Ethics in accounting and financial decision-making

Ethics in business in the U.S. has changed significantly in the last century. Ethical and moral principles provide a foundation to society on how to function, live and work within the society. Over the years, standards and expectations have risen. Management accounting and financial management individuals constantly face ethical dilemmas. Many managers and executives are not clear about their ethical standards. The purpose of ethics in business is to guide individuals to follow a code of ethics to help increase and maintain public confidence about their organization. Without an ethical foundation, organizations collapse, as seen through giant corporate corruptions such as Enron. “Enron used accounting practices to hide their debt. They allowed their senior officers to cash out stock options while employees' 401(K) accounts were frozen. They assured employees of financial stability yet declared bankruptcy shortly after. They decided to waive a code of ethics because of the potential interference with making a buck” (Baset, 2002).

Those in management and financial practices have to maintain the highest standards of ethical conduct. Accountants, along with the corporations, should avoid any potential conflict of interest. “Accountants, especially auditors, must refuse any gift or favors that would influence their actions” (Baset, 2002).

Accounting firms need to see auditing as a governmental mandate and a matter of public trust, rather than opportunity to fulfill self-serving goals. If a company carries an ethic code simply for public relations purposes, there's a great chance that “the words are not worth the paper they are printed on” (Baset, 2002).

Since people are not born with ethical standards, ethics must be taught at some point. The best way to accomplish this is to implement an ethics program. A good ethics program enables an organization to define the lines between what is ethical and merely legal.

Companies with employees trained on ethical standards are more likely to think highly of their company's ethical performance. Employees are also more likely to report any misconduct within the company to the proper authorities. When a company builds and sustains its reputation within the community, it maintains the trust of employees to ensure continued self-regulation. This also provides ethical guidance and reassurance for employees facing situations where difficult decisions have to be made. This also allows the employees to align their work efforts with the company's mission and vision.

Our company has been around for over ten years and still maintains relatively the same employees. Our company mission and value statements are clearly communicated. There is a certain level of trust and confidence among us that ensures continued self-regulation. This is reflected in our company's steady growth and low employee turnover ratio. However, since our office is culturally diverse, it is more important than ever to redefine our code of ethics. Open communication and regular briefings can help accomplish this.

It is imperative for companies, just like ours, to enforce strong ethical standards so individuals can develop their sense of right and wrong in the business world in which they operate. Accountants and managers should communicate information fairly and objectively. Ethical awareness is a must and this is best exercised through education and regulations in ethics.

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