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Q&A: An Accounting Professor’s Eye-Opening Ethics Lessons

Dr. Debra Coleman Jeter pushes students to think beyond numbers and spreadsheets to examine how business ethics affect humans—including themselves.

Educator

Debra Coleman Jeter, PhD

Professor of Accounting, Emeritus, Vanderbilt University, Nashville, TN

PhD in Accounting, MBA, BS in Accounting

The Enron scandal in 2001 was a wake-up call for many people, including professor Dr. Debra Coleman Jeter, who teaches accounting at Vanderbilt University in Nashville. In fact, two of her former students had been caught in the cross fire when this energy services company went famously bankrupt after revelations of systemic accounting fraud.

“I had a couple of students who had actually gone to work for Enron, and who had come back to [visit my classroom] after Enron collapsed,” she says. “They were so thrilled with that job initially. But then they went to lunch with some of the people from other departments within Enron. And they would say, ‘You know, there’s some stuff going on in our department that’s kind of fishy.’ And then they realized it was going on throughout the company, and that it was sort of a top management–down sort of mentality: This is the game that we’re playing. And these two students were sharp enough to realize: This is a house of cards, and it’s going to collapse.”

While Jeter wishes it were not necessary to instill such instincts in her students, it was after an interview with CNBC on this issue of “stretching the rules” that she realized it needed to be part of the curriculum—officially. “Right around that time [of the Enron scandal], there were a lot of accounting scandals. Companies who had been playing games with the numbers, doing whatever they thought they could get away with,” she explains. “Eventually they went beyond stretching the rules to actually breaking the rules. And it seemed to be a mentality. That was a wake-up call for me.”

In the interview below, she shares some thoughts on why an ethics discussion is vital for accounting students, how to drive it, and how it can help students succeed in the workplace.

Context

“I had always figured ethics are kind of instilled in you before you reach graduate school. But at a certain point, I realized I needed to talk about ethics. Because if it changes and affects even one or two students out of a class of 50, it’s worth having that discussion.”

— Debra Coleman Jeter, PhD

Course: MGT 6410 Financial Reporting I

Course description: This two-mod course (with MGT 6411) provides students with refined tools to prepare, understand, and analyze financial statements. The fundamentals of assets, liabilities, and equities covered in MGT 6311 will be reviewed, and the more complex issues surrounding these elements will be unpacked, analyzed, and interpreted. By the completion of this course, students will be comfortable with the preparation of financial statements and the accompanying notes, as well as the economic implications of transactions that are included therein. Students will improve their familiarity with how accounting information is used to evaluate economic conditions and make organizational decisions.

See resources shared by Debra Coleman Jeter, PhD

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Jeter’s tips for nixing a “fraudster” mentality

Today, Jeter urges students to develop a deep level of understanding of accounting concepts, as well as a firm grasp of the rules—and how to avoid breaking them (inadvertently or not).

Course Hero: When did you first realize you needed to teach about ethics?

Dr. Debra Coleman Jeter: Before 2001, accounting had always been self-regulated as a profession. But when Enron happened, I realized I had been hearing questions from my MBA students for years that hinted at this mentality. For example, we might be talking about capital leases. With these, even though you don’t own the asset (you’re only leasing it), it’s very similar to ownership. And the regulations at the time said you should go ahead and put that liability on your accounting books if it met certain criteria. But I would have students trying to find ways to avoid that. They’d say, “Well, what if we created this other little company, and that company leases the asset, then we wouldn’t have to put it on our books.” Literally. And when it finally dawned on me: “Wow, this mentality has been there all along.” My students had been asking me what they could do to get away with things.

Before then, I had always figured ethics are kind of instilled in you before you reach graduate school. But at that point, I realized I needed to talk about ethics. Because if it changes and affects even one or two students out of a class of 50, it’s worth having that discussion.

How do you use stories to teach ethics in accounting?

Harvard Business School puts out a lot of case studies. Sometimes it’s just an article, like there’s one in The Wall Street Journal called “Creative Accounting,” about how to buff your company’s reporting to make things look better than they really are. There’s another one called “Playing Games with the Numbers.” With each story, I ask them to read it and then form an opinion on it. Is this something clever that companies do—they figure out a way to play games with the numbers and make themselves look a little better, then that keeps their stock price a little bit higher and keeps their bonus a little bit better? Is this a good thing? Is this what you would do if you were out there? And why or why not?

Not to preach to them, but if I can get a discussion going—if I can just shut up long enough to let the class take over and let them present both sides of the argument—there’s going to be somebody in the class to make the appropriate ethical argument. It’s always interesting to let the students talk it out.

That’s a really good point. Do you go quiet?

Yeah, I have to bite my lip. I learned that from a man who was my children’s pediatrician who also taught a Sunday school class that I attended. He was so good at that. He would ask a question to a class. And he would just wait. And if the room was completely quiet for five minutes, that didn’t faze him. He just laid it out. And eventually people start talking. Usually if it’s quiet for 30 seconds, I want to jump in. But I learned that’s really not the best tactic. The best tactic is just to bite your tongue and wait it out.

