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Was Socrates an accountant?
by Simon Longstaff
Introduction
As the title of this paper indicates, I want to explore some of the connections linking the ancient Greek philosopher, Socrates, to the role of accountants in an increasingly internationalised economy. Bearing this in mind, you might expect me to begin in Athens in about the fifth century BC. Instead, let me start with developments in contemporary Indochina.
I have recently returned from Vietnam. During my time there, I was asked by the Government of Vietnam to assist in the development and implementation of a most challenging and unusual project. Basically, St James Ethics Centre has been requested to work with senior Vietnamese government officials, academics and business people as they pursue two related objectives. The first is to define a core framework for business ethics in Vietnam. The second objective is to develop a series of practical measures that might be applied in order to give that framework positive effect.
The assignment is seductive as an opportunity to play a role in helping to shape the contours of an evolving economy. It is also overwhelming in its scope and degree of difficulty. Being realistic, it is unlikely that the energies of all of the less admirable ‘animal spirits", currently running free in the Vietnamese economy, can be tamed and turned for the common good of the Vietnamese people. Yet, with a strong central state lending its support to the process, there is a real chance that the Vietnamese could effect significant reform and, in doing so, leap beyond some of the initial dangers faced by those who let tigers loose.
As with virtually every society, the Vietnamese have experienced some of the less welcome effects of economic liberalisation: corruption, a proliferation of unsafe products dumped on an unsuspecting public, a rise in the number of fraudsters and scam-merchants (local and imported), wanton degradation of the natural and built environment, and so on.
Being a Socialist state, many are inclined to conclude that the behaviour of greedy, rapacious, dishonourable people is to be expected in a market economy. Many think this to be the necessary price paid for economic progress. Many emulate the worst forms of commercial behaviour; as if doing so were a prerequisite for success. Yet despite this, the leadership of the country has realised that, in the medium to long-term, the operation of efficient and effective markets depends on the existence and application of an underlying set of ethical principles. This in itself suggests a level of maturity in policy analysis that is noteworthy.
One key concern for Vietnamese policy-makers relates to the effects of entering into the global economy; firstly as newly admitted members of ASEAN and then later as members of APEC. The basis for this concern is multi-faceted. There are bound to be domestic political considerations at work. However, there are also issues to do with preserving a hard-fought for independence and a suspicion that other (more experienced) players may seek to take advantage of the country and its people.
This, then, is part of the background to the assignment that we have been given. So what might all of this have to do with accountants and the theme for this conference paper?
In thinking about how best to respond to the Vietnamese, I have been forced to go back to the roots of my thinking about what makes for the operation of efficient and effective markets. Like the Vietnamese, I believe that markets only operate properly when an underlying ethical base is at work. For example, markets are distorted when people lie. They are distorted when people cheat. They are distorted when they collude. They are distorted when the strong use their bargaining power to oppress the weak. The list of distortions with an ethical foundation can be extended.
Market distortions, of the kind outlined above, involve a cost for the whole community. For example, lying can frequently lead to a mis-allocation of goods. Yet, there is another effect of equal or greater significance for a community; namely, the level of trust operating in the market is eroded by such unethical behaviour. Instead of sealing an agreement with a ‘shake of the hand‘ a whole new set of legal and administrative arrangements must be devised and funded in order to ensure that agreements are kept.
I am comfortable that the arguments about ethics and the market are sound. However, I also realise that, in practice, a considerable number of people act ‘as if‘ applying a quite different model (I say ‘as if‘ because I doubt that many have an explicit model in mind). In this alternative model, ‘selfishness‘ has been substituted for ‘self-interest". The ‘tooth and claw‘ competition of laissez-faire (where there is seldom a concern about the ethical status of the means used to achieve an end) has supplanted the more ethically mature idea of the free market (with its underlying framework of ethical principles within which the pursuit of self-interest occurs). In circumstances where the alternative model is at work, society needs to respond by enlisting the support of people who will, in return for certain goods, put the interests of others before their own. That is, society needs the services of ‘gate-keepers‘ informally to regulate some of the more base impulses that masquerade under the guise of a ‘mere‘ pursuit of self-interest.
