Accountants Don’t Need No Stinking Ethics Classes

One we didn’t want to escape mention, from today’s Durango Herald–with video from the debate in the House yesterday (right):

State Rep. J. Paul Brown made his first attempt to reduce the reach of government on Tuesday with a bid to end mandatory ethics training for accountants.

Brown, R-Ignacio, campaigned on reducing the scope of government. On Tuesday, he tried unsuccessfully to amend a minor bill on certified public accountants to remove the requirement that they take an ethics class…

Brown got support from state Rep. Spencer Swalm, R-Centennial. If people don’t know not to lie, cheat or steal, they won’t learn it at an ethics class, Swalm said.

“Look at the Ten Commandments. Why don’t we have classes where we force professionals to sit down and read the Ten Commandments over and over again? That would do the job,” Swalm said.

We know that Rep. J. Paul Brown very much wants to get the government “off people’s backs,” to the point where he threatened civil war on the campaign trail over mythical United Nations gun-confiscation schemes–but is ethics for accountants really the place he wanted to start? And as for Spencer Swalm, did he really want to call the ethics class for his profession, insurance, “a joke?”

It seems to us this could be interpreted rather uncharitably in both cases.

39 Community Comments, Facebook Comments

  1. redstateblues says:

    thy neighbor’s questionable accounting practices.

  2. Early WormEarly Worm says:

    “Why don’t we have classes where we simply force professionals to sit down and read the ten commandments over and over again.  That would do the job.” – Rep. Swalm.  Is this the fundamentalists version of “Everything I Need to Know I Learned in Kindergarten.”  If the accountants could just get it through their thick skulls to not worship graven images, the world would be a better place.

  3. caroman says:

    and I think the 2 hours of Ethics training every two years is appropriate.  Believe it or not, there are changes, particularly in taxation ethics that happen and need to be imparted to the profession.

    The 40 hour per year CPE requirement, on the other hand, is excessive.  I don’t think there is another profession with such an onerous mandate.  I believe the Colorado Society of CPA’s is the primary advocate for this level of CPE since they make a fortune providing CPE classes.  I think the standard could easily be reduced to 20 or 30 hours per year.

    • gertie97 says:

      Caroman is correct that the 40 hours of CPE annually is the highest of any profession in the state. It appears the bill is another solution in search of a problem.

    • Republican 36 says:

      I’m a lawyer and we are required to attend 45 hours of continuing legal education every three years. Of the 45 hours at least seven hours must be ethics training.

      Your also correct that updated ethics training is appropriate. What Rep. Swalm doesn’t understand is the fact that lawyers and accountants can stumble into an ethical problem without even knowing it. Not all ethical issues are as simple as refraining from stealing client’s money from the office trust account. Ethics training is usually aimed at these subtle situations to enable accountants and lawyers to realize when they may be faced with an ethical issue. Its common sense to require ethics training. Reading “Thou Shalt not steal” a thousand times isn’t enough.  

  4. coloradowahine says:

    …in order to be CERTIFIED as a public accountant. I’m glad Rep. Brown is ready to get the government off CPA’s backs.  Now if he can just get the AICPA to agree.

    What a silly, pointless gesture.

  5. Half Glass FullHalf Glass Full says:

    I assume he thinks that mandatory ethics classes for attorneys every three years are “a joke” as well?

    It should be pretty obvious to anyone without an ideological axe to grind that the ethics issues covered in these types of classes go just a wee bit beyond “thou shalt not steal” and “thou shalt not kill.” There are some rather complex and unusual ethics issues that may come up, both in accounting – witness Enron! – and the law, and I don’t think it’s a terrible, horrible thing that accountants and lawyers be required to update their ethics training every now and then as part of the PRIVILEGE of getting state certification as an accountant or lawyer.

  6. ArapaGOPArapaGOP says:

    What this is actually about is the imposition of unreasonable and superfluous requirements on professional licenses. The fact is, any “unethical” behavior that cross is legal line, meaning it begins to matter, is already illegal.

    You might not like Rep. Swalm, but please tell me how “ethics classes” would have stopped Bernie Madoff. It’s absurd.

    • ohwilleke says:

      all of the Big Four accounting firms that are the gatekeepers to information for the financial markets would be run the way that the two or three man fly by night operation that Bernie Madoff employed.

      Ethics rules are the incentives that CPA firms have to say no to client desires to shade the facts.  They make the price of malfeasance your entire career in the industry for the rest of your life and the entire goodwill of your firm (which is often a large one).

