Ethics is crucial in the profession of accounting and finance as these determine their success and failure. The customers are the investors of a company. If a company is perceived to have good ethical values they invest in the company else not. Companies these days have a pre-set code of conduct that the employees are expected to follow. Those companies that require the employees to adhere to the set code of conduct and ethics in their daily business transactions have been seen to face lower litigation and fines. Companies set high standards of ethics on their dealings are more valued and respected by the customers. (Moyer, McGuigan, Rao, & Kretlow, 2012)
According to the Association of Certified Fraud Examiners, 2010, on average the corporate fraud every year cost amounts to $2.9 trillion. This amount reflects 5% of annual revenue of the corporations and a median loss resulting from financial statement of $4 million. (WESKE, 2013)
"Employee fraud cost companies almost (pounds) 5 million, an increase of (pounds) 1 million on the amount reported in 1995, while management fraud cost almost (pounds) 1.5 million, an increase of (pounds) 1 million on the previous survey.” As we can see that the companies that are caught in fraudulent activity are made to pay huge amount. This is counterproductive to the goal of a profit company that aims to maximize shareholders wealth.
Some examples of companies that have good ethical value are as follows.
TATA has a high ethical value. The TATA group in India are very strict when it comes to fraud and sexual harassment.
"Goldman Sachs could easily be seen as the most controversial pick for this list because of its business ethics. But its vocal support of marriage equality has earned it some merit in terms of social ethics. (Shields, 2013)”
"Given the fact that it was started by Bill Gates, one of America’s most generous philanthropists, it follows that Microsoft would do well in following his example. The tech company and its employees donate over $1 billion yearly to charities and non-profit organizations. (Shields, 2013)”
These are the reasons why ethics is important in accounting and finance and from example we can see how big multinational companies have set themselves different with good ethical standards.
Reference
Moyer, C. R., McGuigan, J. R., Rao, R., & Kretlow, W. J. (2012). Contemporary Financial Management. Natorp Boulevard: South-Western, Cengage Learning.
Mulqueen, E. (1997, October 17). Companies are being choked by escalation in white collar crime Poor internal controls is acknowledged as being the most significant factor infacilitating company fraud according to a new KPMG survey. Irish Times . Retrieved from proxy.lirn.net/MuseProxyID=mp01/Mu...
Shields, A. (2013, February 16). Good Business: 10 Companies With Ethical Corporate Policies . Retrieved from Minyanville: minyanville.com/sectors/consumer/a...
WESKE, J. L. (2013). Share Price Changes and Price/Earnings Ratios as Predictors of Fraud Prior to a Fraud Announcement. United States: ProQuest LLC 2013. Retrieved from proxy.lirn.net/MuseProxyID=mp01/Mu...
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Ethics is crucial in the profession of accounting and finance as these determine their success and failure. The customers are the investors of a company. If a company is perceived to have good ethical values they invest in the company else not. Companies these days have a pre-set code of conduct that the employees are expected to follow. Those companies that require the employees to adhere to the set code of conduct and ethics in their daily business transactions have been seen to face lower litigation and fines. Companies set high standards of ethics on their dealings are more valued and respected by the customers. (Moyer, McGuigan, Rao, & Kretlow, 2012)
According to the Association of Certified Fraud Examiners, 2010, on average the corporate fraud every year cost amounts to $2.9 trillion. This amount reflects 5% of annual revenue of the corporations and a median loss resulting from financial statement of $4 million. (WESKE, 2013)
"Employee fraud cost companies almost (pounds) 5 million, an increase of (pounds) 1 million on the amount reported in 1995, while management fraud cost almost (pounds) 1.5 million, an increase of (pounds) 1 million on the previous survey.” As we can see that the companies that are caught in fraudulent activity are made to pay huge amount. This is counterproductive to the goal of a profit company that aims to maximize shareholders wealth.
Some examples of companies that have good ethical value are as follows.
TATA has a high ethical value. The TATA group in India are very strict when it comes to fraud and sexual harassment.
"Goldman Sachs could easily be seen as the most controversial pick for this list because of its business ethics. But its vocal support of marriage equality has earned it some merit in terms of social ethics. (Shields, 2013)”
"Given the fact that it was started by Bill Gates, one of America’s most generous philanthropists, it follows that Microsoft would do well in following his example. The tech company and its employees donate over $1 billion yearly to charities and non-profit organizations. (Shields, 2013)”
These are the reasons why ethics is important in accounting and finance and from example we can see how big multinational companies have set themselves different with good ethical standards.
Reference
Moyer, C. R., McGuigan, J. R., Rao, R., & Kretlow, W. J. (2012). Contemporary Financial Management. Natorp Boulevard: South-Western, Cengage Learning.
Mulqueen, E. (1997, October 17). Companies are being choked by escalation in white collar crime Poor internal controls is acknowledged as being the most significant factor infacilitating company fraud according to a new KPMG survey. Irish Times . Retrieved from proxy.lirn.net/MuseProxyID=mp01/Mu...
Shields, A. (2013, February 16). Good Business: 10 Companies With Ethical Corporate Policies . Retrieved from Minyanville: minyanville.com/sectors/consumer/a...
WESKE, J. L. (2013). Share Price Changes and Price/Earnings Ratios as Predictors of Fraud Prior to a Fraud Announcement. United States: ProQuest LLC 2013. Retrieved from proxy.lirn.net/MuseProxyID=mp01/Mu...