Cheater’s High? Let’s Talk About the “Auditor’s High”
According to a recent blog entry on the New York Times’ website, researchers have found that people who cheated, and got away with it, experienced a thrill, self-satisfaction and a sense of superiority. While that sensation was not as strong as the high that rats apparently get from eating Oreo cookies, it illustrates how exciting cheating can be. Take for instance the following:
- A recent Wall Street Journal article described the testimony of one of Bernard Madoff’s staff members. Included in that testimony was a story about the time an auditor requested daily trading logs. Over the course of several hours, Madoff’s staff fabricated logs, put them in a refrigerator to cool them (so the auditor wouldn’t know that they’d just been printed) and then tossed the logs around in order to make them look older.
- Researchers from the University of Washington, the London Business School, Harvard and the University of Pennsylvania published a study called “The Cheater’s High: The Unexpected Affective Benefits of Unethical Behavior” in The Journal of Personality and Social Psychology and through multiple experiments documented how unethical behavior can “trigger positive feelings.”
- An Oct. 31 article in The New Yorker (“Inside the Cheater’s Mind”), presented evidence that once a person has cheated and gotten away with it, they’re more likely to do it again. Additionally, the type of goal an individual is attempting to achieve is relevant. Achievement goals (e.g., getting high test grades or completing a project on time) are more likely to lead to cheating than mastery goals (e.g., playing a challenging piano piece or assembling a car engine). This makes sense when you consider some of the better known frauds of the last ten or so years. Good examples of achievement goals that can lead to financial fraud are financial results that affect executive compensation and earnings estimates given to Wall Street analysts.
- In 2012, the AICPA and CIMA conducted a global survey of CGMA designation holders on business ethics. The resulting report, Managing Responsible Business, showed that while there has been an increase in the number of organizations with both statements of ethical values and codes of conduct, there is a weakened tone at the top and a gap between rhetoric and reality as it applies to corporate ethics. The report also noted that there is greater pressure within organizations to act unethically.
So, what does all this mean for CPAs? Should tax and attest clients be subjected to pre- and post-engagement polygraph tests? Should public accounting firms hire former CIA operatives who also happen to be CPAs? Hardly.
Just as The Journal of Personality and Social Psychology study points to a cheater’s high, I posit that CPAs experience a rush from doing solid work that is extremely powerful. While I couldn’t find any science on a dopamine-type high associated with performing an audit in accordance with GAAS, no one can deny the feeling you get from completing a job well done and knowing how much the public relies on your objectivity and attention to detail. And who among us hasn’t experienced the positive effects of doing the right thing, like returning a lost wallet or cell phone? The college my daughter attends has a lost-and-found Facebook page, and I’m astounded at the number of students who find cell phones, computers, car keys and jewelry and make a serious effort to locate the owners.
Additionally, in the achievement oriented, profit-driven world of business, those feelings of contributing to doing the right thing can pay off in the long run. Ethisphere’s 2013 World’s Most Ethical Companies list of 138 organizations includes some well-known American companies such as Adobe, eBay, Gap, Microsoft, Target, Starbucks and UPS. So it is possible to be both ethical and profitable.
We all know that a financial statement audit is not designed to detect fraud, but CPAs have a lot going for us when it comes to addressing the risk of fraud in an audit. Here are just a few examples:
- The Code of Professional Conduct. The code is in the midst of being updated and codified.
- Generally Accepted Auditing Standards. See AU-C 240 Consideration of Fraud in a Financial Statement Audit.
- Professional skepticism. This is embedded within the auditing standards but it can’t be emphasized enough. If something doesn’t seem right, trust your instincts and investigate further.
Dave Andrews, CPA, Technical Manager – Professional Ethics, American Institute of CPAs. Dave is responsible for performing investigations of cases referred by various agencies of the U.S. government as well as by private sources.
Employee changing time clock image via Shutterstock