As you may gather from the direction of my comments, I see the professions fulfilling this role. I am aware that some argue (quite persuasively at times) that the privileges of the professions are a product of measures to advance the professionals‘ self-interest (what has been labelled ‘market control‘ - see Wesley Pue quoted in Samuels, 1995, p. 21).
However, I am more inclined to the argument that the simultaneous development of free market economies and self-regulated professions can be explained by:
... the model of structural functionalism which asserts that the destructive consequences of untrammelled economic exploitation are held at bay by professionalism, which pursues arrangements which ensure or are designed to ensure that service rather than profit becomes the professional label. In return for this the professions are granted a state-enforced monopoly and other privileges to which I have referred.
(Samuels, ibid, p.20)
I will refer to this ‘social compact‘ view of the professions, in more detail, later in the paper. However, I hope that enough has been said to indicate why it is that an adequate response to the people in Vietnam must include an account of the foundation of the professions in countries like Australia. This can then be compared with local ideas and traditions that might be harnessed to the same end.
Against this background, the profession of accounting requires of its members that they possess something more than technical skills. These are necessary, but not sufficient. In addition, the professional accountant needs to understand the ethical significance of her role - especially in relation to the ‘social compact‘ that gives it shape. And she will also need to develop certain dispositions - that is, to be a person of virtue and practical wisdom.
It is my contention that such a person has a distinctive role to play in a market economy and that their role is of increasing importance as economies become internationalised.
A matter of trust
The world of commerce is best fashioned in an environment of trust. There are at least two reasons for this. The first is that it is only when people are allowed some scope to exercise independent judgement that they can also be seen to develop and maintain a sense of personal responsibility for that which they say and do. An environment of close regulation tends to stifle this sense of responsibility as people defer to the supposedly higher responsibility. Released from the obligation to judge and act according to a well-informed conscience, there is a tendency to follow any course of action that is not proscribed. No amount of black-letter law or regulation can cover every eventuality. Yet in order to stamp out specific instances of unwanted behaviour (set within the compass of loop-holes) a plethora of legislation is enacted, thus further eroding any residual sense of personal responsibility.
In addition to the cost of reducing the ethical sense of individuals, there is also the financial burden to be borne by a society that can no longer rely on the inexpensive conventions of a hand-shake and a promise. As Davis (1989) has observed:
... in some sense we are contrasting a world in which the notion of ‘my word is my bond", a world of high trust, with a world which is purely caveat emptor, which implies very low trustworthy organisations. And the thing that I think economists teach us which bears on our morality is that the first is likely to be a much more productive society in any economic sense, because the entire deadweight loss of inspection, of protection, of insurance and of contracting is held to a minimum.
Trust also lies as a foundation on which the relationship between professionals and their clients is based and it is to these foundations that the discussion now turns.
Associations, occupational groups and professions
The professions do not have a right to exist. They are not the product of a law of nature. Nor is their existence a curious metaphysical fact that one must necessarily take into account when contemplating the cosmos. Rather, the professions are a social artefact.
There could be thousands of people with a superb knowledge and understanding of the relevant disciplines and still be no professions as such. Individual practitioners might attract clients willing to recognise and pay for their learning and skill, but this would not make for a profession. Indeed, for there to be a profession at all it would first be necessary for people to come together in order to form some sort of voluntary association. The trouble is that not all associations are allowed to survive, let alone flourish. For longevity, one or more of the following conditions need to apply (the list is indicative and not exhaustive):
External conditions:
- there continues to be a raison d'etre for maintaining the association
- the membership of the association remains committed to its preservation
- there is a decision-making process capable of resolving and managing internal disagreements, of charting new directions, and so on
Internal conditions:
- the new association is relatively insignificant and therefore escapes attention
- the new association is conceived by society as an expression of itself
- the new association is perceived to offer no threat to society
- the new association is believed to offer positive benefits to society
- the new association is under the protection of some power sufficient to shield it from attack
- the new association is sufficiently powerful to ward off any attempt to curb it
As noted before, the conditions outlined above are not mutually exclusive. Indeed, it is quite possible that a fledgling association will pass through a number of phases in which its status changes. One imagines that a history of the professions would reveal just such a progression. But this is beside the point. The chief fact to bear in mind is that the existence of an association is a contingency and not a necessity. A sufficiently powerful force can obliterate it at any time. Alternatively, it can destroy itself through implosion, collapsing when internal supports have decayed. The facade may stand awhile, but it too will eventually fall.
