When people are affected, when interests collide, when choices must be made between values, and when ethical considerations are at stake – do ethics and business mix? Here’s a case study of ethics in business or the lack of it. Moral of the story: Don’t let an ethical dilemma take your ship down….
Ethics….a loaded word but what does it mean? What is ethics? Why is it important in our daily lives – be personal or professional? Most, if not all, of us can relate to the query.
Ethics is broadly defined by Merriam-Webster as “the discipline dealing with what is good and bad and with moral duty and obligation.” It states that ethics and morals are often regarded as synonymous but there is distinction in how the words are used. Another defines ethics as “moral principles that govern a person’s behavior or the conducting of an activity.”
It also adds that, “Morals often describes one’s particular values concerning what is right and what is wrong: It would go against my morals to help you cheat on the test. While ethics can refer broadly to moral principles, one often sees it applied to questions of correct behavior within a relatively narrow area of activity: Our class had a debate over the ethics of genetic testing.”
In my profession as a certified public accountant, I have attended countless seminars or courses on ethics as part of professional continued education. There is also a separate ethics exam that a CPA candidate must take after passing all four parts. Why does the profession take ethics seriously? And why do so many companies or people fail at ethical issues and decisions?
There was once a “mighty” CPA firm named Arthur Andersen, the first CPA firm I joined right after college. It was a very prestigious and classy firm with high net-worth clients including many Wall Street public companies. I learned a lot about being proactive, working hard and “tick & tie” of workpapers as a newbie staff accountant in the firm’s tax department.
At the time, it was at the top of the “Big 6” in the accounting industry – the envy and rival of other prominent accounting firms as well as the most coveted, sought after CPA firm for accounting students. Back then it was also famous and admired for not being embroiled with the Savings and Loan debacle in the 1980’s. But sadly, the famous firm soon became infamous with the Enron scandal and fraud in the late 90’s to early 2000’s, leading to its eventual downfall, aka…fall from grace.
Basically, Arthur Andersen (who was Enron’s audit firm at the time) failed to protect the investors and shareholders in its “fiduciary duty” to do so as auditor of a public company. Enron, an energy company, was once considered a “darling of Wall Street.” It was found that Arthur Andersen failed to adhere to the set of rules and high standards that the profession required thus becoming complicit in Enron’s illegal acts.
In essence, the firm miserably failed in its ethical responsibilities and was penalized heavily by being barred from performing its “bread and butter” attest engagement business (among other things). With such judgement, the firm could no longer continue the way it was. Many employees including bigwig partners and their clients jumped off the sinking mighty ship. In the end, many employees lost their jobs including company retirement plans but worse of all were all the investors or shareholders who lost their investments and public trust in the profession’s integrity.
Now, most people don’t even know who or what Arthur Andersen was. Only that the name has become synonymous with ethical failings along with Enron whose officers served or are still serving many years in jail. Both companies have become an infamous “poster child” for greed, failed moral responsibilities and compromised ethics. It takes years to build a good reputation but takes only one wrong choice to destroy it.
This is why ethics and how to deal with ethical dilemmas are very important in the profession. It is for the protection of the public from those who will try to take advantage and game the system to the detriment of many others.
As a certified public accountant, I uphold the profession’s commitment to integrity and bound by rules of ethics while providing the best service as a trusted business adviser. Always be wary of others who will undermine or compromise their professional obligations. What’s your stance on Ethics?
I’m a CPA who assists individuals, entrepreneurs, and small businesses navigate the complex world of tax compliance along with other business issues through planning strategies or ideas. It’s essential that entrepreneurs stay focused on their own key craft and achieve a more balanced approach to any pursuits.
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