Are future CPAs prepared? The status of ethics education: in the court of public opinion, ethical behavior is a key determinant of value and trust. Unfortunately, a few bad actors can taint perceptions of the performance of an entire cast.

CPAs continue to earn high marks for ethics among business leaders and the public in spite of recent national accounting and auditing scandals. How is ethics being taught to the next generation of CPAs? How has the last decade shaped accounting ethics education?

A four-year research study reveals the status of ethics education in the largest colleges and universities in North America and what it means for members of The Ohio Society" of CPAs.

HOW THE CONVERSATION BEGAN

The 1998 AICPA report "CPA Vision: 2011 and Beyond" increased the emphasis on ethics education for the accounting profession. At the time, an undergraduate accounting major was exposed to 10 classroom hours of ethics education over four years, with over half of that time devoted to auditing, intermediate accounting, and introductory accounting classes.

After the Enron and Worldcom scandals, accusing fingers pointed toward:

* The SEC for their lack of supervision

* ASB for permitting accounting standards with loopholes

* An accounting firm that had not done its job properly

* The academic community for not teaching and instilling ethical values in the classroom

This final critical point provided the impetus for a study of the largest accounting programs in North America to determine the extent to which ethics was taught. Chairs of the 530 largest accountancy programs in North America were surveyed, resulting in 122 useable responses (a response rate of 23%).

The responses were divided into two institutional categories for analysis:

* Schools accredited by the Association for the Advancement of Collegiate Schools of Business International (AACSB) versus non-AACSB accredited institutions

* Public versus private institutions

The objective was to determine if there were significant differences in attitudes towards ethics education based upon institutional categories. Where and to what extent was ethics taught in both the business and the accountancy curricula at these institutions.? Accounting program chairs were also asked whether they preferred an ethics-specific course in the curriculum versus integrating ethics in the curriculum, and their perception of the amount of time that should be devoted to ethics.

STUDY RESULTS

Based on a scale of one to five, the accounting chairs rated ethics as more important in the accountancy curriculum (4.34) than in the business core curriculum (4.16). Not surprisingly, accounting chairs in all categories would also like to devote more time to ethics education in accounting curriculum (see Table 1).

The largest institutions in North American devote more than 27 hours to ethics education in the accountancy curriculum. Based on the limited research available, this means that over the last four years, the largest colleges and universities have increased their ethics coverage from approximately 10 hours to more than 27 hours within the core accounting curriculum. Plus, other courses in the accounting program that were not included in this survey may also incorporate ethics into the curriculum. It is plausible that students enrolled in the largest accountancy programs may be exposed to nearly three times as much ethics education as students in the pre-Enron era.

Further, the chairs of the largest accounting programs also indicated that ethics education should be expanded to approximately 29 hours of instruction within the accounting curriculum in the future.

WHERE SHOULD ETHICS BE TAUGHT WITHIN THE PROGRAM?

Where ethics should be taught in the accounting program is a longstanding question. Should ethics be taught as a stand-alone course or integrated within the accounting curriculum? Should ethics be part of the core business curriculum of the accountancy program?

The following table shows the results to these questions.

The required ethics class for all business students is most likely a broad based course in business ethics, while the ethics-specific class required for accountancy majors focuses on issues that only accountancy students would likely face in practice. Given the low number of required, ethics-specific classes for accountancy majors and the amount of time ethics is reported in the accounting curriculum, it is likely that ethics is integrated throughout the curriculum instead of being a stand-alone class. This is consistent with the desires expressed by most of the chairs to see ethics taught within the curriculum. The survey indicated that approximately 70% of the chairs wanted ethics integrated throughout the curriculum while about 30% wanted ethics taught in a stand-alone class in the accountancy program.

IS ACCREDITATION A FACTOR IN ETHICS EDUCATION?

While the AACSB requires that ethics be a component of the business program, it does not specify how ethics should be covered. However, because of this standard we expected AACSB schools would spend more time on ethics and have more required courses on ethics. As tables 1 and 2 indicate, this was not the case. Actually, more time was spent on ethics and there were more required courses in ethics for both the business and accounting curriculum at non-AACSB schools. This suggests that the value of ethics instruction is driven by other factors.

CHAIRS' PERCEPTION OF RESOURCES MOST FREQUENTLY USED TO TEACH ETHICS

In his 2004 article, C. William Thomas gave readers a list of resources that may be used to teach ethics. However, his list did not provide a rank order of preference for the use of these materials. In order to extend the preceding work, the authors provided the chairs with a list of six major resources comparable to those developed by Thomas and asked the chairs for their perception of the most frequently used resources by faculty teaching ethics in the curriculum. Their top three choices were:

1. Ethics case studies that appear in accountancy textbooks

2. Professional codes of ethical conduct

3. Ethics-related content appearing on professional exams

The third item will likely change in the near future as both the major certification examinations (CPA and CMA) have been closed for more than 10 years, thereby making the availability of such material difficult.