Of the external conditions, except in the application of conditions five and six, the association will depend on the goodwill (or indifference) of the host society. One can imagine societies in which a powerful protector might be minded to guard the interests of an association. And it is possible to think of groups having sufficient power to protect themselves. However, all of this is quite academic when it comes to understanding the place of associations in a modern democracy such as we find in Australia today.
Given the sovereignty of the people, the community has the power to dissolve associations as and when it may desire. Constitutions and Bills of Rights offer only limited protection as they may be amended according to the popular will. Of course, it could be argued that the selective abolition of certain associations would be ‘undemocratic". This may be true. However, it is a curious feature of democracies that they enjoy the capacity to act undemocratically. The only penalty they might suffer is the sting of criticism from those who are concerned to promote authentic democratic consistency. The charge of bad-faith might stick. But short of some external power imposing sanctions, there would be little to prevent such a course of action being followed.
The social ‘compact'
While a society might be expected to tolerate all manner of associations as a proper expression of a commitment to the principles of liberty, it is a little more difficult to see why it should allow any group, defined by a common occupation, to enjoy privileges not available to other occupational groups. A moment's reflection will lead one to conclude that a society founded on the idea of the formal equality of all can accept only two reasons for positively discriminating in favour of one group over another. The first is to redress some acknowledged wrong, the second (which it might be argued entails the first) is to promote the interests of the community as a whole.
For example, it is accepted by most people that the community would suffer if I had the right to perform open-heart surgery on my kitchen table. Instead, the right to perform such operations is restricted to those properly qualified and registered as medical practitioners. Similarly, it has been concluded that society would suffer if each individual were permitted to take the law into his or her own hands. Civil peace is thought to be enhanced if a properly accountable State is able to exercise a monopoly in the administration of force. Thus, powers of arrest are limited. An impartial cadre of judges supervises the trial of alleged offenders and the State (on behalf of the community) punishes the guilty.
None of this is controversial. At the heart of the position described above is the idea of a social compact made between society and particular occupational groups and associations. Certain privileges are accorded in return for the provision of social goods that would not otherwise be available. It is within this general scheme of arrangement that an understanding of the role of the professions in Australia must be located.
The idea of a profession
There is, however, another dimension to the discussion of professions. Rather than flowing from a consideration of the external environment in which the professions are sustained, this other dimension relates to what have been held to be the internal standards of a profession per se. One can observe that all manner of occupational groups can make bargains with society in return for privileges or other social goods and yet still not be considered to be professions. For example, parking meter officers have special powers not normally conferred on ordinary citizens. Yet, to be a parking meter officer is not to be a member of a profession. So where does the distinction lie?
One particularly influential definition of a profession was offered by Roscoe Pound (1986, p. 10). It goes as follows:
The term refers to a group ... pursuing a learned art as a common calling in the spirit of public service - no less a public service because it may incidentally be a means to livelihood. Pursuit of the learned art in the spirit of public service is the primary purpose.
The point should be made that to act “in the spirit of public service” at least implies that one will seek to promote or preserve the public interest. A person who claimed to move in a spirit of public service while harming the public interest could be open to the charge of insincerity or of failing to comprehend what his or her professional commitments really amounted to in practice.
It is not uncommon for definitions of the professions to include other important elements such as possession of:
- a specialised body of knowledge
- an ability to regulate itself
- high social status
Yet, it is not clear that these three attributes really offer anything distinctive about the professions. For example, a number of occupational groups can lay claim to mastering a specialised body of knowledge. Similarly, self-regulatory schemes wax and wane in their relative effectiveness - both as utilised by the traditional professions and those other occupational groups that have sought to exercise a measure of control over the affairs of their members.
For example, the guild is a form of association made up of people who have attained a defined level of mastery of their chosen craft. It sets standards of performance, both in terms of the members‘ personal and public life, and regulates conduct accordingly. Above all, a guild acts in a manner designed to ensure mutual aid and protection and to advance and secure the interests of its members. ‘Provisional‘ association with the guild is open to apprentices in the craft.
Traditionally, guild members have enjoyed high status and incomes. They have exercised special privileges, especially in terms of the work that they might carry out to the exclusion of all others. They have been possessed of skills equal to any professional. To many contemporary observers, it would seem that this description is nothing more than that which applies to a profession. So at what point lies the supposed distinction?
