Justin Crouse, CPA Assistant Professor of Accounting Wartburg College Pushing Students to Answer the Hard Questions The Conference on Teaching and Learning: Shared Craft of Teaching August 2015

Teaching Ethics in Accounting u Ethics is: “A philosophy that investigates normative judgments about what behavior is right or what ought to be done.” u If your students are anything like mine then they probably hear something like this: “blah.. blah.. Do the right thing… blah.. blah.. I’ve heard this in every class I’ve ever taken.” Brooks, Leornard & Dunn, Paul (2012) Business & Professional Ethics for Directors, Executives & Accountants. Mason, OH. South-Western

Teaching Ethics in Accounting (cont’d) u This is obviously a problem u How can we lead a conversation on such an important topic if many students immediately close off their thinking at the mention of the word? u One of the biggest struggles students have is relating the thought of ethics to their work as an accountant

Making Ethics Real u Many times we present ethics by looking at fraud Posting fictitious journal entries Making an adjustment to meet analyst expectations Recording something in a way to maximize a personal bonus u Students simply say this is wrong and it shouldn’t be done They do not have experience to simulate the pressure They have nothing to lose by making this choice Seems like an easy answer –Thus it becomes boring

Making Ethics Real (cont’d) u What if we went at this another way? Challenge what they know to be “right” –I typically do this in a non-introductory course so that basic skills are already covered at length This proves to be more interesting and a better way to get at the impact of ethics

An Example u Our company purchased a new piece of machinery during the year for $50,000. How much depreciation expense should be recorded in the first year? u Immediately, you will get questions like…… What method should we use? What is the useful life? Is there any salvage value?

An Example (cont’d) u This sense of panic is exactly what we should strive for There is no “right” answer for this Thus a choice has to be made –This is what ethics is all about u Most students do fine when asked “how” to do something Ethics is really about the “why” instead

Plethora of Options u Just think about how many other similar options we have without distinctive “right” answers When to write something off as uncollectible What actually classifies as a bargain purchase option When do market conditions warrant an impairment test Do we need to establish a valuation allowance on a deferred tax asset Is a potential liability probable or just possible u These are just a few and these only come from financial accounting

Why Don’t We All Do This? u More than one answer usually means it is more difficult to grade efficiently u We now would look at not only what answer a student submitted but why as well u The question must be is this additional work worth it? For me it is

Why Should We Do This? u A topic like this is something that all students can understand They also see a potential use in the future u More and more accounting standards are putting increased use on professional judgement Yet how often do we do this in the classroom?

Grading u Assignments take the form of cases Gives them some background information about the company Also gives them the information needed to address the concern u Assignment requires a student to write a summary of their analysis Typically one page or less Also some sort of support for their treatment –For financial accounting I require an ASC reference –This can get interesting because they won’t find an exact reference and thus more judgement comes into play

Grading (cont’d) u In addition to a summary written portion, I often have one student present their findings Others in the class are then charged to challenge these findings –Helps to simulate a board presentation Faculty member interjection if there seems to be too much agreement u Reflection exercises

How To Decide If Something Is Right? u FASB Concepts Statement No. 8 tells us: “The objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders, and other creditors in making decisions about providing resources to the entity.” u This is our charge for financial accounting and we certainly have similar guiding principles in the other areas of accounting FASB Concept Statement 8:

Benefits of Use u I have found this practice very successful over the three years I have used it Huge improvements in how students prepare their analysis from beginning to the end –Plus it gives them practice working with various reference materials Presentation skills are critical It really helps to show students how often ethics may be a part of their decision making

Questions? u