Oh My Fraud

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Earmark CPE: [00:00:00] If you'd like to earn CPE credit for listening to this episode, visit Earmark Cpcomm. Download the app, take a short quiz and get your CPE certificate. Continuing education has never been so easy. And now on to the episode.

Caleb Newquist: [00:00:28] This is Oh My Fraud, a true Crime podcast where the most common torture method is death by a thousand paper cuts. I'm Caleb Newquist.

Greg Kyte: [00:00:36] And I'm Greg Kight. Greg, sometimes we talk about ethics around here, and we have also taught a lot of ethics courses together. Mean mostly it's you are in the role of teacher and I am in the role of curious, annoyingly enthusiastic student when you say that is correct. And it's funny, I actually looked back through my my Google Drive and and I looked the very first time that I taught ethics for CPE was in October of 2013. So I've been teaching ethics for almost a decade now. Yeah. Um, and interestingly enough, the second time that I taught ethics was actually the first time that I ever did a web like presented in webinar format. And it was awful. It was unwatchably awful. Yeah. Because, because what I, what I realized and it took, I mean, I realized immediately that it was awful. But what I eventually realized is that and the reason it was awful is because if you're trying to be funny, that's the only, that's the only like part of my resume that makes me interesting to anyone in our profession is that I do comedy. But if. Just imagine. But but you're just telling a joke in a room all by yourself to a webcam with absolutely no feedback and that that murders the humor any like when you're doing that, every joke you try to tell is immediately transformed into like the worst dad joke where it just looks like somebody desperately trying and failing at entertaining people. But what I found out eventually was the trick to that is having a co-presenter. Then all of a sudden I'm not just telling jokes to no one, I'm telling jokes to at least one other person, and hopefully that person is receptive to it. And sometimes you are, and I appreciate that. That's nice. But but just to say your role as a as the enthusiastically curious attendee is, is vital to the. Yeah. To the success of the webinar.

Caleb Newquist: [00:02:55] Yeah. I mean, I don't know if I'm an attendee as I am kind of like your Andy Richter or something. Like who just.

Greg Kyte: [00:03:02] Yeah, yeah.

Caleb Newquist: [00:03:03] Yeah. Just chuckles along and, and, and sets you up at particular places. But I do, I try to, I do try to bring the enthusiasm. I try to pepper you with questions.

Greg Kyte: [00:03:16] Well yeah you absolutely do. And, and I like it because also I'm so familiar with the topics that sometimes I think that I like like my brain doesn't isn't thinking about it from someone who's not as familiar with the topic as I am. And so it's nice to have fresh ears to kind of go, wait a second, say explain what you just said. So that's that's also hugely valuable.

Caleb Newquist: [00:03:37] Ethics, right? Wrong. What? Right.

Greg Kyte: [00:03:40] We're supposed to be good. Wait, explain that. Yeah. I'm lost. Me? I'm not buying that in this profession.

Caleb Newquist: [00:03:47] Yeah, So. Which is kind of exciting. We. I bring all this up, I guess, is what I mean. Because today we're talking to Michael Shaub. He is the clinical professor and Deloitte professional program director, professor at the Mays Business School at Texas A&M University, and he teaches auditing and accounting ethics. And we had a great time talking to him, didn't we? Greg Yeah.

Greg Kyte: [00:04:13] Absolutely. And listeners, just to set your expectations correctly, I know you come to this podcast because you love the swears, but knowing that Dr. Shaub is a devout Christian, out of respect and deference to him, we didn't swear. Not even a single time while we were talking to him.

Caleb Newquist: [00:04:32] Not a single fucking time. Greg, I'm so proud of you. I'm proud of us. We did.

Greg Kyte: [00:04:37] It. Yeah, it's possible. We can. This could be a we can do it.

Caleb Newquist: [00:04:40] Be a G-rated podcast.

Greg Kyte: [00:04:42] Absolutely. Except for the last line you just said. So without further ado, here is our conversation with Dr. Michael Shaub. Mike Shaub, so nice to meet you. Thank you so much for coming on the podcast. Real quick, just I'm always curious, are you I read a bunch of your blog posts that were posted on the Texas A&M site. I'm assuming you're still you're a professor currently at Texas A&M, is that correct?

Michael Shaub: [00:05:15] I am, Greg. Yeah, I'm still teaching here. I teach auditing and I teach accounting ethics here. And yeah, I've been here for this is my 17th year here.

Greg Kyte: [00:05:23] Nice. Where were you before that? Just out of curiosity.

Michael Shaub: [00:05:26] Well, I've taught for other places. I came here from Saint Mary's University in San Antonio immediately before. But I've I've taught both in the big research university and the small liberal arts setting and but have really enjoyed being here at A&M.

Greg Kyte: [00:05:42] Nice. And just to just to test my own my own trivia knowledge. Texas A&M is in College Station, Texas, is that right?

Michael Shaub: [00:05:52] It is. College Station is about 90 miles northwest of Houston. Well done. Okay. And yeah, it's a campus of over 70,000.

Greg Kyte: [00:06:01] Yeah, that's a big old campus.

Caleb Newquist: [00:06:04] I just have to note that in a previous episode that was located, a case study that we did that was located in Texas, we demonstrated some horrific Texas geography. And yeah, we, I don't remember what yeah, it's a big place. Was the.

Greg Kyte: [00:06:21] Fruitcake fraud. It was, it was. Course it was Corsicana, Texas. Yep. Yeah. So, yeah, yeah. The Collin Street Bakery.

Michael Shaub: [00:06:29] Have you been.

Greg Kyte: [00:06:30] Have you been there? Have you had their fruitcake?

Michael Shaub: [00:06:33] Yes. Been through Corsicana many times. But I guess driven by the Collin Street Bakery. But I think I've had the Collin Street Bakery Fruitcake at some point in the past, though not a huge fruitcake fan. If I was going to go fruitcake, it would be Collin Street.

Greg Kyte: [00:06:51] Yes. This episode brought to you by Collin Street Bakery. If you'd like to order your college street, please go to Collin Street. Dot com backslash. Backslash. Yeah. We remodeling free.

Caleb Newquist: [00:07:03] Ads. Free ads for fruitcake. Yeah. So, Mike, we like to we like to kind of get a sense of everybody's. I don't know, Just their whole just the just leading up to like your work now, But so just give can you give us a brief synopsis of your life growing up? Like, where did you grow up? You know what what did your parents do? Where did you go to school? Things like that.

Michael Shaub: [00:07:25] I grew up in Maryland, in Virginia, born in Baltimore, so I'm a lifelong Oriole fan. My dad was transferred from Virginia out to Houston when I was in seventh grade, worked for an oil company. He was a research physicist. My mom stayed at home for the most part, did several things, but mostly stayed at home. Five one of five boys graduated from high school in Houston, went to the University of Texas, got a degree in accounting, got married, been married 45 years. The world's most beautiful woman, five kids, Just had our ninth grandchild last week. Oh, wow. So. So, yeah, really rich life from Texas. I went into industry, thought I might even do campus ministry at one point. Figured out quickly. I was neither gifted nor called to do that and went back for my master's in oil and gas accounting went out into big firm life, public accounting firm life, then back into industry as a controller for commercial real estate company. Before I went back for my PhD, got my PhD at Texas Tech, where I also got my master's, and then I started my academic career. So this is year 34 as an academic year 17 at A&M.

