Accounting Ethics

Accounting Ethics, by Michael Pakaluk and Mark Cheffers

I was so glad and excited to have received my copy of ‘Accounting Ethics’! Image above is a shot of my copy 🙂

Allen David Press book review:

In their third book on this subject of accounting ethics, Pakaluk (one of the world’s leading Aristotelian scholars) and Cheffers (formerly one of the country’s leading accounting fraud investigators) have produced what could come to be seen as the best book on the topic ever written. Combining first-hand accounts of gross accounting ethics failures with deep discussions about the philosophical foundations associated with these failures, the authors have written a book on accounting ethics that in parts reads like a detective novel and in parts like an advanced seminar on philosophy. They begin the book by connecting the dots between the long standing and gross accounting ethics failures at AIG (American International Group) and AIG becoming the instrument for the near collapse of the entire financial system of the world (Fed Chairman Bernanke’s description). Added to this are chapters discussing gross failures at Enron and Worldcom. A chapter on Lehman Brothers is also included but interestingly this analysis concludes quite differently from previous chapters. Intermixed in the book are chapters dealing with some of the most difficult topics facing accountants. How do rules, principles and ethics interact? Is accounting a profession or a business? Are accountants trusted because they are competent and tell the truth or trusted because they are independent? How has the profession changed over the past century? Can accounting ethics be taught? What must be done?


Excerpts of review from ‘Accounting News Report’:

The aim of the book can best be summed up as stopping the next great scandal the only surefire way you can: before it starts. “Only ethical behavior can prevent the next scandal.”

The book’s focus on having an ethical foundation is apparent in its treatment of what many financial experts, Fed Chairman Ben  Bernanke included, viewed as the linchpin that could have caused the collapse of the world’s financial system, the impending bankruptcy of American International Group.  The book approaches the dealings at AIG not as a failure of people or institutions but as one of accounting ethics.

In addition to AIG, the book gives a good play-by-play account of other high-profile collapses including Lehman Brothers, Enron and WorldCom.

Pakaluk and Cheffers make the case that following the rules aren’t enough. In fact, in the Lehman Brothers play-by-play, the authors ask the troubling question, “What are an accountant’s professional responsibilities if the principles themselves seem to be misguided, or if an accounting standard itself seems to promote a purely rules-based approach?”

The book covers virtues, personal responsibility, the relationship between rules and principles, several influential but misguided, alternative approaches to ethics, professionalism, the aforementioned high profile cases, and ten cases taken from everyday practice.

“Accounting ethics lies at the intersection of accounting, ethics, and professionalism.”

The authors felt the area of professionalism was so fundamental to the subject of accounting ethics, they devoted three chapters to it and the subtle yet important shift from “Trusted because Truthful” to “Truthful because Trusted.”

If you are familiar with Understanding Accounting Ethics, either the second edition or the original, also written by the Cheffers and Pakaluk, you will immediately see the same passion for ethics evident in the latest book.

But just because the “feel” is familiar don’t mistake the relationship between the old and the new as just a refreshed edition, because it is much more, and not just because 11 out of the book’s 15 chapters are completely new.

🙂  🙂  🙂