Ethics in Accounting and Financial Decision Making

Ethics in Accounting and Financial Decision Making

Financial Decision-making is one of the most important things in the business world. In today’s diverse world, ethics in accounting and financial decision- making is a process that many organizations have trouble dealing with. Many organizations put emphasis on ethics and the financial decision making process within the organizations. It is expected that all organizations will behave in an ethical manner in the current economy. In today’s business world, it is difficult to define what ethics are because of the different ethical beliefs people have (The Journal of Accountancy, 2007).

Implementing good ethical behavior in a business helps the business become very successful. In many organizations, bad ethical behavior can lead to many negative things within the company that affects every person tied into the company. Some business people do anything to earn money, even if it includes practicing unethical behavior.

Ethics are important in accounting and financial decision-making because ethical beliefs and values provide the foundation on which a civilized society exists. Without a foundation, the civilization would fall. The Sarbanes-Oxley Act of 2002 is an excellent example of ethics in accounting and finances. “Following the rash of reported financial statement frauds in 2001 and 2002, Congress passed the Sarbanes-Oxley Act (known as the corporate responsibility act) in 2002. Sarbanes-Oxley Act is a law passed by Congress which gives the SEC significant oversight responsibility and control over companies issuing financial statements and their external auditors; the act creates a Public Company Accounting Oversight Board with broad powers and authority to regulate the public accounting profession” (Albrecht, Stice, Stice, & Swain, 2005, 261). This law was passed due to accounting scandals involved with Tyco International and Enron. Making money in a business is important, because money is what makes a business successful, however; a business that becomes greedy and decides to do anything to make money, will eventually fail. There are many risks involved in creating a stable company, but losing the public trust is not one of the risks.

In the article, Beyond Sarbanes-Oxley, the author, Neil S. Lebovits, suggests that organizations can do several things in order to ensure their ethical health. The top three practices suggested by Lebovits are to cultivate ethical role models, demonstrate ethical decision-making, and to encourage pushback (Lebovits, 2006).

Sarbanes-Oxley Act goes a long way toward providing financial practices and reporting guidelines for companies. Lebovits suggests that companies can and should do even more to ensure company personnel at all levels behave ethically. The first thing the author suggests companies do is to cultivate ethical role models. These role models should be natural influencers