Since we anticipated that chairs would consider professional codes of conduct a highly used resource in teaching ethics, we also provided the chairs with a list of eight codes of professional conduct to rank in terms of frequency of use. Their top three choices were:

1. AICPA

2. Institute of Management Accountants 

3. Institute of Internal Auditors 

Neither the code of conduct sponsored by the International Federation of Accountants (IFAC) or the United Kingdom's Chartered Institute of Management Accountants (CIMA) was selected among the top three codes. However, we believe it is likely that the chairs will alter their selections in the future given the movement toward the implementation of International Financial Reporting Standards (IFRS) and a global code of conduct evolving from this process.

FUTURE SOLUTIONS

Has the academic community responded to the call to elevate ethics instruction? The survey results indicate it has, to the benefit of the profession as a whole. Programs now provide an average of more than 27 hours of classroom time devoted to ethics in the core accounting classes, compared to the previous average of about 10 hours before the Enron and World.com scandals.

Even with this apparent progress, the National Association of State Boards of Accountancy (NASBA) issued a proposal to require colleges to revise their accounting programs to include both a required, stand-alone ethics class in their accounting curriculum and another such class in the business core curriculum. Although this proposal was withdrawn, it still indicates that accounting regulators may not feel completely comfortable with how institutions may have included ethics in the accounting curriculum. Furthermore, while this study reflects a dramatic increase in the emphasis on ethics in the largest institutions, it does not ensure comparable progress at smaller accountancy and business programs that may not have the same resources.

Given these concerns, there may be other options to ensure the inclusion of ethics in accounting education. One suggestion would be for state CPA societies to work with their state boards of accountancy to develop some type of requirement for a specific amount of time spent on ethics instruction. This requirement, however, may put programs at smaller institutions at risk.

Another suggestion is to look beyond the university and its curriculum for ethics instruction. Accounting regulators might require new CPAs to pass a state-board ethics examination before receiving their CPA certificate.

Also, the CPE requirements for CPAs could be revisited. Do CPAs really need 40 hours of annual continuing education? Or would fewer hours of CPE with a higher quality of relevant content for the individual CPA suffice? Part of that relevant content must be an awareness of professional conduct requirements for a CPA in their state of licensure. This could mean that CPAs would take a state-based ethics class every three years before their license would be renewed, as is the requirement in Ohio.

The Ohio Society is one of the most progressive state CPA societies. The Accountancy Board of Ohio, along with the support and encouragement from The Ohio Society, has already incorporated some of the suggestions noted, but only a handful of states have gone in this direction. The goal of this paper has not been to advocate policy, but to provide information about what is currently being done at universities and colleges in ethics education. This background provides a basis for members of the Society to assess and discuss how to continue to evaluate and measure how ethics is incorporated into the profession.

REFERENCES

American Institute of Certified Public Accountants, "Focus on the Horizon: CPA Vision-2011 and Beyond," Journal of Accountancy, December 1998 Special Insert, pp.25-72.

Madison, R. 2001. To what extent is ethics taught in the accounting programs of Ohio's colleges and universities? Ohio CPA Journal 60 (2): 39-42.

Madison, Roland L. and Jacqueline J. Schmidt, "Survey of Time Devoted to Ethics in Accountancy Programs in North American Colleges and Universities," Issues in Accounting Education, May 2006, pp. 99-109.

Association for the Advancement of Collegiate Schools of Business International, 2008, Eligibility Procedures and Accreditation Standards for Business Accreditation, 15, Tampa, Florida 

Roland L. Madison, CPA, Ph.D., Is a professor and Wasmer Faculty Fellow in the Department of Accountancy at John Carroll University A Society member, he is a past president of both the Ohio Region of the American Accounting Association and the former Cleveland Chapter of the OSCPAs. You may contact him at [e-mail].

By Roland L. Madison, CPA, Ph.D. and Jacqueline J. Schmidt, Ph.D.

Jacqueline J. Schimdt, Ph.D., is a professor and former chair of the Department of Communications at John Carroll University You may contact her at [e-mail].

TABLE 1
Perceptions of actual and ideal time that should be devoted
to ethics education within the accounting curriculum

                        AVE. ACTUAL   AVE. IDEAL
                           TIME          TIME

Private institutions    27.40 hours   28.50 hours
Public institutions     26.30 hours   28.75 hours
AACSB Accredited        25.60 hours   26.O0 hours
Non-AACSB Accredited    29.40 hours   32.40 hours

TABLE 2

                                          PERCENTAGE Of
                        PERCENTAGE OF    SCHOOLS WITH A
                       SCHOOLS WITH A    REQUIRED ETHICS
                       REQUIRED ETHICS    CLASS IN THE
                        CLASS IN THE       ACCOUNTANCY
                        BUSINESS CORE        PROGRAM

Private Institutions        22%                9.4%
Public Institutions         43%               73.9%
AACSB Accredited            20%                8.1%
Non-AACSB
Accredited                  40%               16.7%

30% STAND-ALONE CLASS
70% INTEGRATED IN CURRICULUM

Note: Table made from pie chart.