The Importance of Ethics 1 / 11

Ethics Definition

  • A set of moral principles guiding behaviour.

Just like how people have a responsibility to do the right thing when witnessing a crime, accountants at work need to act ethically too.

Accountants should make sure their employer follows ethical business standards.

Companies have a duty to many different groups of people, so they should consider these interests when making decisions.

Ethics and Stakeholders

  • Shareholders:

    People who invest money in the company to make a profit. 

    But some won't invest if they think the company is unethical. So companies need to think about more than just making money.

  • Employees:

    Companies have to pay employees a fair wage and make sure they work in a safe place. 

    They can't treat employees unfairly because of their race, gender, religion, or age.

  • Lenders:

    Banks and other organisations lend money to businesses to make interest. They decide based on the company's financial and ethical behaviour. 

    To get money, a company must prove it can pay its debt and is run honestly.

  • Suppliers and customers:

    Companies (and people) may want to work with businesses that act ethically and follow certain rules.

  • Government:

    Companies must pay taxes and share some profits with the government to help people who need it.

  • Public and the Environment:

    Companies should make sure they don't harm the environment. But if they do, they have to fix it.

The Accountant as an Individual

Accountants often face tough ethical choices during their career.

For example:

1. They might be offered bribes to act in a certain way.
2. A boss or client might push them to hide the true nature of a financial transaction.

In some cultures, like Japan, accepting gifts can influence decisions.

It's not only important for accountants to be ethical themselves but also to report any unethical actions they come across.

However, this can be tough:

Whistle-blowers might face financial losses if they lose their jobs and can't find new work. They may also suffer emotionally from the stigma.

Breaking confidentiality rules can lead to a breach of an employment contract, and the individual might be sued for a lot of money by the company.

Many organisations see whistle-blowers as a threat. But, a lot of occupational fraud is uncovered because of them. To work well, a whistle-blowing system must be:

Properly put in place (just ticking boxes won't work).
Regularly updated in training and promotional materials.
Supported from the top with encouragement to report concerns and a promise that information will be taken seriously and kept confidential.

Businesses and Social Responsibility

Shareholder Wealth

The main goal of a business is usually to make its owners, the shareholders, wealthier. But some people argue that just focusing on making as much profit as possible might not be the best approach. They believe that there are other people involved, like employees, who can get left behind when profit is the only thing that matters.

Being ethical or socially responsible might cost more, which can reduce the shareholders' wealth. But there are also some benefits, even if they're not all about making money.

For example, if a company pays employees more and gives them better working conditions:

There might be measurable benefits, like lower costs because fewer employees leave their jobs, and better work quality.
There are less measurable benefits, such as a reduced risk of workplace accidents and longer, healthier lives for workers.