Intellectual virtues and practical wisdom

Intellectual virtues are “active conditions of the soul (hexis) which can disclose the truth” (Sachs

2002) . This definition suggests their importance to the accounting profession. Some of the intellectual virtues that Aristotle names clearly relate to accounting, such as domain knowledge (episteme), and technical knowledge (teelme). Some of the intellectual virtues appear to parallel Bloom's Taxonomy of critical thinking skills, which has influenced accounting education and the professional examinations in the United States. And some help a professional govern their moral actions, specifically the intellectual virtue of practical wisdom (phronesis). The intellectual virtues Aristotle mentions in his Nicomachean Ethics are listed in Table 4.1. Table 4.1 also offers examples from the accounting profession that exemplify each of the intellectual virtues.

Art (techne) includes the ability to use processes, tools, and judgment. This is important to accountants when selecting and analyzing financial data, pulling together financial reports, auditing, or tax planning (West 2017). The virtues of intellect (nous) and knowledge (episteme) involve the processes of induction and deduction, respectively. Intellect grasps how an example represents a universal rule (Sachs 2002, 108). Knowledge is not just comprehension but the virtue of active, deductive thinking in order to achieve understanding of a situation starting from universal rules. Theoretical wisdom draws on both intellect and knowledge. Aristotle refers to wisdom as “knowledge with its head on” (NE VI 7, 1141a 20), while the other intellectual virtues support theoretical wisdom’s contemplative process by helping a person think things through issues (eubolia), evaluate the actions of others (sunesis), and develop opinions (gnome).

The Aristotelean understanding of the intellectual virtues is not synonymous with Blooms taxonomy of critical thinking skills. However, some apparent parallels would be worth investigating further given the attention that Bloom’s taxonomy has received in the profession. Intellect (nous) involves induction, so one could liken it to comprehension in Bloom’s taxonomy. Since knowledge (episteme) involves deduction, it resembles analysis in Bloom’s taxonomy rather than what is referred to as knowledge in the taxonomy. Theoretical wisdom resembles the higher levels of critical thinking that bring ideas together, such as synthesis and evaluation. However, these conjectures should be examined further.

Practical wisdom (phronesis) is different from other intellectual virtues. While it is concerned with figuring out the truth, it is also concerned with action (Sachs 2002, 106). Since it is concerned with good actions, it helps direct the moral virtues:

Virtue is an active condition that makes one apt at choosing, consisting of a mean condition in relation to us, which is determined by a proportion and by the means by which a person with practical wisdom would determine it.

(NE II 6, 1107al—2).

In other words, virtue is a mean condition that lies between deficiency and excess. For instance, courage is the mean between cowardice and rashness (NE II 2, 1104a 11—25). And practical wisdom (phronesis) plays the critical role of helping the virtuous person figure out the best course of action in a given situation: what action does courage require in this situation? Therefore, practical wisdom is also referred to as a governing or administrative ability (Pakaluk 2005).

As indicated in Table 4.1, one example of practical wisdom in auditing may be professional skepticism.1' Cowton specifically lists skepticism as a virtue in his analysis, relating this virtue to the principle of objectivity in the code of professional conduct (Cowton 2017). According to AU 230.07, professional skepticism is as “an attitude that includes a questioning mind and a critical assessment of audit evidence” (AICPA 2013). One way that professional skepticism has been operationalized in research is by looking at how much evidence an auditor gathers (Hurtt et al. 2013). Professional skepticism helps the auditor to determine the mean between the excess of gathering too much evidence (inefficient auditing) and the deficiency of gathering too little evidence (ineffective auditing). Therefore, professional skepticism may be an application of practical wisdom in the auditing profession.

One important observation is that the intellectual virtues need to be taught (West 2017). Therefore, practical wisdom is central to Domenec Mele's (2005) discussion of ethical education

Table 4.I List of Intellectual Virtues from Book VI of the Nicomachean Virtues

Major Intellectual Virtues


Examples in accounting






art*; craft expertise**;

craftsmanship***; “an active condition involving a true rational understanding that governs making" (pl05)

technical knowledge of the revenue recognition rules, the necessary journals to record transactions in the books, and the analytical and substantive testing that are used in auditing

ph rones is



practical judgment*; practical wisdom**; administrative skill***; "a truth-disclosing active condition involving reason that governs action, concerned with what is good and bad for a human being" (S.106)

professional skepticism;

knowing when it is necessary to act, to gather more audit evidence, but also governing the courage to act upon that knowledge




intellect*; intuitive understanding**; good intuition***; inductive; "that which grasps the universal when a particular [example] is perceived" (S. 108)

comprehending the terms in a client’s sales contract and recognizing that the contract has multiple performance obligations with different performance dates

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cpis terne


knowledge*; science**; demonstrative knowledge***; deductive; “an active condition of the soul that governs demonstration" (S.105)

being able to apply the revenue recognition rules to the contract to determine how much revenue should be recorded on what dates and being able to defend a recommendation





wisdom*; theoretical wisdom**; philosophical wisdom***; a combination of intellect and knowledge;

"knowledge with its head on" (S.108)

being able to contemplate the truth and fairness of a set of financial statements as a whole

Minor Intellectual Virtues


Examples in accounting






deliberating well* (B.196); thinking properly about the right end; giving good counsel

advising a client on the best way to present a transaction in the financial statements


Tabic 4.1 (Continued)

Major Intellectual Virtues


Examples in accounting






astuteness*; literally, “putting together” . . . and appreciating when someone else displays practical judgment (S.113); “the ability to judge particular matters well according to common rules of thumb” (B.196)

recognizing when management assumptions are reasonable




thoughtfulness*; which Aristotle links to compassion (sun-gnome) and being a considerate person (eugnome) (S.108); opinion; “the ability to judge when common rules of thumb are insufficient” (B.196)

appreciating the relational issues that might increase risk of fraud or earnings management, but also in arriving at an audit opinion

Notes: Explanations given by Budziszewski (2017) referenced as (B. page no.) in the Table 4.1.

  • * translations used by Sachs (2002); explanations referenced as (S. page no.) in the Table 4.1.
  • ** translations used by Kraut (2018)
  • *** translation used by Pakaluk (2005)

in accounting. And while the focus of contemporary virtue ethics concerns the moral virtues, it is important to understand that the intellectual virtues complement those moral virtues by helping the accountant choose an appropriate action in the course of their practice (West 2017). Therefore, it is important to understand the role of the intellectual virtues in accounting.

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