Caleb Newquist: [00:08:38] Cool. Now, just a couple one silly question and one maybe. Well, maybe they're both silly questions. But anyway, so born in Baltimore, but essentially the formative years in Texas. So do you like do you you're a tried and true Texan. Do you think of yourself that way or do you consider your.

Michael Shaub: [00:08:56] I'm a Texan, I'm a Texas. I'm one of those got here as soon as I could type of people. But yeah, my heart and my heart is still if I walk into Camden Yards or if I see orange and black or even the Orioles road uniform, that's really the song of my heart. So I'm an Orioles fan. Even when they're playing in Houston, I'm wearing I'm wearing the birds cap, I'm wearing my jersey. I'm an Orioles fan for life. So I have these root ties and kind of family feel to to Maryland. And I grew up in Richmond for a while, too, and really enjoyed that part of my childhood, probably the happiest part of my childhood. So but yeah, I'm a Texan. We came back to Texas in 2000 and have loved being here.

Greg Kyte: [00:09:37] Cool. So Mike Interesting, interesting parallels not having known your story. So I currently am a controller in industry for commercial medical real estate. That's where I'm at right now, so I'm connecting with you on that. Also, I, I'm interested what campus ministry were you? Did you were you thinking about going for it? Because I at one point in a former life, I, I almost went on staff with Campus Crusade for Christ.

Michael Shaub: [00:10:06] For me, it was a group called the Navigators. Okay. But yes, certainly have lots of friends in various various of those ministries and still do. But I just wasn't designed for that as a vocation. You know, I've really enjoyed investing. I still invest in lives. I enjoy investing in students. You know, I have lifelong friends from my students. I've been privileged to have some of my former students go to significant roles out there. And it's just, you know, I'm proud to call them friends. So doing this a long time. But yeah, that's what we do. Linda and I, you know, we have the best thing for us is to have eight students around our Amish dinner table and and just have a conversation. We really enjoy that a lot.

Greg Kyte: [00:10:45] That's awesome.

Caleb Newquist: [00:10:47] So I'm curious, can you you touched on a little bit, but what was your as a practitioner, what was what was your career like? What happened in those years that looking back on them, were there were there significant points or were there were there were there developments that happened during those years that are instrumental for you? I'm just curious about what your time was like as a as a practitioner.

Michael Shaub: [00:11:13] Well, I think I wanted to go out of my master's degree to go to work for an oil and gas company. That was my master's degree was in oil and gas accounting. But the industry was really in a downturn. And my in my program, they assigned you to an internship. And so they assigned me to what at the big time was at the time was a big eight internship. And so I did that internship and was just captivated by it. It was awesome. I just loved what auditing felt like and they threw me in. They let me do stuff. You know, I discovered in, you know, a revenue recognition issue with a Fortune 500 company. They took me into the comptroller's office for that. You know, it turned out I thought they were just showing off to recruit me. Instead, they made me explain the whole thing. My sweat rings were down to my to my ribs, you know, talking to this guy. And but it, you know, just overwhelmed by how much I was learning. And I felt like I was swimming up really in terms of my learning experience. And so I didn't have any trouble saying yes to going out into public accounting. When I went out. The thing was Linda and I got married early, had children early, and so by that time we already had two children.

Michael Shaub: [00:12:25] And I had my third child while we were in public accounting. And, you know, that that experience kind of, you know, it's hard to sit in those days in a hotel room getting a 20 minute call at night home with your children, saying, when are you coming home, daddy? That was probably the hardest thing on me. I loved the work. I loved being stretched. I was growing faster than I'd ever grown personally. But I you know, I wanted to keep my marriage and I wanted to be a good daddy. And I wanted to do the things that I thought were important for a lifelong type of decision. So I decided, you know, at that point I went back into industry first trying to get the work life balance. But to be honest, after I'd been in public accounting, even at a controller level, I struggled just to find it to be incredibly interesting for me because I just wasn't getting the same level of push and challenge. But I really had been bitten by the bug when I had to teach to put bread on the table during the master's program. I'd been bitten by that teaching bug and I thought maybe someday I'd like to be back in a classroom.

Caleb Newquist: [00:13:31] So I just want to hear a little bit more about you mentioned the feeling as a as a big eight auditor. What what just talk a little bit more about that. Like, can you be more specific about like what those feelings were? Was it like the intellectual rigor or just like the kind of the just the breadth of all the things that there were to learn? Just curious about what that was.

Michael Shaub: [00:13:55] Yeah, I think, you know, when I teach my students about understanding the entity and its environment, just that whole progression of understanding, wait, this, there's this industry and there's this company and where it fits in the industry, and then there's these particulars about way the systems work in this company that make them vulnerable to X, Y, and Z, and that it just kept unraveling. For me, it was constant, just, you know, unraveling that for me it was like solving a puzzle, right? It was like, how do we do this? Okay, let's let's fix this. How are we going to make this work? What how do I solve this? I can remember one time being out on a client I had no idea how to solve this problem of measuring throughput in some kind of a gas system or whatever. How I was going to do that. And I was back in those days, the firm I worked for was really one of those culturally figure it out firms not fill in the forms firms. And for me that was ideal. And I can remember just trying to figure out how am I going to measure this to determine whether this is accurate throughput we're measuring here. And I can remember when I got taken out for my evaluation, I knew I had done well because he took me out to this really nice restaurant for lunch to do my evaluation on the client.

Michael Shaub: [00:15:09] And I thought, Yeah, like, yeah, like, yeah, I can do this. Like, yeah, I can figure this out and solving that. I mean. Caleb that's, that's what I, when I say the feelings in me, the ability to do something that really added value, that provided protection for my firm, that I was getting it right. And then I also went through the, oh man, I'm completely overwhelmed. I can't do this feeling that was harder to live with. But it also made me realize, Wow, I'm doing something significant here. If I'm overwhelmed by this, I must be doing something really significant here. And what can I do to GEtrillionEADY so I can do this next time? You know, I remember going in and having to do a three year retroactive restatement on an acquisition when I'd been at the firm like two years kind of thing, you know, year and a half or two years and thinking, I'm supposed to run this job with people from three offices or whatever, you know, and how in the world do I do this? And that was the thing about public accounting. You don't like work your way up like you do in some corporations where you've got an incremental every 2 or 3 years, you just they just throw you in the cold water.

Greg Kyte: [00:16:18] Yeah. So clearly, if they had taken you to lunch at Arby's, you would have known that you had done a horrible job. Because I find I find Arby's to be an indicator of poor performance. So and really a punishment when you get down to it. This episode brought to you by Arby's, Arby's, go order download the new Arby's app.

Michael Shaub: [00:16:41] We got the meats.

Caleb Newquist: [00:16:43] They got the meats.

Michael Shaub: [00:16:45] We got the meats. That's Arby's.

