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Jorem Hu
Professor Christine Jones
RHET
1 December 2011
Ethics in the Business World
The Ethics of accounting is a very prominent issue in the business world. Being the cause
of many legal issues like fraud and embezzlement, the lack of accounting ethics is a major
concern. Enron and Worldcom are examples of companies who have hired accountants to
manipulate the company information to project false profits. These projections fool investors out
of thousands of dollars. Falsifying information, tax evasion, fraud, and embezzlement are all
considerable complications for accounting departments. One solution to boost accounting ethics
has been to teach it in school. Colleges have been teaching ethics in ethics integrated accounting
courses but they have been proven to not be as effective as they want. The initial cause for many
corporate scandals is greed. However, is the incentive for all these criminals solely based on an
objective greed? Like any other problem, nothing is always black and white. Accounting ethics is
based on moral and situational dilemmas. Greed or even the risk of some personal loss can drive
someone to commit these acts or even the passive act of looking the other way.
A case in 2010 involved the Lehman Brothers Holdings Inc., the 4
th
largest investment
bank in the United States. The Lehman Brothers committed an accounting fraud when they
withheld information about the company from their investors. The Lehman Brothers report
showed that the company was not riding on a huge debt. They used a Repo 105, a short-term
loan that appears as a sale on the companys balance sheet, to make the company appear to be in
less debt. This allowed the company to mask their debts on their balance sheets, tricking
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investors into thinking that the company was on a decent standing. For this to work they needed
the help of their accountants, who have the power to manipulate the company reports and
overlook some key aspects like the Repo, choosing not to include it in the report.
Ethics in itself is very controversial, with very different moral standards from one person
to another, the gray area of ethics. However, according to Marcel Costuleanu, a professor at
Grigore T. Popa University of Medicine and Pharmacy in Romania, this can be generalized into
concepts of ethical and moral nature: truth, honesty, regularity, reality, neutrality, continuity,
permanency, etc (Costuleanu 51). Companies are dependant on the reports given by their
accountants. With these reports the companies are able to show to their investors the results of
their financial statements. The company head is usually only interested in making huge profits
for the company. This shows how fraud has the greed aspect to it. However, the accountants, the
ones who write these reports, are also heavily involved in these fraudulent cases; these
accountants are likely not doing it because of corporate greed. These corporations involved with
fraud will influence the accountants with money or even threats of unemployment. In the end,
these accountants twist the truth to appease their investors. This example shows how the
situational dilemmas can greatly influence the judgment of the accountants. The risk of
unemployment is a huge burden on the accountants because jobs are not readily available and
their decline would not make a difference to the company; the company could always hire
another person who would be willing to falsify any information to keep the job. They are faced
with the issue of keeping their job and lying or become jobless by declining the proposition. Is it
greedy to want to keep ones job? Greed is the driving force in a capitalistic economy, allowing
for new innovations and for technological progress. Money is the chief incentive of a capitalist
economy. However, this clearly does not justify the unlawful acts to become wealthy.
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These cases are prime examples of why ethics is crucial to accounting and should be
taught early on, before a job. In 2005, the Texas State Board of Public Accountancy has made it
mandatory for ethics to be taught in a separate approved 3-hour college ethics course, rather than
be implemented into the accounting curriculum itself. In one study Janice Klimek, an assistant
professor at the University of Central Missouri, wrote, Students from the school that required a
3-hour ethic course rated themselves significantly more conservative than the integrated ethics
group (Klimek 114). This showed that taking this 3-hour course made students want to maintain
the already existent legal systems. In this study, the students who attended the 3-hour course
were less prone to make decisions for personal interests, i.e., exchange of favors. The students
also preferred post-conventional moral thinking. The students who took the integrated ethics
course were found to be more likely to answer questions based on direct advantages to the
[individual] (Klimek 115). The Students who took the 3-hour ethics course were also shown to
make their decisions based on the facts of the situation and not revert to choices based on what
their peers expect (klimek 115). This test has proved that the students who took the 3-hour
course had a higher ethical reasoning ability than the students who took the integrated ethics
course. This is most likely because the course is more specialized and allows the student to
completely focus on the ethical principles of accounting.
Teasley, as a professor at the University of West Florida argues that the classes that teach
ethics are somewhat limited by relegating [Ethics and Social Responsibility] to a single course
(Teasley 71). Teasley makes a very important point in that it might not be enough to just teach a
course to students and expect them to become ethical saints in the workplace. He suggests that
proper planning, organization, leadership, and control are vital within these organizations. He
proposes that it would need to be implemented in all levels of management in order to make the
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desired impact in the company. The company will actually achieve a great benefit from the
higher work ethic of their employees. In a Korean study on business ethics, [They] found that
companies that are committed to a higher level of [Business Ethics] exhibit better quality
financial reporting than those that are committed to a lower level of [Business Ethics] and that
companies with a higher level of ethical commitment use management discretion over accruals
on a smaller scale and recognize bad news on a timelier basis than those with a lower level of
ethical commitment (Choi 424). This level of commitment is only viable in a job in which the
individual feels that they are making a contribution to the job, and not by cheap lies where they
will feel an underlying emotion of guilt and a self-loss. Work ethic will stop being a burden to
the employees and become a social responsibility. The results of this Korean study show that the
quality of the work goes up as the individuals work ethic goes up. This difference in the quality
of work is shown to be largely determined by the morals of the individual.
The lack of accounting ethics plays a very profound role in the greed evident in many
huge corporations. Businesses crumble, thousands becoming unemployed, and huge losses result
from a single lie. The importance of accounting ethics weighs heavily on the integrity of the
company and the individual. The commitment to their job gives them self-satisfaction where as
being a part of fraud makes them lose their feeling of importance to the company, becoming a
drone mindlessly obeying the orders from their superiors. Whether based on amoral greed or to
secure their own livelihood, the cause of unethical judgments made in accounting are not solely
based on amoral acts of greed, but are situational, grounded on the position of the individual. In
conclusion, the presence of greed in accounting is very subjective and that the ethical
responsibility does not fall on just the accountants but on all levels of management in the
company.
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Choi, Tae, and Jinhan Pae. "Business Ethics And Financial Reporting Quality: Evidence From
Korea." Journal Of Business Ethics 103.3 (2011): 403-427. Business Source Complete. Web. 7
Nov. 2011.

Damato, Karen. "Financial Planners' Advice May Be Biased, Too." Wall Street Journal - Eastern
Edition 17 June 2005: C1+. Academic Search Complete. Web. 7 Nov. 2011.

DIZIK, ALINA. "Deloitte Focuses On Ethics." Wall Street Journal - Eastern Edition 19 Nov.
2009: B8. Academic Search Complete. Web. 7 Nov. 2011.

Klimek, Janice, and Kelly Wenell. "Ethics In Accounting: An Indispensable Course?." Academy
Of Educational Leadership Journal 15.4 (2011): 107-118. Business Source Complete. Web. 7
Nov. 2011.

Marcel Costuleanu, et al. "Morality, Ethics And True Image In Business Accounting."
Theoretical & Applied Economics 18.6 (2011): 47-54. Business Source Complete. Web. 7 Nov.
2011.

Teasley, Wynn, and Marty Hornyak. "Ethics And Social Responsibility: Not Just For Chapter
Six Anymore." Business Education Innovation Journal 2.2 (2010): 65-72. Business Source
Complete. Web. 30 Nov. 2011.