Professions are very like guilds - except in one important respect. I believe that the critical distinction is to be found in the professions‘ commitment to act in a spirit of public service. Within the context of a market economy, where self-interest is believed to be the primary driver, this is a sufficiently remarkable commitment to warrant special mention.
In August of 1993, the Australian Council of Professions (1993, p. 1) issued a discussion paper, Professional Services, Responsibility and Competition Policy. Significantly, a press release about this paper was issued under the title, In The Public Interest. Both the paper and the release sought to distinguish a profession from “more commercially minded occupational associations”. As opposed to others, professional practitioners:
... must at all times place the responsibility for the welfare, health and safety of the community before their responsibility to the profession, to sectional or private interests, or to other members of the profession.
If the idea of a profession is to have any significance, then it must hinge on this notion that professionals make a bargain with society in which they promise conscientiously to serve the public interest - even if to do so may, at times, be at their own expense. In return, society allocates certain privileges. These might include one or more of the following:
- the right to engage in self-regulation
- the exclusive right to perform particular functions
- special status
At all times it should be remembered that what society gives, it can take away. It only accords privileges on the condition that members of the profession work to improve the common good. Having said this, there should be no doubt that all citizens are served by the existence of independent professions that are free to interpret the common good as being something other than that which a government of the day decrees. Once again, it should be noted that a capacity for a profession to fulfil this role depends on the extent to which the broader community trusts its judgement and motives.
Deciding to take up the full and proper responsibilities of a professional career is akin to the old idea of finding a vocation. In most cases, the actual rewards on offer hardly seem to cancel out the sacrifice that is made when the narrower pursuit of self-interest (common in the market) is eschewed in favour of the public interest. Instead of relying on the operation of the ‘invisible hand", the professional must choose - and choose well! The burden of choice is sometimes felt to be intolerable. This may explain why it is that one now hears members of the profession stressing that their primary orientation is towards ‘running a business".
Perhaps the idea of ‘vocation‘ has become foreign to most of those who make up the contemporary professions. Perhaps the belief in intrinsic goods has faded. But even if one is motivated by a spirit of public service, how is one to determine what may be in the public interest? One answer, from as far back as the ancient Greeks, is to try to identify certain core goods. Some of these immediately come to mind. For example, a good society is likely to be one in which people are treated with justice, in which good health is commonplace, in which the environment is rich, rewarding and safe.
The introduction to Ethics & the Legal Profession, edited by Michael Davis and Frederick Elliston (1986, p. 18) builds on this idea:
One of the tasks of the professional is to seek the social good. It follows from this that one cannot be a professional unless one has some sense of what the social good is. Accordingly, one's very status as a professional requires that one possess this moral truth. But it requires more, for each profession seeks the social good in a different form, according to its particular expertise: doctors seek it in the form of health; engineers in the form of safe efficient buildings; and lawyers seek it in the form of justice. Each profession must seek its own form of the social good. Without such knowledge professionals cannot perform their social roles.
As noted above, an old idea is at work here. It suggests that professionals might need to develop a particular appreciation and understanding of some defining end, such as justice. It is as much for this and the disinterested pursuit of these ends that the community looks to the professions for assistance.
Accountants and an orientation towards truth
Professions can be thought of as being defined, in part, by an orientation towards certain goods or ends. Given this, is there a particular end that helps to define the accountant's practice? Medical practitioners have the preservation and encouragement of health as an end, lawyers have the pursuit of justice as an end. It can be argued that accountants have the presentation of truth, in a fair and accurate manner, as an end.
Naturally enough there is cross-over between the professions. No one group can be so focussed as to ignore truth or justice in favour of, say, health. This is especially so when one realises that most matters involve one in engaging with a complex web of values. It should also be conceded that to talk of the ‘presentation of truth‘ as being an important end of accounting may be to run the risk of ignoring other important factors.
Trust and knowledge of two kinds
The focus of the argument can be sharpened by considering a paper by Bella and King (1989) in which they argue for the importance of what they term “common knowledge of the second kind” and, in particular, the importance of trust. The general thrust of their argument is to establish that much of that which we regard as knowledge is, in fact, only considered as such because it is taken on trust. That is, people rely on the expertise of those who warrant that the knowledge is true. This type of knowledge, which is frequently repeated and ‘known‘ by most people only on the word of others, is called “common knowledge of the first kind”.