Greg Kyte: [00:16:47] So. So, Mike, I loved what you were talking about with in terms of just the culture of the firm you were at where it was a it was a go figure it out and do some real auditing, not just fill a file, not just fill out a form, not just check off a checklist kind of auditing that seems like that's the way the audit firms are supposed to work, but not the way that they do work. I also thought it was interesting and this is something I would love to hear you talk more about One of your blog posts that I that I read in preparation for our talk today. I think it was the one about the lady from Theranos where you were saying that so much of today's entrepreneurs and business world, they they run on the model of fake it till you make it. And the problem is the faking it part and when but at the same time, when you say that your company was stretching and they're taking you out to places where you're not, you don't feel necessarily comfortable and they're making you do it anyways. There is to me, I, I kind of feel like there's a fake it til you make it a like how, how do you balance that of like you need to be stretched but you also but but faking it till you make it is maybe not the way that especially the accounting profession should operate. So how do you, in your mind, how do those two things balance each other out?

Michael Shaub: [00:18:12] Well, if you got a good hierarchical structure, you you can you can handle that. You can build controls in. So, for example, that one example I was giving you, I was overwhelmed and they brought in someone else to help me do that. They were they responded. They were sensitive to that. I could speak to them honestly and say, I can I can do this, but I can't do this. How do I do this? They actually did bring someone else from another office to help me in that process. So if you're responsive in leadership and if the firms are set up to, you know, when we talk about adequate planning and supervision for audits, that's what it's supposed to be. There actually is supposed to be supervision. Not just, you know, let the worker bees go and do whatever they come up with. You're supposed to have someone who's interacting with them. My firm did. And they had those things in place. That probably was one of the reasons they at the time dominated the Fortune 500 companies in terms of their even though they weren't one of the largest of the big eight firms, they were they were dominating in terms of the big companies. So that was my experience. I also got feedback immediately. If I struggled, if I didn't do well, they told me the truth, you know, and they told me how to get better. And then they sent me off to the next adventure, right, with no pause. So I had to learn to cope with that emotionally. But I want to commend them. I really appreciated them, you know, for for actually stepping in when I said I genuinely need help here, this is really more than I can do that they didn't just ignore that.

Greg Kyte: [00:19:48] Gotcha. So it's almost like a component of humility with that where it's like, you know, you're being stretched, but there's the humility, there's the transparency even of going, Hey, here's what I'm doing. Is this right? Because again, with with your Elizabeth Holmes post, I think one of the things you mentioned there, even with her, was that if she had just said, yeah, we tried this thing and it and it failed, she just acknowledged it, that likely she'd be she'd still be a powerhouse CEO today. But the fact that she she maybe hung on to the to the fake it part longer than she should have or could have that that's without without asking for help, without getting that feedback and that, you know, without being transparent. That was probably the the Achilles heel for her. Would you agree with that?

Michael Shaub: [00:20:32] Without a doubt in my mind, she would be. There's no question in my mind if you just look at how she's wired and the way she was able to make connections with people with influential people in such a short time as a young person, that to me is it's a sure signal. Look, you're going to fail three things and you're going to succeed at five things and you're going to be known for the things you succeeded at. Right? You're not noted for your first time at Apple. You're noted for after you go back to Apple and turn it into this juggernaut. Right. And so that's if you had someone in your life to say, hey, hey, you know, we'll try and raise some more capital here, but unless this thing's going to work, let's pack this in and let's see where we go from here, because there are companies doing what she was trying to do. There are companies out there in the marketplace that are really advancing toward what she's trying to do. And you just couldn't do it with that box and you couldn't and lying about being able to do it with that and then entering into contracts with Walgreens while you're lying about that box, being able to do that becomes laughable at some point. It's really hard to backpedal from.

Greg Kyte: [00:21:38] Gotcha.

Caleb Newquist: [00:21:39] I just want to take one step back. Your transition to to teaching and going and moving into the academic world. You kind of touched on that. I think you you were looking for more balance in your life, but then teaching you said you the teaching bug is what bit you and you kind of went down that path. I'm curious about the ethics component. How what's the story behind that? Like is there is there something from your practitioner career or was there something that you were that you experienced in your master's program or your PhD program that said where you said, Oh, that's it, That's that's the way I'm going to go? Just curious about the story behind that.

Michael Shaub: [00:22:18] Well, there's a couple of people involved there. First, I'd go back to my master's program. I had this professor who was an amazing mentor. His name is Ben Trotter. He came out of public accounting, had been, oh, the equivalent of a principal or managing director type person with one of the big eight and went back to a PhD program. And he was my auditing professor for graduate school at Texas Tech. And Ben is still a dear friend, still lives out in Lubbock. But he was kind of my, I guess, my siren for the profession, for what a profession really ought to be. He was that guy. He really believed in the profession and believed in doing it right and believed we provided a public service that we were certified public accountants, not certified profitable accountants. And so he gave me he infused that in me. And so we read I mean, we we were back in mounts. And Sheriff, the philosophy of auditing, why is this Why is this that we're doing what we're doing? That's so I had those kind of roots in that we even took an accounting history class as part of our master's program with another great professor, Herschel. Man, Those guys gave me a sense that the profession was worth preserving and worth saving. When I went back for the PhD early on, I met a marketing PhD student who was doing an ethics dissertation, and he was studying under a guy named Shelby Hunt, probably one of the top five marketing researchers of the last 50 years.

Michael Shaub: [00:23:44] Shelby Hunt's been an editor of both of the top two journals in marketing, and also I think that's right. And he also he just passed away this summer. But Shelby was working with this PhD student, and I loved what he was thinking about. He was studying cognitive moral development and marketing the impact of cognitive moral development in the Kohlberg and Rest kind of stream on marketing decision making. And at that same time, Shelby Hunt was working on a general theory of marketing ethics with a guy named Scott Vetell, who became a professor at Mississippi at Mississippi. And so I decided to do a paper on a similar vein in accounting. I thought I'd certainly encountered moral decision making in accounting, particularly in auditing. I had that there were a number of issues and that developed eventually into a dissertation around that. But my focus on my dissertation, my former firm cooperated with me in getting me subjects. My study was on the ability of auditors to recognize an ethical issue in the first place as opposed to the judgment that they reached on that ethical issue. Because if you don't recognize it, there's no reason you would reach a moral judgment on something you think is just a routine technical issue that you're dealing with. Right. If you think of materiality, for example, as just, hey, this is just you select A or B material or immaterial as opposed to a moral judgment, you're going to treat it differently.

Michael Shaub: [00:25:12] So I studied ethical sensitivity, and the reason I eventually decided this is what I'm going to do my dissertation on is I tried to look at the types of topics that I would still be interested 25 years later in doing because I was in my early 30s and I hope to do this for a long time, to do research for a long time. And it was the thing that really captivated me, Caleb, was the idea of how do people make these judgments? Because I saw him making these judgments all over the place. How do they do that? And I thought this gave me a framework for trying to understand it. And so it was a time when that was just starting to be studied in the accounting profession, a guy named Larry Ponemon who went on to do a bunch of privacy stuff you could Lawrence p o n e m o n. If you look him up, still doing privacy stuff. He ended up he was a partner with the firms, I think with a couple of the firms for a while setting up ethics practices. But he finally moved into privacy, got rich, moved to Michigan. He's an amazing guy, but he was doing academic research in this area that really stimulated me, kind of launched my my research career.

