Accountants' responsibility for the information they report: an historical case study of financial information.

Abstract: This paper describes an instructional case that uses historical documentation to enable the reader to consider his/her own responsibility for the preparation and reporting of information. In this case, the reader is provided a summarized income statement. Then, as detailed information about the financial statement is introduced, the reader is asked to consider the ethics of preparing and using the statement. The financial statement represents a projected income statement for a Holocaust camp prisoner during World War II. The statement includes anticipated revenue from the selling of body parts upon the prisoner's death, estimated as nine months from the time of arrival at the camp. Usage of the case should develop a reader's understanding that accountants' responsibility for the preparation of information should not be separate from what the information reports or the intended use of the information.

INTRODUCTION

This paper describes an historical case that poses an ethical dilemma relative to financial statement preparation and reporting. In the case, a summarized income statement is presented. Then, as additional information about the financial statement is introduced, students are asked to consider the ethics of preparing the statement. In actuality, the statement in the case was prepared and used by the German Third Reich during World War II, something students learn only later in the case. The statement is a projected income statement from the Buchenwald concentration camp and includes anticipated revenues from both leasing camp prisoners to for-profit corporations and selling the body parts of these prisoners upon their death, calculated to be nine months from the time of their arrival at the camp. The ethical dilemma of this case concerns the responsibilities of accountants and the actions they should take when involved in accumulating and reporting information about immoral or illegal activities.

Accounting is fundamentally a moral practice, not solely a technical determination of reporting standards [Funnell, 1998; Waddock, 2005]. AACSB International has recognized this by requiring an ethics component in the business curriculum for all universities that it accredits [AACSB, 2008]. However, educators do not agree on the objectives of ethics education. Stated objectives include raising awareness of an issue, honing analytical skills, teaching moral reasoning, and/or providing a moral framework for analyzing situations [Falkenberg and Woiceshyn, 2008]. Moreover, Falkenberg and Woiceshyn [2008, p. 213] state that a "consensus has started to emerge that ... the goals should be ... stimulation of the 'moral imagination' and identification and application of the students own value sets."

According to a recent survey of accounting educators, cases are the preferred medium for teaching ethics [Blanthorne et al., 2007]. This is not surprising since the structure of cases often encourages students to apply their own value sets to a particular situation. However, there is a scarcity of cases related to ethics. The Journal for Business Ethics (JBE) acknowledged this problem when in 2008, it established a new section of the journal dedicated to publishing cases concerned with ethical business issues [Falkenberg and Woiceshyn, 2008].

Ethic cases can be classified either as ones concerned with rules (utilitarian and rights theory) or those related to character (virtue ethics) [Mintz, 2006]. Historical cases are particularly useful for virtue ethics since students "need stories of moral courage" to determine how to act correctly [Thomas, 2004 p. 28]. Yet, a bias against historical cases seems to exist. JBE guidance on cases states that the cases should "describe current situations" [Falkenberg and Woiceshyn, 2008, p. 214]. Such bias against historical cases exists elsewhere as well. Weinstein [2005] analyzed cases published between 1985 and 2003 in Issues in Accounting Education (IAE) and the Journal of Accounting Education (JAE), two journals that have published a majority of accounting cases, and posted online his database of case analysis for additional journals. His database [Weinstein, 2008] lists only four cases from his 2005 article that were based on historical data. A review of cases published since 2003 also shows a distinct preference for current cases. Of the approximately 80 cases published between 2004 and 2007 in IAE and JAE (which subsequently merged with Accounting Perspectives), just a single case is based solely on historical data.

Yet, cases developed using current information can present an obsolescence problem. Most cases that were current when published may no longer be relevant just a few years later [Weinstein 2005]. For instance, many cases are concerned with technical knowledge, and recent pronouncements may make older cases obsolete. Additionally, cases based on new situations may be more interesting than older ones with dated topics. However, unlike the cases that Weinstein analyzed, historical cases by their very nature have withstood the passage of time and remain relevant.