On the other hand, “common knowledge of the second kind” is that which is ‘known‘ through direct involvement with a thing-in-itself, or through participation in a shared practice. Bella and King give the example of our experience of our coming to know ‘water‘ by drinking it, splashing in it and so on. In a similar vein :
... words like push, pull, life, see, hear, and many others only gain their meanings from practices and involvements that we both participate in.
(Bella and King, ibid, p.419)
The ticklish point to be grasped here is that given that experts can disagree about what should be counted as knowledge, and given that there is a competition of ideas, then most people have to rely on the fact that the whole process of negotiation about knowledge is being conducted by people who can be trusted to seek the truth. That is, the community assumes that there is a climate at work in which the ‘experts‘ really care about what is said in the name of knowledge.
If such communities truly care about their claims, then they will not cover up their disagreements and inconsistencies. Indeed, they will be drawn to them because they care about what they say. But such communities, whether they be scientific, religious, professional, educational and the like, must participate within a history of care, for only then are their claims worthy of trust.
(Bella and King, ibid, p. 420)
The argument then proceeds to demonstrate how it is that the process of giving weight to considerations that are ‘external‘ to a tradition of care can, of itself, erode the very foundations for participating in practices involving ‘knowledge of the second kind". Bella and King warn against allowing functional justifications to usurp the place of those that are internally related to such practices as caring and trusting. Thus, it is argued that people who are involved in relationships only so that they can ‘get something out of them‘ need to be distinguished from others whose involvement allows them to participate in ways that will reinforce their understanding of what specific practices actually mean. On this argument, questions of motivation assume great importance.
Arguments such as those advanced by Bella and King go a long way to demonstrating both the foundation for the community's expectation that accountants should care about the truth and for explaining why it is that they should. Any group that accepts a role in providing information (common knowledge of the first kind) to the community must accept that its approach to the task has implications that go beyond questions of technical competence or profits for the firm. A cavalier approach to truth by accountants has the more serious effect of undermining the shared practice of trusting, itself.
What might accountants be?
The point to be made here is that the claim to belong to a profession entails a considerable range of substantive commitments. In some cases, the privileges associated with membership of a profession balance (even outweigh) the attendant obligations. However, the point has already been noted that the benefits flowing from society to the professions are not equally available to all members. In many, if not most, cases a proper fulfilment of the role of accountant will require sacrifice of some kind - whether it be suppression of the apparently normal desire to place self-interest before all others or the acceptance of a higher degree of risk attached to the discharge of professional obligations.
I wish to argue that it is the accountant's preparedness to accept these additional obligations that has the potential to add so much to the quality of the ethical landscape traversed by us all.
Without wanting to load members of the profession with unrealistic expectations, it seems to me that society is qualitatively improved by the fact that there are people who are committed to acting in a spirit of public service and who are held accountable, to their peers, for doing so. The importance of this should not be underestimated at a time when there is so much popular cynicism about society's institutions. Furthermore, anecdotal evidence suggests that younger people are especially cynical about the prospects of success through ethical means. Rather, there seems to be a prevailing view that the pursuit of self-interest dictates adopting any means likely to secure the preferred end.
Accountants have the opportunity to demonstrate that there are tangible (and intangible) benefits accruing to those who share practices designed to bolster integrity and a range of other virtues that the professions should honour in practice.
This leads to a further point: it is essential that professional virtues be founded in a culture that lends the weight of tradition, stories and institutional sanction to the practical application of best practice. In essence, this requires the profession to demonstrate the reality of inter-personal accountability. This type of accountability is essential to the process of self-regulation, and requires moral courage sufficient to meet the needs for a combination of explicit standard-setting, peer support and effective disciplinary measures. All of this constitutes a fairly tall order - especially when set in the context of a society that places special emphasis on the rights of individuals and the need to be efficient and competitive within a market economy in which the pursuit of self-interest is the ideal.