Greg Kyte: [00:26:19] That's a it's interesting that you that you were kind of your journey into accounting ethics was part of the origin story involved marketing ethics, which I believe technically that's an oxymoron.

Michael Shaub: [00:26:32] Oxymoron. I understand.

Greg Kyte: [00:26:33] But I do think that that's still interesting. And it seems also it seems like your when you look at like the threats because you said you want to part of what you want to do is help preserve the accounting profession. And you see, I mean, and I guess this isn't startling, but you see the main threat to the accounting profession being being ethics, that if there's something that's going to bring down the profession or destroy the brand or destroy the profession, it's going to be the the problems that we have, the ethical situations that we have in the accounting profession. Is that is is that correct observation?

Michael Shaub: [00:27:09] It seems likely. That seems to have been true in a number of other business types of settings, right? That what crashes and burns them is those moral choices that they make when they're technically incredibly proficient. And I think accountants and auditors now are technically more proficient than they've ever been, and they have the tools at hand to do things at a better level, at a higher level, at a lower cost if they're willing to do it. Yes, the world is more complex, but the tools are way ahead of what the actual businesses have evolved into. So if we wanted to do it well, we could do it well. We really are capable of that. But it's hard to it's hard not to kiss up to clients. It's hard not to just say, I don't really want to bother them because I need to keep the revenue stream flowing here. So I don't want to ask that hard question. And so my my ethics class is done in a mini mester where our students are in the class for basically six weeks, four days a week. And it's, you know, it's intensive. And they have to decide. They have to come up with ten or fewer principles to guide their professional life. They get to choose their outside reading. But they they are talking to people from different viewpoints. But what they are doing is figuring out who am I? And I want them to preserve that for a lifetime, whoever they are, I don't want them to lose that because of the profession.

Michael Shaub: [00:28:30] So, yes, I think the profession is vulnerable because of the tendency to consider money more important than actually preserving the profession. And that's why I find the marketing ethics stuff really healthy and helpful to me. I teach it in my ethics class, basically hunts, Hunt the hunt and veto model, says, Look, you're balancing two things and making an ethical decision. Your duties in the situation and the consequences that are going to come out of the situation, that's really what you're doing now. That's determined in part by your virtue, your character, your faith, the things that exist, your culture and your firm, the culture, the business culture, all those things influence it. But when it comes down to it, you're considering, Do I have a duty here? Do I need to step in here? Do I need to say something? Do I need am I responsible for something? And then what's the outcomes if I do that or don't do that? I just find in the profession, overwhelmingly people are consequentialists. They just calculate that. They try and calculate some kind of greatest good and usually it's for them. Occasionally it's the greatest good for the greatest number, but usually it's just ethical egoism. What's it going to cost me? What happens if I do this and there's a bunch of individuals doing that? Whereas the idea with the profession is we exchange. You know, when I look at the classical definition of a profession, it's not just you're really good at something. I mean, professional wrestlers are really good at something.

Michael Shaub: [00:29:58] That's one definition of a profession that you're really good at something. Another is that you have this common code of conduct that you apply that you abide by. And you could almost argue that wrestlers do that, too. But but really, it means a different level in terms of code of conduct. But the third thing that doesn't that really doesn't apply to any but the a narrow group of professions is that you accept the responsibility or the duty to put the public interest or others interests ahead of your own. That's what law is supposed to do. That's what medicine is supposed to do. You heal people rather than just get rich. And that's what we're supposed to do in the accounting profession in order in exchange for the monopoly of the audit, we promise to protect the public from those who would cause harm to them. And that's our job. Our job is to play defense. It's to minimize harm, not to maximize good. And I'm just saying we're way more skilled at trying to maximize good, particularly for ourselves and particularly maximize wealth for ourselves than we are at trying to minimize harm. And minimizing harm is from accepting a duty. And I just say to my students, You have a duty, and if you want to be a consultant, just be a consultant. But if you want to be an auditor, you accept a duty to protect the public from the harm that takes place through things like Theranos, through things like ftcs, through things that really harm people broadly.

Speaker5: [00:31:35] Yeah.

Caleb Newquist: [00:31:35] So I want to ask you about two big ethical lapses that you've written about the KPMG steal the exam scandal and then the ethics exam cheating scandal, which Greg and I, we just recorded an episode for. It's not out yet, but it'll it'll probably come out before this conversation. But I just want to hear your thoughts on those two things because in your writing you seem especially troubled about these two instances and maybe it's just the free or the excuse me, the recency of them, but just curious about why you think those are so indicative of a of a bigger problem.

Michael Shaub: [00:32:15] Again, humility is an important word. We could all do this. We could all do this. I could do this. But and I love those firms and I love and so many of my friends are in those firms. Not just people who recruit here that I value, but my former students populate those firms. Both of those events are abominations as far as I'm concerned. Both of those events. Show how far we are willing to go for how little. And, you know, I call them, I just say tell people, look, you're bad consequence calculators. You all think you're rational, man, and you can calculate the consequences of what you're going to do. But I'm telling you, these folks, in order to not have to study two hours for some kind of continuing education exam or an ethics exam, they were willing to cause their firms to incur combined $150 Million in fines. The reputation damages several people going to prison as a result of it in the KPMG case and a number of trashed careers, a number of people who got fired, a number of people who were sanctioned in the firms, all of this stuff so that you didn't have to study an hour to pass a one hour CPE or a four hour CPE or an ethics exam related to the CPA exam, which is probably open book anyway. Yeah. And that you all had to you were willing to go to the trouble to design systems and to write code that would enable you to pass with a grade of 25%. These types of things. I mean, obviously I've been a professor a long time. I will say I've seen things.

Michael Shaub: [00:34:09] People are willing. People are very creative when it comes to finding ways around just complying and just following the rules. But this was so egregious to me. My brother, you know, my brother worked for Enron and was not there when it all imploded. He was damaged by that. You know, I've had a long history with Enron. This was those two events to me were as egregious as anything that has happened in the profession in my lifetime. And they just showed, you know, what I talked about with my Big eight firm that had this hierarchical structure that would not tolerate that, that would come in and help you get better, but was not going to enable you to do wrong. That's I'm not saying that's gone, but I'm saying these are egregious examples of where it's been voided or it's been the legs have been cut out from under it. What happened to KPMG at the top is scary that it was the very top of the firm that was allowing this and shout out to the Chicago partner, the woman who who said, hey, wait, no, we we can't do this. I can't use this information. Who knows how long that would have gone on if she had not stepped up and shown moral courage in that situation. And she's still prospering, by the way. She's still in Chicago office. She's running a practice for them. But kudos to her for doing it. But so does that answer your question, Caleb? It does, yeah. I got really mad. I will say when KPMG happened, I got really mad. Well, I mean it really deeply angry.

