However, isn’t this situation one in which an exception to the rule should come into play for humanitarian reasons?
Whenever we are confronted with a moral dilemma, we need to consider whether the action would respect the basic rights of each of the individuals involved. How would the action affect the well-being of those individuals? Would it involve manipulation or deception—either of which would undermine the right to truth that is a crucial personal right? Actions are wrong to the extent that they violate the rights of individuals. 68
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Chapter 1 Ethical Reasoning: Implications for Accounting 27
Sometimes the rights of individuals will come into conflict, and one has to decide which right has priority. There is no clear way to resolve conflicts between rights and the corre- sponding moral duties to respect those rights. One of the most widely discussed cases of this kind is taken from William Styron’s Sophie’s Choice. Sophie and her two children are at a Nazi concentration camp. A guard confronts Sophie and tells her that one of her children will be allowed to live and one will be killed. Sophie must decide which child will be killed. She can prevent the death of either of her children, but only by condemning the other to be killed. The guard makes the situation even more painful for Sophie by telling her that if she chooses neither, then both will be killed. With this added factor, Sophie has a morally compelling reason to choose one of her children. But for each child, Sophie has an equally strong reason to save him or her. Thus, the same moral precept gives rise to conflicting obligations. 69
Now, we do not face such morally excruciating decisions in accounting (thank good- ness). The ultimate obligation of accountants and auditors is to honor the public trust. The public interest obligation that is embedded in the profession’s codes of ethics requires that if a conflict exists between the obligations of a decision maker to others, the deci- sion maker should always decide based on protecting the public’s right (i.e., investors and creditors), such as in the receivables example, to receive accurate and reliable financial information about uncollectibles.
Justice Justice is usually associated with issues of rights, fairness, and equality. A just act respects your rights and treats you fairly. Justice means giving each person what she or he deserves. Justice and fairness are closely related terms that are often used interchangeably, although differences do exist. While justice usually has been used with reference to a standard of rightness, fairness often has been used with regard to an ability to judge without reference to one’s feelings or interests. This is the basis of the objectivity principle in the AICPA Code. When people differ over what they believe should be given, or when decisions have to be made how benefits and burdens should be distributed among a group of people, ques- tions of justice or fairness inevitably arise. These are questions of distributive justice . 70
The most fundamental principle of justice, defined by Aristotle more than 2,000 years ago, is that “equals should be treated equally and unequals unequally.” In other words, indi- viduals should be treated the same unless they differ in ways that are relevant to the situation in which they are involved. The problem with this interpretation is in determining which criteria are morally relevant to distinguish between those who are equal and those who are not. It can be a difficult theory to apply in business if, for example, a CEO of a company decides to allocate a larger share of the resources than is warranted (justified) based on the results of operations, to one product line over another to promote that operation because it is judged to have more long-term expansion and income potential. If I am the manager in charge of the operation getting fewer resources but producing equal or better results, then I may believe that my operation has been (I have been) treated unfairly. On the other hand, it could be said that the other manager deserves to receive a larger share of the resources because of the long-term potential of that other product line. That is, the product lines are not equal; the former deserves more resources because of its greater upside potential.
In our discussion of ethical behavior in this and the following chapters, questions of fairness will be tied to making objective judgments. Auditors should render objective judg- ments about the fair presentation of financial results. In this regard, auditors should act as impartial arbiters of the truth, just as judges who make decisions in court cases should. The ethical principle of objectivity requires that such judgments be made impartially, unaf- fected by pressures that may exist to do otherwise. An objective auditor with knowledge about the failure to allow for the uncollectible receivables would not stand idly by and allow the financial statements to be materially misleading.
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28 Chapter 1 Ethical Reasoning: Implications for Accounting
For purposes of future discussions about ethical decision making, we elaborate on the concept of procedural justice. Procedural justice considers the processes and activities that produce a particular outcome. For example, an ethical organization environment should positively influence employees’ attitudes and behaviors toward work-group cohesion. When there is strong employee support for decisions, decision makers, organizations, and outcomes, procedural justice is less important to the individual. In contrast, when employees’ support for decisions, decision makers, and organizations, or outcomes is not very strong, then procedural justice becomes more important. 71 Consider, for example, a potential whistleblower who feels confident about bringing her concerns to top manage- ment because specific procedures are in place to support that person. Unlike the Betty Vinson situation, an environment built on procedural justice supports the whistleblower, who perceives the fairness of procedures used to make decisions.