It could be argued that the professions find a more natural home in a world in which rights are balanced by obligations, in which the individual is recognised as finding full expression only in society and where efficiency is valued less for itself than in terms of its ability to contribute to the common good. Then again, the continued existence of the professions may be one of the pre-conditions for maintaining the viability of this broader conception of an ethical society.
To return to an earlier point: an absence of ethics leads to a reduction in the level of trust that exists in a community. When a community feels that it can no longer rely on informal canons of decent behaviour, it often resorts to formal mechanisms of increased regulation and surveillance. Somewhat ironically, this has a tendency to weaken the bonds of ethics even further. Extra regulation is always accompanied by increased costs. There is a financial cost which hits the good and bad alike and which is passed on to the consumers in the form of higher charges and taxes. There is also a social cost as regulation also depends on the need for surveillance. There is a subtle but real change in the quality of our liberty. And there is also the cost to be borne in terms of our ethics.
If somebody else is prepared to tell you what is ‘right‘ and ‘wrong", then it lifts a burden of having to make our own decisions. In a sense we become less responsible. ‘I was only following the code". ‘They make the rules, it is not my problem". One of the important benefits that a group of self-regulating professionals should bring to society is a framework for informal systems of checks and balances designed to protect the community from some of the less welcome excesses of human behaviour.
This then is the theoretical framework in which this discussion of the accounting profession must be set:
- professional accountants ought to act in a spirit of public service
- professional accountants ought to develop a particular relationship with truth
- professional accountants ought to act always to merit the community's trust
Professional orientation for a practical world
I have spoken of the need for accountants to have a particular orientation to the truth. This is not just a philosophical point about the distinctive concerns that may provide emphasis for professional orientation. It is also a practical point that has particular importance in a world in which the tide of information is reaching full flow.
As a director of a non-bank financial institution, I have found it necessary to keep abreast of changing concepts relating to the provision of financial services. I have been especially struck by the way in which the definition of money has evolved. As I understand it, money is now defined as “confirmed information”. Such a definition fits neatly with anticipated changes in areas such as ‘stored value cards‘ (and other smart money devices), electronic home-banking and so on.
Disintermediation is occurring in a considerable range of activities. Although most commonly associated with developments in the field of financial services, a similar phenomenon can be seen in almost any area where information is the underlying currency. Changes in the scope and power of information and communications technology mean that an increasing number of people, living in the industrialised world, have direct access to raw data (whether it be in the form of text, numbers or images). This increased access raises at least one important issue that accountants might address.
Most people with increased access to raw data will need to find independent sources of advice able to verify that data is reliable (and, preferably, true). Accountants have long been trusted as those who assure the broader community that financial information is both ‘true‘ and ‘fair". Perhaps this role can be expanded to encompass other types of information that might be ‘audited‘ by the profession.
After all, even the most advanced technology will not (at least in the foreseeable future) allow individuals to be eyewitnesses to all of the world's happenings. When awash in a sea of information, it becomes incredibly important that there be a trustworthy navigator who can be relied upon to care about setting a true course; a person who has the skill and disposition to assist by making an accurate interpretation of the mass of data that washes aboard.
Enter Socrates
Only now, at the very end, do I introduce Socrates. So why accord him such a prominent position in the title of this paper? After all, those of you familiar with the history of ideas in philosophy will probably recognise the pervasive influence of Aristotle.
Yet, it is Socrates who stands at the centre of this paper. He may not dominate the intellectual content, however, he claims the central ground for three reasons - each of symbolic or emotional significance. Firstly, because he typically engaged in philosophy, quite literally, in the agora (or market-place). Secondly, because he was a teacher. Thirdly, because he brought people and things to account. That is, he fearlessly sought to discover the truth about people and the world he occupied. And in doing this, he variously sought to goad and encourage others to do the same. His motivation for doing this was not selfish. He honestly believed that his interlocutors would benefit from joining in his search for wisdom.
The kinds of issues that he explored still tax our understanding. For example, he took a keen interest (at least Plato would have it so) in the nature of truth and justice. Despite the best efforts of those who set the standards, the notion of accounts being “true and fair” still resonates for me as a basic requirement.
