FINANCIAL STATEMENT ANALYSIS: A CLASSROOM EXERCISE FOCUSING ON ETHICAL AWARENESS

In the continuing quest to enhance the ethical wherewithal of the professional accounting student, this exercise is intended to provide avenues to increase student ethical awareness. Such awareness is expected to enhance their ethical decision-making abilities and their capacity to evaluate ethical failures and the corresponding impact on the financial condition of the company. As a future certified public accountant (CPA), critical thinking, financial statement analysis and evaluation of internal control effectiveness should be routine; therefore, this requisite knowledge is crucial. This paper proposes a classroom exercise based on real financial data requiring all accounting majors to review recent news reports and articles, select an instance that describes a fraudulent activity and thoroughly research that incident as well as the company and all related entities. Students should be able to articulate the ethical fracture and the impact on the financial condition of the company as well as the impingement on the investors and culture. The common framework requires that each student answer the same four main questions: what was discovered, how was it discovered, what is the impact on the financial statements and what solutions could be put in place to prevent future occurrences. The aim is to provide each student with ample opportunities to develop their critical thinking skills, problem solving techniques, and communication skills while continuing to improve their auditing skills and strengthen their ethical awareness toolkit. The classroom can be used to provide the required auditing skills and fact-based content, which will set the foundation for a successful Problem-Based Learning (PBL) undertaking.