF Method that mirrors the CPA Way.

Step 1: Assess the situation
Step 2: Identify issues
Step 3: Analyze issues
Step 4: Make conclusions
Step 5: Communicate findings.