Socrates displayed great moral courage. Indeed, he preferred to die according to the sentence of his peers in democratic Athens, rather than impugn his integrity. As such, I believe that Socrates offers an important and relevant model for educators and students in accounting to reflect on and subsequently emulate. I have argued elsewhere that the discipline of accounting will slowly expand to include much more than the preparation and assessment of financial statements. I know that this occurs now, with accounting firms offering a number of value-added consulting services to their clients. However, I expect that many of these services - especially those related to audit functions examining management processes, cultural audits, environmental audits and so on, will come to be recognised as elements belonging to the core of accounting practice.
If this should be so, then professional accountants will need to develop a broad set of skills of a kind that Socrates would have easily recognised. Such skills will need to be matched by dispositions (or virtues) of a kind necessary for the authentic discharge of professional obligations - that is, obligations primarily directed to securing the good of others.
Those who teach accountants have an important role in their formation as members of a profession. I do not wish to overstate the significance of this role. Nor do I wish to understate it. A popular conception of liberal education would have us believe that it is neutral in relation to competing conceptions of the ‘good life". Yet, a moment's reflection reveals that this, in itself, is a substantive position. But of more importance than this is the need to realise that a teacher's influence (or potential influence) goes well beyond the capacity to pass on relevant skills or knowledge.
Teachers are also exemplars. They may not care for such a role. However, it is theirs by virtue of their authority as masters of their discipline. I think that Socrates understood this. I think that who he was, is as significant, as what he said. Indeed, he would have seen that his very being was revealed through the manner of his living.
I do not wish to suggest that you should all be like Socrates. He was a difficult person. Even so, the things that most people admire are his tenacity, his honesty, integrity and courage. He is credited with one particular epigram that I believe to be of real relevance to accountants. He is reported (by Plato) as holding that:
The unexamined life is not worth living.
Conclusion
To be a member of a profession is to be a member of a community. Ethical issues are not restricted to matters arising in relationships with clients and the community. There is also the very real question of how accountants relate to one another.
This goes beyond being a matter of professional etiquette. Whilst matters of etiquette are important as an indication of mutual respect between members of a profession, there is a need to be aware of deeper obligations to one's colleagues. In particular, members of the profession have a responsibility to provide mutual support and encouragement so that it becomes absolutely unquestioned and natural for accountants to present the truth in a fair and honest fashion and in a spirit of public service. In such circumstances clients would probably think twice before seeking creative accounting solutions to particular problems. Some of the hesitation would be due to the fact that the days of shopping around for a compliant practitioner would be largely over. One would also hope that those accountants operating in business would find a greater acceptance of their role as professionals capable of providing considered advice that goes beyond matters of simple expedience.
Being consciously ethical in one's outlook, keeping one's eyes open and mind engaged on such matters is a taxing and frequently thankless task. Very few people openly appreciate being made to think about value questions when under pressure to get the job done. This remains so despite the fact that ethical blindness is a lot like colour blindness. In both cases defective vision can lead to accidents where injury to innocent third parties could have been avoided if warning signs had been seen and read.
As those largely responsible for the education of young accountants you share responsibility for preserving and enhancing a tradition in which people have been prepared to point out the warning signs, even when the driver has been unwilling to look up from the road (or, for that matter, without thanks from the pedestrian on the crossing). In the past, some have felt able to betray that tradition. Whether or not it can be preserved will depend on the kinds of decisions that individuals make when trying to answer that fundamental practical question, “What ought one to do?”.
It has been argued that the defining feature of a profession is a commitment to promote and preserve the public good. The need to honour such a conception at all flows from the nature of the ideal social compact between society and the professions. It has been argued that the interests of society are advanced by the existence of a genuine accounting profession rather than an accounting industry in which people operate businesses in accounting.
The current debate about competition and the professions sees bodies such as the Trade Practices Commission advancing arguments that are based on the assumption that the professions are just another type of service industry. To the extent that the community treats the accounting profession as just another industry subject to market forces so it erodes the foundation for any expectation that accountants should recognise a special duty to promote the public interest. Instead, it would be perfectly reasonable for accountants to pursue self interest with all the vigour at their disposal, only limited by the constraints of the Law itself. I believe that society would suffer if such a state of affairs should come to pass.
If accountants wish to remain part of a true profession, then their response to the community should be an unambiguous declaration of allegiance to the overriding principle of public service. Fine declarations will then need to be matched by evidence of decisions taken that involve some willing cost to the profession. There are many occasions when the interests of accountants and the broader community (of which accountants are a part) coincide. However, there is a suspicion that when a choice is to be made, then in practice the interests of the profession override all others.