Caleb Newquist: [00:35:47] One one thing I'll just mention and then I think Greg has a question. But Mike, you're you're a very good writer. As someone who writes a lot, I recognize good writing. And I think what came through, what comes through in your writing and we're sharing a lot of your writing in the show notes for this episode. But what comes through in your writing is you are very vulnerable in your writing. You aren't afraid to be. You aren't afraid to be angry. You aren't afraid to express things, whether it's things about your faith or things about death, death of Friends. You've written about the deaths of some of your friends. Like that kind of writing really comes through, and that's what makes it so powerful. So like, yes, be angry. Definitely. That is that is what I think. That's how we learn. And I think that's how I think that just underscores your principles and that comes through in your writing and it's certainly going to come through in your teaching. So I just want to commend you for that. Um, but.

Michael Shaub: [00:36:41] Greg Yeah, if I am angry and angry is a normal emotion, you know, perfectly normal. I wouldn't be angry and not sin about it. You know, I want to help. I want to be angry in a way that when I speak that it helps. So that would cause a firm to reconsider how you might do this or that would cause my students to choose to do otherwise. Because we we graduate a lot of students here out of our five year program, we're going to graduate 200 to 250 into the profession a year. So, you know, in in a decade, you're putting out, say, 2500 people into the profession. You can you can have an influence. You can change. You know, you can you can you could change a firm. We're certainly going to have a presence in certain practices in certain firms. Right. And you could make a difference. You could be that person who stood up like that Chicago partner. And that's what I want to give my students the courage to do. I mean, encourage literally means to give courage. That's what I want to do for my students is encourage them to be willing to step in and take a risk. Because I say there are jobs worth losing. You should always be willing to lose a job if that's what's necessary to maintain who you are.

Caleb Newquist: [00:37:48] Greg and I have talked about that. Absolutely.

Speaker5: [00:37:51] Yeah.

Greg Kyte: [00:37:52] Yeah. And that's actually that's a couple of things I want to I want to talk to get to. But I do like what you're saying that you like when you get angry, you're hoping that that's anger, that gives energy that like puts energy into into creating positive change. And I think that's important because when Caleb and I get angry about stuff, it's usually just to fuel nihilistic cynicism. So I think your, your approach is probably a more.

Caleb Newquist: [00:38:22] Noble, slightly more productive, slightly more productive. Can say.

Michael Shaub: [00:38:25] Something. Greg, I, I follow you guys. Okay? I follow you guys. So you guys make me laugh, all right? You guys make me laugh. And it is another way. Humor is another way for you to bring about change and has always been a way to bring about change. And there are times that I'll introduce humor as well. But, you know, I get this window when my students are trying to figure out and make kind of long term moral decisions and figure out who they are. And so I have this different opportunity than you do around the souls of people to actually make them ask hard questions. So I'm probably more serious than I would be if we were just sitting together having a conversation. Sure. And I appreciate that you made me laugh and going concern. I got to admit, I've been following going concerned for a long time and some stuff. I think you should not be laughing at that. Stop laughing. But the stuff I mean, the stuff is creative. It's really creative. Caleb You know, and you and, and those who've collaborated with you, Adriana or, you know, different folks have been really, you know, brought out that you strip away the varnish off these things and you make people actually encounter what's really going. And I appreciate that that's not really my role and that's kind of not what I feel like. God's called me to do this. My role is I have this opportunity because I also do research in the area and I also write in the area. And you're right. Bottom line ethics, which is my ethics blog on the Mays Business School website, they've allowed me to write since 2010 and they've really you know, I'm writing about some stuff that's touchy and, you know, I'm writing about people that are recruiting, and they could have said, Hey, that's it, no more blogs. But I appreciate the fact that they they allow me to to write to these issues and and be who I am.

Greg Kyte: [00:40:13] Okay. So in that vein, to take off the varnish of some some very prevalent I mean, not just prevalent central ideas to the accounting profession. Going back to something that you mentioned earlier where you said it's really difficult for auditors to try to not just make their clients happy so that they don't interrupt their revenue stream. I've contended for a while and I and I think I picked this up from Ron Baker that that independence, like the whole concept of independence, is just an illusion because we are being paid by you can't be independent from the person who's putting food in your kid's mouth and everything that we do, even even the whole idea, you know, Sarbanes-Oxley, having an independent, you know, audit board in your in your board of directors that chooses your auditor, things like that, I think it's all just pretense. Do you do you agree? Do you disagree that that that that being truly independent is not it's it's it's not even aspirational. It's unattainable. We're just trying to create an illusion of of independence as a as a profession.

Michael Shaub: [00:41:26] Well, I'm teaching independence tomorrow in auditing class, so.

Greg Kyte: [00:41:30] It looked like. No, no, just for the for the listeners, you just grabbed your headphones and it almost looked like you were just going to take them off and leave them leave.

Speaker5: [00:41:38] But no. So end of interview.

Michael Shaub: [00:41:40] So I'm reading. I'm reading Max Basman's book Complicit right Now, which is I recommend as a read. But I my ethics students all have to read his article from late 90s with a couple of coauthors called The Impossibility of Auditor Independence. And he still holds to that view and understandably so the idea of being independent, in fact. I think is structurally, virtually impossible in the American culture. Virtually impossible. But it's I still think. I want my students to aspire to it. And you can be more independent rather than less independent. And I want my students. What I also want to do is seed industry with a bunch of objective people. Even when you can't be independent, you can still be objective and say, Hey, that's not gap. And if the profession was doing and by profession, I mean broadly all of us in the accounting profession. So, Greg, in your role and the people who work for you and whatever, if you were actually doing the things the standards call for you to do, like being transparent with the auditor that you're supposed to be not I'll only answer that question if he or she asks, or I'm never answering that question. If we were doing as a profession the things we needed to do, then we would supplement things in a way that effectively brought about something that aspired to independence. But those folks in in industry largely feel no responsibility. My experience is, except in the most egregious circumstances, to do anything but comply with the boss on how we're going to handle this transaction, which puts the auditor out on an island. And the reality is it's incredibly difficult for to with anyone paying your bill to, you know, you're providing your livelihood to go against them.

Michael Shaub: [00:43:41] I'm sure if you're sponsored by advertisers, same kind of thing for me when I do exec Ed, when I go into exec Ed, you know, it's hard for me to say, you know, like management was really stupid in this decision or, hey, look, this is not what you guys are doing. Really Borders on not being GAAP, right? You know, those kind of things. To be skeptical in that setting is hard for me. I try, but it's really hard. So I understand. But so that's why we just couldn't do it. The answer is we couldn't do it. That's why we got a PCAOB. We just flat couldn't do it. It wasn't just Anderson couldn't do it. They seriously couldn't do it in a lot of clients. Not just not just Enron or Worldcom or whatever, They seriously couldn't do it. But none of the firms. It was hard. I shouldn't say none of the firms. They differed on how well they did it, but I still I'd still say, you know, I am not objective about the world's most beautiful woman. You're not. There's zero independence there. And I'm not objective at all. I have no desire to be. But I. I'm willing to be, even though it would pay off for me to treat certain people well. I'm able to be objective and a lot of settings. I'm objective about offensive coordinators at universities and stuff. You know, I'm objective about that stuff, even though it may get me in trouble on Twitter.

Speaker5: [00:45:06] Right.

Greg Kyte: [00:45:07] Even even even though you're a diehard Orioles fan, if they're coaching bad, you're going to you're going to be yelling at your TV from your couch.