      The laws governing public accounting for public companies were revised at the federal level after that event specifically to prevent any two or three person CPA firm from doing that kind of work despite the fact that their gain from an individual client was so great that it could justify any risk of being caught breaking the law.

    • parsingreality says:

      First, “unreasonable and superfluous requirements” is entirely subjective. You might think so, and you are entitled to that opinion, but all professions require additional, ongoing education.  As noted above, things change and one can get into unethical situations without realizing it.

      To state that legal and ethical are the same standard is why I say you are ignorant.  The list of activities that are, or have been legal (think financial crisis of 2008)but unethical, or immoral is very long.  

  7. ohwilleke says:

    There is more to accounting ethics than knowing that you shouldn’t “lie, cheat or steal.”

    The kinds of issues involved include, knowing just how sure you have to be about a client’s likelihood of prevailing on a tax issue to be free of a duty of disclosing a disputable tax law position (which turns out to be a highly technical matter that changes from time to time), how to balance the duties to your client and third parties receiving disclosures (particularly when your client is behaving badly), and figuring out what decisions can and cannot be legitimately delegated to non-CPA subordinates in a large organization.

    All in all, this private sector allocation of responsibility, which doesn’t cost taxpayers a dime (even the monitoring of ethics classes is paid for with users fees), that is directly related to the benefits and privileges we gives CPAS and makes our economy better for business by making it more trustworthy and transparent, and reduces systemic risk (and hence the risk of socialist intervention in the economy) seems like an awfully good deal for all involved.

    CPAs are a classic example of pro-market solutions to government regulation.  Mostly, the regulatory bureaucracy is privatized and governed by the private sector using private sector set GAAP rules instead of handled by a government agency according to government decreed regulations.  We’d need hordes of government bureacrats to keep businesses honest otherwise.  Lassiez-faire types should be praising this kind of minimalist government involvement at a state and local rather than federal level, that produces great results, rather than trying to undermine it.  

  8. allyncooper says:

    I’m involved in a lawsuit right now in which I am certain a registered structural engineer falsified an inspection report to meet their clients contention that I improperly performed a construction job. I was forced to file a lawsuit in order to start discovery and have my own inspection done

    The client refused to allow me to to observe their “inspection” and take pictures, and now refuse to produce any pictures of the “inspection”, which should have been taken in any inspection of this sort done by a registered structural engineer.

    If I am able to prove fraud, I’m going after their license.  

    • Sir RobinSir Robin says:

      Clearly, if they have no societally accepted and defined norms that draw the lines regarding what is ethical, and what isn’t, lawlessness ensues.

      Ethical training is what defines the norms, and informs the license holder. A license, by the way, which enable the holder to earn an enviable economic position. Take the license away, and their just any bookkeeper.

      We’re talking about one of the more important aspects of our lives…..money. We can argue whether its the MOST important.

      Personally, my first business dispute involved a breach, that (lo and behold) came down to an issue of money. The majority’s CPA at first, vocally defended me. Then, his position changed.

      A few weeks later, laying in bed on a Sunday morning, viewing the Boulder R.E. transactions, my wife noticed a house sale between our partner and the CPA. It was a favorable deal for the CPA. Ethics.

      Ethics is a topic that should be required in school. The topic is fascinating. The two main schools of Ethics stand in stark relief held against the human record. It illuminates our condition, and provides a very practical tool that had the ability to lessen the stress in our lives.

      Maybe it should be a part of the Affordable Health Act. What the Republicans,

      shamelessly insist on calling Obamacare.

      One core principle of Ethics is that in any given situation, an active participant does neither too much or too little. The closer one gets to that magical zone, the more ethical one is.

      Why woould Republicans try to eliminate such a wonderfully human skill?

  9. Barron X says:

    .

    bond trader

    hedge fund manager

    Fannie Mae Exec

    Congressional Representative

    .

  10. DavidThi808DavidThi808 says:

    I agree with licensing and pulling it for violations. And I think good accountants will stay on top of what is legal. But does requiring a calls affect behavior?

    (not disagreeing – just asking. I work in a profession that has no certification or requirements.)

    • The first is, the classes aren’t about changing behavior, but rather about informing the CPAs of the current ethical standards they must follow to stay within the laws and rules of financial accounting.  It’s part of the job to know these rules, and they change over time.

