Accounting Ethics – The Importance of Ethical Practices in Business and Personal Finance

What is ethical accounting? The idea of accounting ethics deals with the moral and values-based judgments and decisions an accountant or accounting agency confront daily in their practice. Due to the nature of their work as communicators of financial information to business managers, shareholders, and the general public, as well bookkeeping and auditing of business entities, accountants and accounting agencies are held to the highest standards of transparency and morality in regards to their research and the information they convey. Accounting can be used as a way to study how and why a business may succeed or fail, but above all it is a public service; those who practice it must make judgments and decisions that can sometimes supersede the interests of their clients in favor of the interests of the public at large.

Failure to apply ethical standards to accounting creates the opportunity for manipulation of facts and information that, if used to mislead, could cause a person to invest under false pretenses, or a business to represent its finances fraudulently to its shareholders. It is of the utmost importance that the public be able to trust accountants and accounting, because their financial future, and that of their family or business, could be at stake.

Why is it important that accountants and accounting firms be ethical?

Over the years there have been several large accounting scandals in the United States, and in the world at large, which caused private investors and public shareholders to lose billions of dollars, and giant businesses and accounting firms to fold, because of falsified or incorrect information given out about the companies in which the money was invested. The Enron scandal is perhaps the most recent and glaring example of unethical accounting causing widespread negative effects, including the loss of $25 billion in shareholder assets, the closure of the Arthur Anderson auditing firm, and the subsequent loss of 85000 jobs when the unethical practices were reported and the company dissolved.

Ethical accounting is not only important to private businesses or individuals for reliable information about their respective financial states, but has a responsibility to the public to provide transparent evaluations of publicly held business entities. Ethical accounting can help eliminate the serious problems raised when incomplete or incorrect information about business or individual is disseminated, saving money and jobs and helping to increase stability in financial markets.

The Importance of Ethics in the Marketplace! (Part One)

Answers to some of the most frequently asked questions in the Global economy.

In the past it was assumed that all that had to be done to ward off bad behavior and unethical practices in the financial industry was to put in place regulations to help guide and encourage ethical behavior in the marketplace. However, regulation is no longer a guarantee of ethical behavior.

Billionaire Warren Buffett acknowledged the need to put measures in place to make sure that this behavior is practiced on a daily basis with his execs. Buffett has told his managers that there is a difference between what’s legal and what’s ethical. “Let’s start with what is legal, but always go on to what we would feel comfortable about being printed on the front page of our local paper.”

“A good name is to be chosen rather than great riches, and favor is better than silver or gold”.

Proverbs 22:1 (esv)

Here are some questions with answers that I hope are helpful and that will provide some form of guidance.

Q & A:

1. How do ethics affect the stock broker on Wall Street?

a. Misleading the client

i. When a broker is dealing with a client, the client is of the impression that he/she is dealing with a professional. Giving in to bad practices that promote laziness on behalf of the broker is a sure way to make oneself vulnerable to conduct unbecoming a broker. This can also cause that broker to lose his license as an investment banker or a broker/dealer. The broker should sticks to the facts as is relates to the advice that the investor seeks. For example, if the investor is seeking further clarity as is relates to a group of mutual funds, his answer should not be ambiguous due to the broker being bias. Keep it simple and clear.

b. Lack of full disclosure

i. All too often we are looking for the easy way out of things. When it comes to financial matters one can never be too detailed. The investor expects full disclosure. Never take short cuts in the name of expediency. Besides, if something goes wrong in the market, you would have peace in your mind knowing that you served the client well. The broker is obligated to making sure that when the investor buys a product from him that the investor is making an informed decision.

c. Breach of Confidentiality

i. This is the “holy grail” to long life in this industry. If a broker breaches client confidentiality, he can kiss his career good-bye. This is like have a bad rap sheet that follows you everywhere you go. The broker can face possible reporting to the Securities and Exchange Commission (SEC).

d. Neglecting to offer Alternatives

i. It is said that a person who works on commission will tell you anything they believe you want to hear to close the deal or sale. This is why Insurance Professionals, Car Salesman/woman and Realtors have a hard time with people trusting them. People don’t feel confident that they are being given all the facts and options that are available to them. That they are only being told what the Salesman wants them to know, to streamline their options so that the decision that is made will be to the benefit of the salesman. The broker should not allow this to be said of them. Trust is the key to building long lasting relationships. Give your clients options, and help guide them in their decision making – they’ll do the right thing and you would have gained a possible long term loyal client.

“The plans of the diligent lead surely to abundance, but everyone who is hasty comes only to poverty”

Proverbs 21:5 (esv)

In The Next Issue:

Question 2: What are some rules a broker should follow?

Importance of Ethics in Public Speaking

It is a known fact that the goal of public speaking is to gain a desired response from listeners but not at any cost, but we have to look into the branch of philosophy that deals with issues of right and wrong in human affairs “Ethics”

Question of ethics arise whenever we ask if a course of action is moral or immoral, fair or unfair, just or unjust, honest or dishonest.

We face questions daily in almost every part of our lives. The parent must decide how to deal with a child who has been sent home from school for unruly behavior. The researcher must decide to shade her data “just a bit” in order to gain credit for an important scientific breakthrough. The shopper must decide what to do with the $5 extra change mistakenly given by the clerk at the grocery store. The student must decide to say anything about a friend he has seen cheating on a

final exam.

Questions of ethics also come into play whenever a public speaker faces an audience. In an ideal world, as the Greek philosopher Plato noted, all public speakers would be truthful and devoted to the good of society. Yet history tells us that the power of speech is often abused sometimes with disastrous results.

Adolf Hitler was unquestionably a persuasive speaker. His oratory galvanized the German people into following one ideal and one leader. But his aims were horrifying and his tactics despicable. He remains to this day the ultimate example of why the power of the spoken word needs to be guided by a strong sense of ethical integrity.

As a public speaker, you will face ethical issues at every stage of the speech making process from the initial decision to speak through the final presentation of the message. This is true whether you are speaking in the classroom or the courtroom, if you are participating in a business meeting or a religious service, if you are addressing an audience of two people or 2,000 people. And the answer will not always be easy.

Your ethical decisions will be guided by your values, your conscience, your sense of right and wrong. But this does not mean such decisions are simply a matter of personal whim or fancy. Sound ethical decisions involves weighing a potential course of action against a set of ethical standards or guidelines. Just as there are guidelines for ethical behavior in other areas of life, so are there guidelines for ethical conduct in public speaking. These guidelines will not automatically solve every ethical quandary you face as a speaker, but knowing them will provide a reliable compass to help you find your way.

As with other ethical issues, there can be gray areas when it comes to assessing a speakers goal areas in which reasonable people with standards of right and wrong can legitimately disagree. But this is not a reason to avoid asking ethical questions. If you are to be a responsible public speaker, you cannot escape assessing the ethical soundness of your goals.

Your responsibility as a speaker is to ask whether your goals are ethically sound. During world war II, Hitler stirred the German people to condone war, invasion, and genocide. More recently, we have seen politicians who betray the public trust for personal gain, business leaders who defraud investors of millions of dollars, preachers who lead lavish lifestyles at the expense of their religious duties.