Virtue Ethics Virtue considerations apply both to the decision maker and to the act under consideration by that party. This is one of the differences between virtue theory and the other moral philosophies that focus on the act. To make an ethical decision, I must internalize the traits of character that make me an ethical (virtuous) person. This philosophy is called virtue ethics, and it posits that what is moral in a given situation is not only what conventional morality or moral rules require but also what a well-intentioned person with a “good” moral character would deem appropriate.
Virtue theorists place less emphasis on learning rules and instead stress the importance of developing good habits of character, such as benevolence. Plato emphasized four vir- tues in particular, which were later called cardinal virtues: wisdom, courage, temperance, and justice. Other important virtues are fortitude, generosity, self-respect, good temper, and sincerity. In addition to advocating good habits of character, virtue theorists hold that we should avoid acquiring bad character traits, or vices, such as cowardice, insensibility, injustice, and vanity. Virtue theory emphasizes moral education because virtuous character traits are developed in one’s youth. Adults, therefore, are responsible for instilling virtues in the young. Virtue characteristics are particularly relevant to the cognitive moral develop- ment models discussed in Chapter 2.
The philosopher Alasdair MacIntyre states that the exercise of virtue requires “a capac- ity to judge and to do the right thing in the right place at the right time in the right way.” Judgment is exercised not through a routinizable application of the rules, but as a function of possessing those dispositions (tendencies) that enables choices to be made about what is good for people and by holding in check desires for something other than what will help achieve this goal. 72
At the heart of the virtue approach to ethics is the idea of “community.” A person’s character traits are not developed in isolation, but within and by the communities to which he belongs, such as the Principles in the AICPA Code that pertain to standards of accept- able behavior in the accounting profession (its community).
MacIntyre relates virtues to the internal rewards of a practice (i.e., the accounting profes- sion). He differentiates between the external rewards of a practice (such as money, fame, and power) and the internal rewards, which relate to the intrinsic value of a particular practice. MacIntyre points out that every practice requires a certain kind of relationship between those who participate in it. The virtues are the standards of excellence (i.e., principles of conduct) that characterize relationships within the practice. To enter into a practice is to accept the authority of those standards, obedience to the rules, and commitment to achieve the internal rewards. Some of the virtues that MacIntyre identifies are truthfulness, trust, justice, courage, and honesty. 73
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Mintz points out that the accounting profession is a practice with inherent virtues that enable accountants to meet their ethical obligations to clients, employers, the government, and the public at large. For instance, for auditors to render an objective opinion of a client’s financial statements, they must be committed to perform such services without bias and to avoid conflicts of interest. Impartiality is an essential virtue for judges in our judicial system. CPAs render judgments on the fairness of financial statements. Therefore, they should act impartially in carrying out their professional responsibilities. 74
The virtues enable accounting professionals to resolve conflicting duties and loyalties in a morally appropriate way. They provide accountants with the inner strength of charac- ter to withstand pressures that might otherwise overwhelm and negatively influence their professional judgment in a relationship of trust. 75 For example, if your boss, the CFO, pressures you to overlook a material misstatement in financial statements, the virtues of honesty and trustworthiness will lead you to place your obligation to the public, including investors and creditors, ahead of any perceived loyalty obligation to your immediate super- visor or other members of top management (as occurred in the Betty Vinson case). The virtue of integrity enables you to withstand the pressure to look the other way. Now, in the real world, this is easier said than done. You may be tempted to be silent because you fear losing your job. However, the ethical standards of the accounting profession, as depicted in part in Exhibit 1.3 , obligate accountants and auditors to bring these issues to the attention of those in the highest positions in an organization, including the audit committee of the board of directors, as did Cynthia Cooper in the WorldCom fraud.
We realize that for students, it may be difficult to internalize the concept that, when forced into a corner by one’s supervisor to go along with financial wrongdoing, you should stand up for what you know to be right, even if it means losing your job. However, ask yourself the following questions: Do I even want to work for an organization that does not value my professional opinion? If I go along with it this time, might the same demand be made at a later date? Will I begin to slide down that ethical slippery slope where there is no turning back? How much is my reputation for honesty and integrity worth? Would I be proud if others found out what I did (or didn’t do)? To quote the noted Swiss psychologist and psychiatrist, Carl Jung: “You are what you do, not what you say you’ll do.”