What are the Challenges for Ethics in Business? Are They Different for Accountants?

Ethics is defined as that branch of philosophy concerned with the moral life and consisting of consideration of one’s ordinary actions, judgments and justification as a means of discovering what one ought to do and of determining what actions are morally good, acceptable, or right and what actions are unacceptable or wrong (Campbell, 1989).

A manager within an organisation always faces a conflict of interest between short term profitability and long term sustainability of the entity. If the manager chooses to implement decisions that are beneficial to the entity in the long term, his behaviour is primarily considered to be ethical. However, the goal of achieving short-term profit maximization has been duly compromised. According to self-interest theory an individual seeks to maximize his/her personal utility whereby short-term profit maximization motives could be thought dominate managerial incentives.
Ethicists have developed two frameworks relevant to businesses. They are the Utilitarian and Deontology frameworks. Utilitarianism is defined as the moral correctness of an action based entirely on its consequences whereas Deontology defines moral correctness of an action through the underlying nature of its correctness. Deontology can be divided into two parts where one part considers that action itself is measured thus lying is always unacceptable, on the other hand, the other part considers the cumulative nature of action as well as the consequences and thereby deems that lying could be acceptable under certain circumstances.

Ethics within the scenario of businesses are largely determined by the frameworks outlined above. Business ethics have a large impact upon the global society as fraud and embezzlement can impose large dead-weight losses within the world economy. In Australia, business ethics are primarily defined by the Corporations Law and Accounting Professional Codes Of Conduct such as the ICAA which govern the professional behaviour of the relevant professional members.

Ethical rules for accountants are subtly more stringent than for normal business professionals. Under the assumption, that the ethical behaviour of accountants mirrors the behaviour of the company auditors, I seek to explain the underlying dilemma. The Chief Financial Officer works under the supervision of the Chief Executive Officer of the organisation. His/her primary responsibility is to ensure that the financial reports prepared under his supervision mirrors the true and fair view about the financial. operating and investing decisions of the entity. He is directly accountable to the shareholders for his actions. However, his actions are determined by the leadership of the CEO. If the CEO demands the CFO to incorrectly manipulate the financial reports of the organisation, the individual faces a dilemma. He has a dual sense of responsibility and an ethical situation arises whereby, he/she can either pursue his own self-interests (financial security) or disobey the commands of the CEO and report fairly to the share-holders. Thereby, following the correct spirit of ethical behaviour, his role entails reporting fairly to the shareholders and whistle blowing against the CEO.