How do you use written essays to encourage ethical thinking?

I change how I handle that from year to year, but quite often in our textbook there actually are open-ended questions—called conceptual analysis questions—rather than problem-solving or number-crunching ones. Some students will write a really brilliant piece in response to that kind of question. And on the outside readings that I assign from various publications, I’ll say, “Pick one of these readings, summarize it for me, and state an opinion and defend your thinking. There’s no right or wrong, just defend it.”

Same way with the standards. If we’re looking at the standard on leases, which is one that has been recently changed, I’ll ask, “Do you think that was a change for the better or for the worse? And why?”

I have developed essay assignments like these to encourage students to develop a deeper level of conceptual understanding when studying accounting, so they are prepared to adapt as needed.

Beyond the Numbers: Jeter’s Written Works

Debra Jeter brings more to accounting than a fascination with numbers. She also is quite the wordsmith, having written numerous nonfiction and fiction articles, coauthored a screenplay and two textbooks, and recently published her second novel, Joy After Noon, (a Sugar Sands novel, book 1) about a college professor coming up for tenure and watching her family and career collide. Her third novel, Song of Sugar Sands (Sugar Sands book 2), is being released in August 2019. She has also coproduced an award-winning film with her son, director Clay Jeter. “I think it’s nice to get the message out there that not everybody who’s an accountant is necessarily just a numbers person,” says Jeter.

Below, she answers a quick query on what inspired her to coauthor, along with Paul K. Chaney, a textbook called Advanced Accounting.

What inspired you to write your Advanced Accounting textbook?

The subject of advanced accounting is complicated. The first half of our book focuses on mergers and acquisitions or consolidations. If you look at a company’s annual reports, the vast majority of them are going to say “Consolidated Balance Sheet,” “Consolidated Income Statement,” “Consolidated Statement of Cash Flows.” And what that means is that most companies are not just one company—they’re jointly owned or there are multiple companies being consolidated into one set of numbers.

The year that I was getting ready to graduate, I was taking Advanced Accounting, and I was also interviewing for jobs, and I was trying to cram all that in during the two or three nights before the exam, and I just couldn’t do it, I was just overwhelmed by it. I was like, “Man! Consolidated, financial statements are really impossible. I just can’t figure this out.”

Later, after I had gotten my master’s and started teaching, the first class they wanted me to teach was Advanced Accounting. And I was like, “Are you kidding me? That’s the one I don’t even quite understand myself.” So I really started trying to dig into it and learn it.

I felt like I was just a couple of days ahead of my students, but I finally got this stuff figured out. I realized, “I could do a better job of writing the textbook than the one that I’m trying to read and follow.” I could make it clearer.

My coauthor, Paul Chaney, was approached by our publisher (John Wiley and Sons, Inc.), wanting him to revise an existing advanced accounting textbook written by some professors who had retired. Paul asked me to join him in the endeavor. I was hesitant because I was about to come up for tenure. But I looked at the last edition of the book—one I wasn’t familiar with—and I really liked the approach the authors had taken. Even though textbooks don’t carry as much weight in tenure cases as academic research publications, deep down I liked the idea of writing something concrete for students around the world (the book has, in fact, been translated into Chinese). So I allowed myself to be persuaded. Our book is now in its seventh edition.

How does this type of thinking help students succeed in their careers?

In conversations that I have had over the years with employers, if you ask them what they are really looking for in the ideal candidate, this is one of the things that they will tell you they want: critical thinking. It’s because things do change.

A lot of the accounting students are going to go with the big CPA firms. You might think those firms are the ones that would be the most interested in students who know the rules. Even those employers will say, “Not so much. We can teach them the rules. We want to hire people who come out with the ability to look at a problem and figure out a creative way to solve it.” Businesses are looking for creative thinkers who can figure things out: How can we turn things around? Should we diversify? Or should we try to grow another way? Should we buy another company? Does this merger make sense? Those kinds of things.

In accounting, you can actually challenge the way we do things. People who are able to think that way are going to adapt better when the standards change. And they’re going to do a better job of explaining it to one of their clients. Instead of looking at it as a thorn in their side, they can think, “Well, this is actually going to be a better way of doing things.”

What are your hopes for your students in their future careers?

There are a lot of managers out there in various companies who don’t understand accounting as well as they should. Sometimes they try to mask their lack of understanding by using accounting jargon to convince people they have a better grasp than they actually have. I want my students to leave the class not only with a strong understanding but with the confidence to ask questions and admit it when they don’t understand something … to challenge their supervisors when they throw out fancy terms that don’t make clear sense. Accounting can be complex, but I don’t want my students to feel intimidated. Whether they take jobs as auditors or corporate positions, I don’t want them to be afraid to do what’s necessary to get to the bottom of a transaction and how it affects the company’s health.

Ultimately, I want my students to take roles in their firms where they use their energy—and encourage everyone around them—to look for genuine ways to improve the company and its contribution to society, rather than ways to make it look healthier than it really is.

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