Michael Shaub: [00:45:15] Yeah. Or Texas A&M football. We went five and seven this year, man. We got we've got the biggest budget. We've got the either the first or second biggest cash inflow into our athletic department of any university in the US. And we went five and seven in football this year. I'm more than willing to be transparently independent, even though Texas A&M pays my freight, right?

Speaker5: [00:45:35] Right. I get a paycheck that says.

Michael Shaub: [00:45:36] Texas A&M on it, but it's really hard. It's really hard for CPA firms to do that. This is their livelihood. And what I would say is my prediction for a while has been that one of the big four will no longer be an audit firm by 2030. And it could be more than that. That's that's the way I see it going rather than this, you know, split up, you know, and I think we see that happening. I see, you know, I've been saying that for a while, but I think the the earthquakes you're seeing right now, the rumblings going on are an indicator that you're going to have trouble finding people who are actually willing to audit these firms for all the things they're foregoing. Right. You know, it's it's hard for an EA to forego all the consulting opportunities in high tech because they are the tech auditors. Right? They are foregoing so many over a ten year window, billions of dollars in potential fees because they can't.

Greg Kyte: [00:46:37] So let's. Caleb, let's make a note that we need to have Mike back on in 2030 to discuss the accounting firm that died between now and then. So are you okay with coming back in?

Michael Shaub: [00:46:53] I'll let you know my beach address. Yeah.

Speaker5: [00:46:55] Yeah. Okay.

Michael Shaub: [00:46:57] It will not it will not be an emotional issue for me in 2030. I will.

Speaker5: [00:47:00] Say.

Michael Shaub: [00:47:01] Safe to say I will not be an emotional issue.

Speaker5: [00:47:03] For me in.

Greg Kyte: [00:47:04] Less anger in 2023. So. So here's here's another thing. And you touched on it in one of the blog posts that I read. You touched on it here in the interview as well. Is that basically the idea that if we're being honest with ourselves, everyone's vulnerable to ethical lapses and that and that that that reminds me of the psychological bias that's called bias blind spot where we're basically you say, yeah, there's these, there's, there's these psychological principles that are going to prime people for poor behavior But I'm I'm smart enough that stuff doesn't it's kind of like me with with with advertising I go advertising doesn't work on me. I'm I'm smarter than that. And then I see a commercial pop up.

Speaker5: [00:47:55] On your Diet Coke.

Greg Kyte: [00:47:56] Right, Right. Exactly. And I see your commercial for a big, juicy hamburger. And I'm like, I think I need to try that juicy hamburger. So, so, So with that, what I guess, what do you think is the best way as an ethics researcher, as an ethics professor, what do you think is the best things that we can do to protect ourselves from the vulnerability that we all have towards ethical lapses? I think that even stretches beyond accounting, but obviously specifically since we're talking about accounting, what do you think are the best things? Are there some silver bullets out there?

Michael Shaub: [00:48:31] Well, I have a I'll be teaching in the classroom with the chief legal officer at a company next week. And he he says you need a board of directors. You need a personal board of directors. For me, what I have is an accountability partner. I have a guy that I'll meet later today. We meet on Tuesdays and he's allowed to ask me any question. So you need people that you are transparently honest with. And I say to people, to my students, you need a resource within the firm if possible, and you need one outside the firm that you can speak truth with about what's really going on. I mean, obviously within the limits of confidential client information or whatever. But you need to be able to speak truth about what you're encountering. And I always offer to be the sounding board if they need a person outside that, I'm willing to do that. But a personal board of directors helps. It doesn't guarantee anything. You know, all of our lives can collapse. We can do stupid things. But when you're speaking to someone habitually, you say things offhand in the conversation that indicate your heart and somebody says, Hey, what's going on? Or What are you thinking about? Or are you serious about that? Those kind of comments can short circuit it going to you. This kind of spiral you go into that causes you to make decisions you never thought you would make? That's the first thing I would do is have you ought to have a somebody. There ought to be somebody who can ask you any question. And I mean, other than your significant other, your spouse, whatever. And there ought to be, I think preferably a broader set, 3 or 4 that you really trust and are truth tellers that won't just make you feel good.

Speaker5: [00:50:10] Gotcha.

Greg Kyte: [00:50:11] That's that seems important. That seems. Yeah. Do you have in terms because I'm sure that you're telling your students to do that. I think you even said that you do that. Do you feel like that's because I'm trying to think I mean, I got I got some buddies who who would ask, but I don't really they're not like on alert to say say, hey, are you stealing from your company? Hey, this is a pretty this is a pretty nice dinner and you just picked up the tab. So, Greg, are you are you embezzling? No. No one's asking me that. Do you do you feel like people are how how prevalent do you think that is even among the students that you've taught that that's a that's a good idea to do that.

Michael Shaub: [00:50:48] Well, I think you look at the what I see more prevalent in my students is depression and isolation. And that's been accelerating the last few years. But I think that's because we have these stand alone demonstrate how wonderful I am lives, you know, that are just just they undermine culture broadly. You shouldn't be surprised that our culture seems at war with each other because we live these stand alone lives that we want to you to celebrate me. You celebrate me and my individuality and. And you show this perfect life. I mean, I got five kids and and I just think the pressure they live under trying to raise their kids to not be driven by what some other 12 or 13 year old or some other 16 year old or even some other 8 or 10 year old thinks about them. And so there's not yeah, I find relatively few, probably more in my setting here at Texas A&M. I find a lot of grounded kids here. It's been pretty fun to teach her. One of the reasons I've stayed here so long is that I really find a set of kids who are grounded in who they are and really don't want to lose that during the college years. But there are more and more who are struggling with that isolation. And so it's not natural. And so that's why I that's why I tell them, you need to do this.

Michael Shaub: [00:52:12] And I also in the ethics class, I put them in accountability groups. So I assign them randomly into groups of 4 or 5. And during the entire course they read each other's reading summaries each week because they have to do 300 words or so as a reading summary of what they read and what they took from that week's reading. In their outside reading, they read each other's and annotate that and comment on that. And I don't grade it until I get the annotated version of that writing. So that makes them they're talking to people who are strangers for the most part because they're not self-selecting into those groups. And so you've got these groups where somebody is reading somebody for their ethics, reading somebody is reading Siddartha or somebody, somebody reading Zen and the Art of Motorcycle maintenance, Somebody is reading C.S Lewis, somebody else is reading Harry Potter, someone else is reading the Quran or the Bible or whatever. You know, they're reading a variety of things and then having to speak to each other about it and what's in common. What do we see here? What what what do you believe? Why do you believe that? Because I want people to have convictions about why they believe things and not just I believe that, you know, that this is the reason I order my life this way.

Caleb Newquist: [00:53:29] So I know you've got to go soon. I'm not saying this is the last question, Greg, so don't jump on me about that. But it's my last question.

Greg Kyte: [00:53:36] I got one more. I got one more. We got to get to you.