      The second is, if they fail to follow these ethics guidelines, they can have their certification revoked.  That can be a big hit to the pocketbook, and probably does have a deterrent effect, at least up to some point.  (It’s pretty obvious that there’s a limit to the deterrent effect, though – see all of the major accounting scandals over the past 10 years…)

    • ohwilleke says:

      Accountants, dispositionally, are about the most compliant and risk averse group of professionals you’ll ever meet.  You don’t become an accountant if you are a rebel with authority issues, or like to make high stakes gambles just for the thrill of it.  Those people become lawyers and investment bankers respectively.

      Obviously, an accountant, like anyone else, wants to serve their client.  But, the more clear the rules are in gray areas, the more likely it is that accountants won’t cross them.

  11. Diogenesdemar says:

    House Ethics Committee Clears 3 of Conflict of Interest

    The House ethics committee, in one of its first official acts since the start of the new Congress, dismissed cases involving three members accused of creating an appearance of a conflict by holding fund-raising events with financial industry executives and lobbyists in the days before major votes on legislation revamping the nation’s financial regulations.

    The decision came as a relief to lawmakers. If the ethics committee had found violations, ground rules for fund-raising would have radically changed in Washington, where popular restaurants and bars around Capitol Hill sometimes host two or three events each night.

    http://www.nytimes.com/2011/01

    Of course, this article may also be evidence that ethics as we know them are irrelevant.  Ladies and gentlemen choose your Rorschach . . .

  12. JeffcoBlueJeffcoBlue says:

    You can’t tell from the printed word just what an ignorant spittoon Brown is – you have to hear it. What an embarrassment to the GOP he is.

    Swalm is even worse, he is almost the perfect caricature of a used car salesman sleazebag.

  13. Half Glass FullHalf Glass Full says:

    Let’s expand it.

    Do away with law school altogether. Same with med school. Same with any and all licensing and regulation. Same with elementary and high school.

    Just let’s all read the Ten Commandments over and over and over.

    And then we can do away with our representative form of government, declare “Christian Law,” and follow this guy:

    http://wonkette.com/436272/man…  

  14. TheBluRidr says:

    but I also question the value of ethics classes. I think the CE requirements that keep professionals up on the new standards in the industry are great.  That being said, I don’t know that an ethics class has EVER made someone who wasn’t ethical in the first place change their ways.  You have dedicated professionals, then you have the hacks in just about every profession.  I would be more in favor of those with a professional license being retested every 5th year  on their profession or some such arrangement.  I’ve seen insurance professionals that while legal, don’t understand the basics of insurance well enough to be trusted.  I know they sit through their 2 hours of ethics every two years.  They don’t change, they just remain woefully ignorant.

    • The ethics classes are to let ethical CPAs (and just plain clueless but otherwise not malicious CPAs) know what the rules, laws, and standards are.

      • TheBluRidr says:

        CE classes are to show what current legal, rules, standards are.  Why should we duplicate them with a separate ethics class?  If you’re not ethical, you won’t be ethical because you sat through an ethics class.

    • coloradowahine says:

      PLUS – the profession has an obligation to maintain high standards. High standards usually includes ethical behavior.  And, in the instances when a CPA is unethical, the profession has to be able to respond, “Hey, we taught them better!” and not just “They were going to do it anyway.”

      TheBluRidr, about your comparison with insurance and testing – accountants have required CE in all areas, not just ethics.  That’s for their CPA license, not simply the license to practice in CO. If the insurance industry had a robust professional organization like the AICPA, AMA or ABA, their members might be less ignorant.  

      • TheBluRidr says:

        Ethical behavior involves following the laws, rules and regulations. The consumer is better served by enforcing rigorous education up to most recent policy forms and best ways to protect clients.   I have to sit through 24 hours of CE every 2 years (3 of which are ethics).  I routinely triple that requirement, not because I have to, but because it is the right thing to do for my customers.

        We have several robust organizations in the insurance industry.  PIA, IIABA, The National Alliance for Insurance Education, locally, PIIAC.  Those are just the ones with independent agency ties.  I’m sure the captive agents have their own orgs. Ethics classes won’t make the people less ignorant.  I think they take away from the other class time that insurance professionals should be studying.

        I’m not advocating for unethical behavior in my industry.  Our agency will turn away customers that expect us to behave in a fashion that is unethical.  I think maybe instead of these classes we should start a stronger fine system for agents that to operate within ethical boundaries.

  15. ScottP says:

    From what I read from the comments from people who know about the CPA world in Colorado, it doesn’t sound like a bad idea to look at changing the requirements. Getting rid of them seems a bit far though.

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