Post Enron: Will Students Avoid Accounting?

Cameron Morrill and Janet Morrill
University of Manitoba
janet_morrill@umanitoba.ca

While the recent collapse of Enron Corporation has had profound implications for the operation of business and financial markets, it could also have implications for accounting students. Albrecht and Sack (2000) contend that students selecting an accounting major are fewer and of lower quality than in the past. If students who had intended to become Chartered Accountants decide to change careers due to Enron, this could exacerbate the situation. Furthermore, as current graduates might alter the public accounting profession as their careers advance, their perception of the Enron collapse may yield insights into changes they might make. For example, if students perceive that Enron's auditors bear no responsibility, they may be less likely to become accounting's change agents in the future.

To investigate these questions, we administered a survey containing twenty-five statements relating to the Enron situation to 80 fourth-year accounting majors at the University of Manitoba. The questionnaire was administered on April 4, 2002, before any criminal charges had been filed against Arthur Andersen, Enron's auditors.

The University of Manitoba students overwhelmingly reported that they had heard and read about the Enron collapse, and that their professors in both accounting and non-accounting classes had discussed it. Students expressed greater agreement with the statements that Enron management was probably negligent (mean=3.9 out of 5) or fraudulent (mean = 4.0) than incompetent (mean = 2.9). Students overall placed less blame on the auditors. Students assessed the auditors' level of incompetence as equal to Enron management's incompetence (mean = 2.9), and the auditors' level of negligence (mean = 3.8) as slightly less than that of management (3.9). Students had significantly lower levels of agreement that the auditors were fraudulent (mean = 3.4) than that the Enron management was fraudulent (mean = 4.0).

While students felt that Enron management's behaviour was more fraudulent than the behaviour of the auditors, they did feel that the profession needed to change in the wake of the Enron collapse (mean = 3.9). Students strongly agreed that the reputation of the audit profession has been tarnished (mean = 4.0). Furthermore, students disagreed with the statement that another big 5 auditor would have uncovered the alleged accounting irregularities sooner than Arthur Andersen did (mean = 2.2). That is, it appears that students feel that any problems that may have contributed to the alleged audit failure are endemic to the profession as a whole, rather than just to Arthur Andersen.

Nevertheless, student awareness of firm differences may have been heightened due to the accusations against Arthur Andersen. Fifty percent of the respondents (mean = 3.3) reported that the Enron collapse had affected how they would choose the accounting firm to article with.

Although students did feel that the situation has damaged the profession, they overall remain committed to careers as Chartered Accountants. Only 7% of respondents agreed with a direct statement that the Enron collapse had changed their intentions to pursue a Chartered Accountant designation. Furthermore, comparing student's responses to a statement of their current intention to pursue a Chartered Accountant designation to a statement regarding their intention before Enron, only 14% of students had weaker intentions than before.

Group comparisons

All responses were analyzed to identify any significant differences between: a) males and females; b) high and low GPA students; c) students older and younger than 22; d) students that had accepted positions at CA firms and not; and e) students that had accepted positions at Arthur Andersen and not. Among the first three analyses, few differences were noted. Some noteworthy differences included that females were significantly less critical of Enron's management. They agreed less often than males with the statement that Enron's corporate governance was inadequate, and with the statement that the management of Enron was probably fraudulent. Students older than 22 agreed significantly more strongly with the statement that the reputation of the Chartered Accountant profession had been tarnished than their younger peers did. However, these same students (those over 22) felt that the prestige of the profession was significantly less important to their decision to become a C.A. than did their younger counterparts, perhaps explaining why their was no overall significant age-related difference in the change of intent to pursue a designation.

Interestingly, there were many significant differences in agreement on several questions depending on whether or not the students had already accepted a position at a Chartered Accounting firm and whether that firm was Arthur Andersen. Students who had accepted positions with C.A. firms were both more tolerant of Enron's management and more tolerant of the auditors. Students with positions at C.A. firms agreed marginally less strongly with statements that: a) management of Enron was probably negligent; b) auditors of Enron were probably negligent; c) auditors of Enron were probably fraudulent; and d) changes to the auditing profession are necessary. The differences were even more pronounced between students accepting positions at Arthur Andersen vs. those that didn't, although the sample size of the Arthur Andersen group is very small (6 students). Students at Arthur Andersen were significantly more likely to blame Enron, believing that its corporate governance was inadequate and its management was incompetent, and less likely to blame the auditors. Specifically, the Arthur Andersen students agreed far less with the statements that the auditors were negligent or that the auditors were fraudulent.

Overall, the results indicate a strong escalation-of-commitment phenomena. The closer a students' ties to Arthur Andersen and to the accounting profession, the less culpable they view the auditors as being. Nevertheless, the overall results indicate that students do see a need for change, which they may translate into action as their careers progress.

These results are based solely on students at the University of Manitoba, who have received relatively homogeneous instruction. Thus, they may not be generalizable to other accounting students at other institutions. Nevertheless, it may be important for instructors to be sensitive to how Enron is affecting their own students, given the profound implications for students' career intentions and for the Chartered Accounting profession as a whole.

Note: 

• Means in BOLD differ significantly at p < .05
• Means in italics differ marginally significantly at .10 > p > .05