Caleb Newquist: [00:53:39] Okay. We'll get we'll go quick. When you wrote about Harambe, the gorilla at the Cincinnati Zoo, that had to be shot because of the young, the child that had fell into the enclosure was in danger. You were quoting, I believe, a colleague that said, well, no one's blaming the gorilla because that's what gorillas do. And then you wrote how, you know, some people explain kind of these cheating scandals and things is like, look, humans are biologically predisposed to, like, make these kinds of errors. Right. And you said that you disagreed with it, number one, because it's silly. But number two, it's kind of an abdication of responsibility. And so I guess what I'm saying, I guess my question is or what I what I want to hear you talk about is why is telling people and I'm kind of over I'm kind of being glib or oversimplifying it a little bit, but like, why why does telling people not to cheat over and over and over again, Why is that worthwhile? And why does and why are you optimistic in terms of like if you are optimistic about the future, how does that move forward, I guess?

Michael Shaub: [00:54:46] Well, I could be wrong, but I think people are more than they think they are. I don't think they are just there. Pile up biological predispositions. Yeah. And I don't think we'd have the level of ordered society that we have or have maintained for centuries if people hadn't concluded they're more than purely their biological predispositions. Now. I'd rather know more than less about my biological predispositions or how that changes over time, or how. I'm not against the scientific discoveries that lead to the conclusions of some reached that we just you can't make yourself do this. I think that's different from like this impossibility of auditor independence. You can devolve into you can't control your behavior at all. You can't change what you do. I just I just have to do this. That's that's my argument is. No, no, you don't have to. You still have choice because what the predisposed person gives you is, say, a world of no choice. Who on earth wants that wants a life where you have no choice, where all you can do is devolve into what you are destined to become because of your biological predispositions. Without denying science, I would say I think there's ample proof. And I've known lots of these people that you can be somebody fundamentally different than your biological predispositions and that you can withhold yourself from just calculating what's the greatest good for me? Because that's essentially what that kind of argument, the biological argument makes is it just justifies ethical egoism.

Michael Shaub: [00:56:30] In fact, it goes to psychological egoism. You ought only to consider what is good for you because it's impossible for you to know what would be good for someone else. And you have no role in judging that, though. You look at any news story between 5 and 6 p.m. and you see people on the streets and you see people in subways and people shooting up and you see tents and you see sex trafficking and you see all kinds of things and you say, Yeah, I'm pretty sure that's not what people prefer. I probably do have some idea that that people would prefer something different. And so I think it's just a case of recognizing who you are that you Now, I happen to believe in a God that designed that stuff into you. And you know what? Let me be let's be humble. I could be wrong. I could be dead wrong on everything. But as as I would tell a student, you know, all my chips are on red on that one that I you know, I think there's evidence for design.

Michael Shaub: [00:57:28] I think there's significant evidence for design. It's not just purely just I'm taking a leap here. I think there's significant evidence for design as opposed to purely this being a random set of effects. And so based on that, if that's true and people live as if it's true, they never live their whole life as if it's just biological effects. Because when they walk into Arby's, they expect to be served, then I'm going to say I'm going to call boo on you. If you say it's just a biological predisposition because you don't live one day like that. And no one I know, including my students lives one day like that. So that's you know, for me, I don't think it's irrational. I think it's perfectly rational to live as though we were designed in to make a difference and to live differently and to choose if we wanted to do that. And I'm saying you have if you want to be in the accounting profession as a CPA, you have a duty that you have accepted to choose to protect the public.

Greg Kyte: [00:58:27] Right on. So you have to go. But before you do, just really quick, you mentioned virtue before and I know you're a professor of ethics and I know you're familiar with with Aristotle's Nicomachean ethics. So I thought real quick, you and I could play a little game, just a quote off. What We'll go back and forth just with quotes that we've memorized from Nicomachean ethics. I'll go first. Freedom is obedience to self formulated rules. Okay, you go.

Michael Shaub: [00:58:53] Yeah. I'm not going to go.

Speaker5: [00:58:54] I'm not going to go.

Michael Shaub: [00:58:55] Sorry. You got me.

Speaker5: [00:58:57] You got me. Okay. All right. I'm not going to go. But I. Yeah.

Michael Shaub: [00:59:03] I should. I should be able to. I should be able to play that game with you for about 30 minutes for sure.

Speaker5: [00:59:08] Well.

Michael Shaub: [00:59:10] We were. And we were going through some of the cardinal virtues in class yesterday, but thanks. Thanks for. Thanks for making it fun. Yeah, I know you think that would be really fun for me and I appreciate that. But I will say this, I think I think appealing to virtue, I think appealing to the kind of person they want to be is important. And I think there are ways to inform them in virtue ethics, for example, in the median, when I say you want to be say, let's say with courage as a median between foolhardiness and cowardice, right? I'm teaching students moral courage in the in the setting, which doesn't mean burn the whole thing down. That would be a going concern approach, right? Caleb? Burn the whole thing down. I'm just kidding, Caleb. Just kidding. Burn the whole thing down. Right? And I'm not saying shut up and just do your job. Put your head down. Go hide. I'm saying there's something here, and let's model it for you. And so this semester, I'll get Tyler Schultz in there to model moral courage. I think he's spoken the last two springs to my students, and I think he will again from Theranos as one of the two whistleblowers of Theranos, whose grandfather is George Shultz, the former secretary of state, Sharon Watkins, has agreed to come in, the Enron whistleblower. I've never had her in the classroom. She's agreed to speak in my class. Cynthia Cooper and Glen Smith from Worldcom are planning to be in my class this semester. I will. I want them to see what it looks like. What's Aristotle talking about when he talks about courage? It looks like this. It looks like an ordinary human being who lost their job or could have lost their job or was threatened or whatever and did it anyway because they felt they had a duty to do it. That's what it would look like. Right. And so maybe on the next time we talk, we can go back and forth.

Speaker5: [01:01:04] Cool.

Michael Shaub: [01:01:04] And how about how about I'll do C.S Lewis quotes.

Speaker5: [01:01:07] With you. And you do. Okay? Okay.

Michael Shaub: [01:01:09] Aristotle, with me or whatever works. You know, I would. I'd love to to do it again. I think this is really stimulating to me and and really helpful for me to think out loud about why it is I do what I do because I've been doing it a long time. And there are days I feel like maybe I, you know, have I worn out my welcome on this? But I love what I do and I love investing my life in my students. And I'm grateful to have the chance to I live in an environment where there you know, there are things like this podcast or there's Twitter or whatever I can I can have a blog, I can speak into these issues instead of just being a voice in the classroom. So I'm grateful and I'm grateful for your time. Thanks. Thanks a lot for having me on. Yeah, of.

Caleb Newquist: [01:01:49] Course. Thanks, Mike. Okay. That was great, Greg. Did we learn anything? We learned something, right? All kinds of.

Greg Kyte: [01:02:02] Stuff. We absolutely learned some things. Caleb, I learned that contrary to popular belief, professional wrestling is not actually a profession, which is bullshit. Dr. Shaub. That's right. Dr. Shaub. Sunday night, you and me at the Tacoma Dome, we'll see who's in the profession and who's in a hospital bed. It's going to be the rumble and the revenue recognition, the fight for the credits on the right. You be there or you don't be there. Without ethics.

Caleb Newquist: [01:02:31] Challenge extended.

Greg Kyte: [01:02:33] Yeah, it's. Yeah. Enough said about that.

