Business,
Accounting and
Personal Ethics
Sources Used
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Trevino, Linda, Gary Weaver, David Gibson,
and Barbara Ley Toffler, “Managing Ethics
and Legal Compliance, California
Management Review, Winter 1999
Nanda Ashish, “The Professional Pledge and
Conflict of Interest, Harvard Business
School, 1999
Seglin, Jeffrey, “How to Make Tough Ethical
Calls”, Harvard Business School, 2000
AICPA Code of Professional Conduct
“One of the most difficult but enduring
lessons to be learned by professional
accountants is that technical brilliance
without sound ethical values is
hazardous to themselves, their
organizations, their fellow
professionals and society as a whole.”
98% of Fortune 1000
companies have formal ethics
or code of conduct documents.
Of those 78% have a separate
code of ethics and most distribute
them widely within their
organizations.
How should I act?
Ask yourself the following questions:
 Is it legal?
 If someone did it to you, would you
think it was fair?
 Would you be content if it appeared on
the front page of your hometown
newspaper?
 Would you like your mother to see you
do it?
Who does it affect?
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Financially
 The
company
 The stock price
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People
 Employees
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customers and vendors
The community at large
 Externalities
 Environment
What is the “Five” Approach
to Ethical Decision Making?
What is the effect on profitability?
 What is the effect on legality?
 What is the effect on fairness?
 What is the effect on the rights of
shareholders?
 What is the impact on the
environment?
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When do ethical violations
occur?
There are significant personal gains to
unethical behavior
 Practice is motivated by economic
goals
 Risk of detection is low
 Risk of future losses is limited
 Transactional services rather than
relational
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What to do to prevent unethical
behavior
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Perception of commitment to values
Consistency between policies and actions
Openness
Existing reporting system
Rules apply to everyone
Ethics has impact on daily decision making
Follow up on lapses
What is necessary for a
Corporate Code of Conduct?
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Top management
must endorse
General rather than
specific rules
Guidance on
tradeoffs
If in doubt,
encouraged to seek
counsel
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Fair hearing process
Assign
responsibility to
update code
Distribute code to
all employees
Training in support
of the code
Compliance
encouraged
Accounting Code of Conduct
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To serve the public from whom my authority is
derived
To serve my profession and contribute to its
institutions
To practice at the highest professional level
To maintain an ethical posture characteristic of a
learned profession
To maintain my ethical skills so that the public is
served with competence
To maintain a state of independence at all times
to decisions are reached with objectivity.
To work with my colleagues with mutual respect
AICPA Code of Professional
Conduct
“In carrying out their
responsibilities as
professionals,
members should
exercise sensitive
professional and
moral judgments in
all their activities.”
Accountant’s Responsibilities
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Public
Clients
Creditors
Governments
Employers
Investors
Business
Community
Stakeholders
How to Act
“Members should accept the obligation to act
in a way that will serve the public interest,
honor the public trust, and demonstrate
commitment to professionalism.”
• Integrity
•Objectivity
•Due Professional Care
•Genuine interest for the public
Integrity
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Honesty
Candidness
Within constraint of client confidentiality
Public interest comes before personal gain
and advantage
Principled
Doing what is right and just
Observe both the form and the spirit of
technical and ethical standards
Objectivity
Impartiality
 Intellectually honest
 Free of Conflicts of interest
 Independence
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Independence
Avoid conflicts of interest
 Continuing assessment of client
relationship
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What are some conflicts of
interest for accountants?
Due Care
“..observe the profession’s technical and
ethical standards, strive continually to
improve competence and the quality of
services, and discharge professional
responsibility to the best of the
member’s ability.”
•Strive for excellence
• Knowing when to get
•Diligence
expert help, consultants
•Mastery of the common body • Thorough
of knowledge
• Supervision
Characteristics
•Discretion
•Skepticism
Obstacles to Ethical Behavior
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If it’s necessary, it’s ethical
False necessity trap
If it’s legal and permissible, it’s proper
It’s just part of the job
It’s all for a good cause
I was just doing it for you
I’m just fighting fire with fire
It doesn’t hurt anyone
Everyone’s doing it
It’s OK if I don’t gain personally
I’ve got it coming
I can still be objective
“The real test of our ethics is
whether we are willing to do the
right thing even when it is not in
our self-interest”
From Josephson Institute of Ethics
Remember actions speak
louder than words!