Why Ethics Are Important in Business3 min read
When working in the business world, it is a necessity to encompass moral ethics. Ethics is also especially important when working with financial information. It is very difficult to trust someone handling lots of money. Companies in the past have distorted their financial statements in order to look better to stockholders, without thinking of the consequences that may follow if they get caught. If a company does not promote good ethical behavior within the organization, it is hard to trust the financial statements.
Auditors, or “independent third parties”, must be truthful and honest when auditing a company’s financial information. If honesty is not involved in the auditing process, it will be very hard for a shareholder to trust the company. In other words, if a company is caught altering their financial information, it is tremendously hard to have confidence the business, therefore putting the company in a bad situation. No one will want to buy their stocks anymore and many people will lose their faith in the company. Most likely, the company will collapse and it will be that much harder for people to put their trust into another company similar to the one that has collapsed.
In order to prevent fraud in companies, it is a great idea to let the accountants have vacation days lined up and have other accountants fill in for the job. This way, fraud will be detected before any of the financial statements are sent out to the shareholders, and the employee creating the financials can be fired. Similarly, separation of duties also comes into play when dealing with important financials. Just like allowing accountants to take time off, there should be separation of responsibility within each department. For example, one employee can balance the books, and another employee can “audit” the financials and make sure that everything is balanced and in the right place. This may become time consuming; however, it is essential that the financials are accurate and completed with ethical precision. Most companies would want to make sure that the financials are correct and save the hassle of having ruined financials.
There are also personal reasons as to keep financials accurate, such as having an honest and truthful reputation. Accountants must have strong moral values, or else there would be more fraudulent financials. It is hard to prove honesty to new people, especially to co-workers and new bosses. However, it is possible. Sincerely wanting the company to do well and succeed is a key factor in helping to prove trustworthiness. Arriving to work on time, getting projects completed, and having a good relationship with associates within the company are ways to prove to be a trustworthy person as well.
In addition to shareholders having confidence in the company, partners and suppliers need to be able to trust the company. Personal relationships are based upon trust, as are corporate relationships. Companies thrive on networking in order to be successful. Employee performance also improves while working in an ethical environment. If employee performance improves, the company will thrive, and as a result, everyone wins.
By making ethics mandatory within a company, success will be established. There is a chain reaction when ethical behavior occurs and when non-ethical behavior occurs. Non-ethical behavior can scorn the company and create bad publicity. Shareholders and corporate partners will lose their confidence in the company and give their support, money, and business to a similar company. Being non-ethical can lead to failure and the fall of the business. By being honest with the financials, shareholders can see the true potential the company has and base their decisions off of honesty. Corporate partners can count on the company when making business decisions. This would prevent any bad publicity for the company and keep them out of negative spotlights.
The benefits of being ethical greatly outweigh being non-ethical in business. There are plenty of reasons why being honest and truthful is the better decision to make when creating financials for other businesspeople to see and use to make conclusions. Although it can be said that ethics is a given when working for a business, companies should enforce being ethical and ultimately become more successful because of it.