In the current social environment there are many who would argue that a genuine commitment to ethics is an unrealisable ideal. Many think that sound ethical principles are fine in theory but that they can't really be applied in practice. To try to do so is to be nostalgic. They say that to promote virtue is to be old fashioned, to hark back to ideas only useful in a different era. They ask us to be ‘realistic‘ and to embrace the ‘modern‘ way of doing things. This plea is often nothing more than an ill disguised plea to allow for the survival of the fittest. Perhaps such people are right. Perhaps a dog-eat-dog world will be the most efficient. And perhaps efficiency is the only value that we need to embrace in the search for a worthwhile life. Or perhaps efficiency is only one of a number of important values that we must learn to juggle across an unpredictable landscape.
Those members of the accounting profession who are serious about meeting their ethical obligations must face up to this challenge. After all, what if their critics in the marketplace are right? What if the prime (and exclusive) objective really is to “run a business in accounting”? One can only reply that an authentic commitment to professional ethics may require accountants to live a life that makes only partial sense in a world dominated by an orientation to markets. The full sense of such a commitment might only be appreciated when viewed against a background of community. That is, the relevance of professions probably depends on the prior existence of a society and not just an enterprise association.
Most people have a fairly good feel for what it means to live in a ‘society". But what about an ‘enterprise association'? John Casey (1990, p. 191) has tried to describe the latter:
We might imagine a city founded purely as a trading post. The laws of the city will reflect its original purpose, and have to be understood in relation to this purpose. Contracts will be vigorously enforced however unreasonable or unjust, because it is of the highest importance to retain the confidence of those with whom the city trades. Indeed, the notion of a contract being ‘unjust‘ will have no meaning. All education will be subordinated to the need to produce an ‘enterprise culture", and no subject will be studied as an end in itself. The rulers of the city will regard themselves essentially as the managers of the enterprise. Their tasks will be to maximise wealth and promote trade.
Is this so very far away from what we now experience? Some may say that this is an accurate and even attractive picture of the type of world in which we live. But does such a view of our relationships miss something of vital importance? For example, do we exist simply to “facilitate the exchange of commodities” or is there something more? Is there, for example, a need to value friendships, to realise that other people can make a claim on us? Is living in a society only possible when we recognise that each person is bound to others within a network of formal and informal relationships?
The challenge facing us today is to make a choice about which alternative we want. Do we want a society of citizens in which something like a self-regulating accounting profession makes sense? Or do we want the enterprise association in which each of us is little more than a purveyor or consumer of commodities? The latter consigns us to a place where the ideals of justice and community seem strange and alien - just a shadow of a once remembered past?
I believe that a number of the tensions outlined above can be resolved if only the profession draws back towards an older view of professional responsibility. It requires a type of peer review that may have been more easily applied in days when the number of practitioners was much smaller. The challenge faced by the profession is to instil, in difficult times, the sense of a corporate responsibility based on a genuine belief that the practice of the accounting profession is a noble calling and not just a job.
Notes:
An interesting perspective on this topic is offered by the Managing Director of Bankers Trust Australia Limited, Rob Ferguson in an unpublished paper, Adam Smith and the Mixed Economy, 1993
References:
Australian Council of Professions, (1993) Professional Services, Responsibility and Competition Policy: a discussion paper prepared for the Permanent Advisory Committee, August 1993
Bella, D and King, J (1989), Common Knowledge of the Second Kind in Journal of Business Ethics, Vol 8.
Casey, J, (1990), Pagan Virtues, Cambridge, CUP
Davis, JG (1989), The Corporation: A Commentary, in Ethics Management in the 1990s: Surviving the Corporate Era, Sydney, St James Ethics Centre.
Davis, M & Elliston, FA (Eds) (1986), Ethics & the Legal Profession, New York, Prometheus Books
Pound, R (1986) quoted in American Bar Association Commission on Professionalism, (1966), ... In the Spirit of Public Service: a blueprint for the rekindling of lawyer professionalism, American Bar Association
Samuels, The Hon GJ (1995), Service or Self-Defence, in Can We Afford To Be Efficient: competition and the changing face of Australia, Sydney, St James Ethics Centre
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