Caleb Newquist: [01:02:36] Enough said about that. I have something, Greg. How about this? I think. And let me know if you disagree with any of this, but. I think, and other people that we've had on the podcast have have kind of expressed similar things. But I think Mike Shaub expressed it about as clearly as anyone I've heard. He believes that the auditing, the auditing profession specifically I won't talk about accounting writ large, but auditing professionals specifically are duty bound professionals, right? So like, you know how lawyers take oaths and like physicians take oaths like do no harm, those kinds of things. Like, he.

Greg Kyte: [01:03:17] He.

Caleb Newquist: [01:03:18] Clearly stated that he believes that that's what auditors are and that's an ideal. Okay. And what it underscored for me is just how far short auditors are falling of that ideal. Like when we when we bring up these stories and these examples of like what's happened at audit firms, it's clear that, you know, Dr. Shaub and I know there's other people out there that think this, but like they want auditing to be on this pedestal. And I think in an ideal world, ideally that would be the case in practice, but it just simply isn't the case in practice. And he talked about that too. Like the the I don't what did he say? Not certified public accountants, but certified profitable accountants or something like that. Right. Right.

Greg Kyte: [01:04:08] Yeah, something like that.

Caleb Newquist: [01:04:09] That's the that seems to be the the profession's attitude about it. But I don't know what you think about that.

Greg Kyte: [01:04:14] Yeah. Well I absolutely agree with you with that in that in that I feel like our profession is not duty bound we're checklist bound and that's that's more of the practical side of things. But in in Doctor Jacobs defense I know I could tell so clearly from our interview that he did not take his role as someone who's creating the next generation of accountants. He did not take that lightly at all. And so the fact that he's teaching his students and saying, hey, you better expect to be a duty bound accountant, I think that's great. And even his story about being at a firm that wasn't that very much was like, let's do it right. Not let's just, you know, fill out a form and make a fat file on this, but let's actually do it right. Those kind of things. I think those are going to, you know, for for his sphere of influence, I think those are going to be very influential and are going to make a difference for at least that cohort of professionals that he turns out from his institution.

Caleb Newquist: [01:05:24] Yeah, I think you are right. I think you're right. But yeah, the to the extent that he has influence as an instructor, as a professor. Yeah. Like I think yeah. For to like instill in his students that they need to be clear eyed about what they think is right and what they think is wrong. And like he said, recognizing, recognizing an ethical conundrum when they're presented with one, even that is something that I think is super important that probably just gets taken for granted. Yeah, yeah, yeah. Not not everyone, not you know, not every ethical ethical conundrum involves a shady looking dude with a with a with a sack with a dollar sign on it, you know, and trying to hand it to you, you know.

Greg Kyte: [01:06:09] The good ones do, but not all of them are like that.

Caleb Newquist: [01:06:12] Right. Anyway, Greg, I have a question for you. Um, what? I thought you asked a very good question about independence and whether it was, in your words, an illusion and whether or not in so many words, whether or not he agreed with it or not. And his answer did not surprise me. He doesn't think it's an illusion. But I'm just curious right now, now that you have the floor all to yourself, like what did you think of his response?

Greg Kyte: [01:06:43] Well, I thought it felt like the most poignant part of his response was when he was talking about how he's not independent from Texas A and M, but he can still be objective about the Texas A&M football team coaching staff. Yeah, right. And I and it's funny because you kind of go okay that tracks I you know I can see why but but I think that there's some holes in that and and here I'm going to try to just whittle down and tell you as concisely as I can my whole this this is my broad philosophical structure for ethics within the accounting profession. We have we have three main ethical responsibilities as accountants. That's to be independent or sorry to be yeah, to be independent, objective and to have integrity. Right. Those are the three. The three pillars of accounting ethics are those three things. But let's, let's trace them through. You can't have integrity if you don't have objectivity. Which I think Dr. Schwab would say that's not correct. I can have integrity without objectivity. But what I would say is you that's possible theoretically, but nobody's going to trust your integrity if you don't have objectivity. Do you see what I'm saying there? Yep. And then take that one step. Then you can do that with the next layer and you can say, Well, you have to be independent, but you can't be independent unless you're objective. And that's what that's exactly what Dr. Schwab said, is he said, Oh, no, I can be objective even though I'm not independent.

Greg Kyte: [01:08:19] And I would say this, I'd say, But no one is going to trust your objectivity if you're not independent. So it's not so much can you be these things? In reality, it's will people trust that you really are those things without this, without this structure? So you can't no one's going to trust you being having integrity if you're not objective and no one's going to trust that your objective if you're not independent, so ergo, by the law of syllogism, no one's going to trust your your integrity if you if you're not independent. And so back to the coaching staff thing. I would also say that he can sit there on his couch on Saturday morning and shouted that goddamn offensive coordinator made him run the 22 red and it should have been the 44 Ohio Blitz and it's not going to cost him his fucking job if he does that. And I think he I think he knows that. I think as loud as he as he complains about his offensive defensive coaching staff, he's not going to lose his job as a professor of accounting at Texas A&M. But if somebody gives an adverse opinion to a client that they've had for years and they get tens of thousands of dollars of revenue from every year, that's a I think we're talking about completely different ballpark when it comes to objectivity and independence.

Caleb Newquist: [01:09:39] Gantlet thrown. Well done, Greg. Anyway, you can follow Dr. Shaub on Twitter at Mike Shaub. That's Mike Shaub. And also, if you want to read some of his writing, you can find all his blog posts@masortim.edu backslash ethics. And there's all kinds of stuff in the show notes that we picked out.

Greg Kyte: [01:10:05] Yeah, check out the show notes. Always check out for a deeper understanding of our content. Dig through the show notes. Well, that's it for this episode. Remember, never get involved in a land war in Asia and never go head to head against me quoting Aristotle.

Caleb Newquist: [01:10:24] And also remember that if your boss takes you to Arby's for lunch, you might want to start looking for a new job.

Greg Kyte: [01:10:30] Absolutely. So, Caleb, where can people find you? Out there on the Internet.

Caleb Newquist: [01:10:35] On Twitter at Newquist and LinkedIn Backslash. Caleb Newquist.

Greg Kyte: [01:10:40] Greg Same thing. Twitter at Greg Kite. Linkedin. Greg Kite, CPA. And also feel free to email me Greg greg.com. That's my that's my email. I read all my emails and I'll get back to you if you shoot me a note.

Caleb Newquist: [01:10:59] Or if you have feedback for us or the show. Email us at fraud at earmark cpa.com. Oh my Fraud is written by Greg Kite and myself. Our producer is Zach Frank. If you like the show, leave us a review or share it with a friend. Reviews and ratings help people find the show. So do that. Rate the show. Please Review. Yeah, please. Yeah. And be sure to subscribe on Apple, Stitcher, Spotify or wherever you listen. And for the accountants out there, if you listen on earmark, you can earn CPE, including ethics credit for this episode. Yep.

Greg Kyte: [01:11:39] Just do it. Do it. You need to.

Caleb Newquist: [01:11:42] Join us next time for more average swindlers and scams from stories that will make you say.

Greg Kyte: [01:11:46] Oh my. Oh my fraud.