It is safe to say that the financial reporting scandals of recent years have forever altered corporate accounting practices, and more broadly ushered in major changes in management and boardroom behavior. As an educator, I have been asked many times whether these cases have impacted how we teach accounting. Without a doubt, the answer to this question is a resounding “Yes.” As  devastating as some of these debacles were for a variety of stakeholders – from investors to  employees to affected family members – they have provided us in academia with a living and learning laboratory for years to come.

A Win-Win SituationIn recent years I have spent a good deal of time considering how the “real world” can be brought into the accounting classroom. Initially, my motivation was driven by a belief that exposing students to the out-side world would better prepare them when they leave the safe confines of the university; however, more and more I am convinced that a real-world emphasis is a win-win situation; not only are students better off, but employers benefit from employees who are ready to deal with the rigors of the workplace in the new millennium.

Granted, challenges exist in trying to replicate in a  classroom what students will see once they begin their careers. Still, companies can only benefit from new employees who appreciate not only the technical aspects of the job but also the moral and ethical responsibilities that come with being part of a profession.

I remind my students that the  technical issues in many of the high-profile scandals centered on very fundamental accounting principles. Enron was a question of when does one entity control another; WorldCom an issue of what is an asset as opposed to an expense. The real challenge for students is trying to put themselves in the position of an accountant faced with the pressures of making the “right” ethical decision.

The Motivation FactorMy experience has been that the motivation level for students increases when they see financial statements for real companies. In our first accounting course at St. Thomas, required of all business majors, students work in groups to analyze the financial statements of a company. Not only do the students have a chance to apply some of the analytical tools they have learned in the course to a real company, they also experience the challenges of working as part of a team.

Students in my MBA Advanced Accounting course choose a company and analyze the “health” of its financial reporting system. That is, the assignment is not to analyze how profitable a company has been, but rather how well it reports to its stakeholders. The course focuses on complex topics such as business combinations and foreign currency transactions.

In the process of selecting a company to analyze, students quickly find that mergers and acquisitions and complex financial instruments such as forward exchange contracts are commonplace in today’s world of multinational conglomerates. Invariably, they comment on how much is learned from taking what they see in the textbook and relating it to practice. And in the process they find that issues in the real world rarely come with clear-cut solutions, and that the ability to deal with the gray areas of tough reporting issues is what makes accounting a profession.

Not all learning, however, comes from seeing what not to do. Prior to its buyout by Unilever, we featured Ben & Jerry’s in our introductory accounting text. Aside from the obvious motivation factor from looking at the financial statements of a well-known ice cream maker, students were exposed to a company with a strong emphasis on social responsibility and one that presented financial information in a very straightforward, transparent way. As the book goes into its fifth edition, we continue to search for companies such as Ben & Jerry’s that can be role models for what good financial reporting should look like.

In the St. Thomas College of Business we have made it our goal to give students the skills they need to become highly principled global business leaders. The belief is that an institution of higher learning can best serve society by exposing students to the challenges they will face in today’s fast-paced business environment. Among the most important of these challenges will be the ethical and moral dilemmas awaiting them. Turning the accounting classroom into a learning and living lab is one important way in which we can prepare our students for these challenges.