Business Ethics

Ethics in Management
Introduction:

Business ethics and corporate governance are two significant factors that impact a company and
how it operates. B.Ethics represents the values, principles or characteristic a company follows
when conducting business in the economy. Corporate governance is the internal framework\ a
company design and implement to govern and protect those invested in a company. Owners and
executives create governance and decide which ethical principal needs to be followed by the
employees. Every company has a corporate image whether it wants or not.

Role and responsibilities of Top Management in Ethics Management:

1. The ethics program must be fully supported by Chief Executive: Chief executive is
the person whom all employees look at. He holds the key responsibilities, so he has to
imitate the program and monitor its development and implementation. He has to set an
example for all the employees.
2. Forming ethics committee at different managerial level: The purpose of forming a
committee is to build confidence level of employees. This committee would ensure that
employees are trained and help is resolving ethical dilemma.
3. Appointing an ethics officer: An officer can be appointed who can look into the various
matters at workplace and how to handle those matters and techniques that can be used.
He can act as guide in decision making and provide assistance to employees if found
guilty.

Tool of Ethics:

1. Code of Ethics:Are statements of values and principles which define the purpose of the
company. These codes seek to clarify the ethics of the corporation and to define its
responsibilities to different groups of stake holders as well as defining the responsibilities
of the employees.It specifies rule of operation govern morality and acceptable behavior
like:
 Personal Behavior: when attending a customer
 Corporate Behavior: when making a business deal
 Behavior towards society: when selecting for a job
 Behavior towards environment: pollution

Few guidelines which help in developing ethics are:

a) Review law and regulation

b) Redefine the important traits of highly ethical and successful product or service in your
area
c) Identify values related to current issue in workplace
d) Specify values based on findings
e) Consider ethical values preferred by stake holders
f) Identify high priority ethical value in the organization
g) Develop the code of ethics
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h) Make sure employees conform all the values
i) Take feedback
j) Update from time to time
2. Codes of Conduct: it’s a general guideline which helps in taking decision for a specific
action in workplace. It’s more at the operational level and very rigid.
Some of the guidelines that are followed while developing code of conduct are:
a) Identify the important behavior which are required to be followed in your code of
ethics
b) Ensure all the employees conform specified
c) Take feedback from key members
d) Code of conduct should be made clear to employees and a copy should be
distributed
e) Code of conduct should be dynamic because it is not possible todefineexcepted
behavior for every ethical dilemma.
3. Policies and Procedure: They are the basis and required for the functioning of any
organization. They are set to identify the expectation of workers and guideline to handle
more common ethical problems which may arise during the course of business. Few
guideline for developing policies and procedure are:
a) It should conform to behavior preferred in the code of conduct
b) It should be helpful in solving ethical dilemmas
c) It should include training of employees about the ethics management program
d) It should state rewards and fines for ethical and unethical behavior respectively
e) Timely review should be done
4. Training:For a successful ethical program training should be given to the staff to make
them aware what is it, how it works and what are their roles in it. Some guidelines before
implementing the training program are:
a) Orientation of new employees to the ethic program
b) Involving staff to from policies and procedures
c) Including ethical performance in personnel performance appraisal

Characteristic of Corporate Ethics Program:

1. Value Statement: A value statement grows along with the growth of the company. It’s
not just words but these values when converted into action matters. They go wrong when
they are not related to company’s actions.
2. Code of Conduct: It’s a booklet which contains policies and tell how these policies
apply to various department and few Q&A’s
3. Executive Modeling: The CEO should tell the employees how to put values into action
and share their experience along with discussing problems faced and methods used in
resolving them
4. Training and communication: Communication is the best practice not only for new but
also for the existing employees on a regular basis about the values a.nd training on a
regular basis to discuss the responsibility and to help employees know how to raise issue
if they notice unethical behavior
5. Systems that embody values: A system having performance evaluation with respect to
the values and examination of values
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6. Mechanism to discuss difficult cases: A mechanism should be developed where in the
employees should be confident in taking the issue to the high authority even if the cost of
the case is high. A team needs to be set up to discuss difficult cases and it should be
transparent to discuss the cases as few employees may hold themselves back
7. Hotline and help lines: Calls are the best and effective way which is very quick and
efficient, employees are help out in all possible way through a call
8. Audit, enforcement and discipline: good set of rules includes auditing everything that is
important, enforcement of few laws and disciplining justly
9. Governance of ethics and values: A senior executive appointed to govern and to report
to board on regular basis and to make changes and adjustment to ethics and value system.
10. Renewal process: Revised values and standard should be rolled out periodically, say
about every three years. Each renewal should be fresh when rolled out.

Code of Ethics In Business Houses:

A code of ethics is about a corporate culture, it doesn’t depend on the size of the company. If a
business as a code ethics it’s considered as luxury in the present scenario.
A code of ethics is a collection of principles and practices that the business believes in and aim to
live by. It’s included in mission statement which gives idea even to the outsiders of what the
company stands for and how its member should conduct themselves.

Writing A Code Of Ethics For The Business:

1. Setting Priorities: The first step is to lay down the code of ethics that is the values and
the boundaries. As they grow and they hire new people who would not be similar in such
cases putting these rules and procedure will help the company grow the way it wants to.
HR educating the incoming employees to company’s culture is important.
2. Getting Input: The code of ethics should not be formed only with the top management
even the employees should be involved while laying down the code of ethics as they are
the one who are more aware and ultimately implies to them, they should also know why
codes is important.
3. Don’t Sweat the Small Stuff: Code of ethics should not be too vague(not clear) or too
specific, it should be framed accordingly keeping in view the important point of views
because a simple mistake can crack down the entire code of ethics and it will make the
employees resentful(angry)
4. Particular Pitfalls: A small business is most affected by ethical dilemma of the
employees than the large business which leads to employee’s dissatisfaction and worst to
a discrimination in the workplace.
5. Who to Turn to for help: If a company has more than 20 employee’s then they can take
help of a human resources specialist or if they are small in size then a lawyer would do
while drafting code of ethics.
6. Putting Someone in Charge: An ethical officer needs to be appointed who can look into
for applying and making changes in the code of ethics. Officer should have good skills
and need to have access o the senior management for periodical updates or in case of a
problem. An officer may be mainly from a HR or Sales team for monitoring and
reporting and it should be done secretly. It’s

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also crucial to make code of ethics a dynamic thing that changes as business changes
according to the environment.

ETHICS IN HUMAN RESOURCE MANAGEMENT

HR professionals are the one who are more involved in most ethical issues. Some of the most
serious issues HR managers have been reported about are:

 Training and promotion is based on favoritism i.e. friends or relatives

 Difference in pay scale due to close relation with top management
 Sexual harassment
 Sex discrimination
 Not maintaining confidentiality(leaking of information)
 Extra income for personal gain

Ethics Issues in HR
1. Cash and Incentive Plans: One of the most sensitive issues is regarding salary scale,
provident fund and other benefits. Employees feel they are under-paid or they are not
appreciated or not treating them fairly and few other issues like late payment, paying in
installment, holding salary during slack season(low business). This leads to both legal
and ethical breach.
2. Performance Appraisal: Its means evaluating employee’s current and past performance
during a course of work and effects on salary raise and promotional decisions. It’s a
formal method done on frequent interval. The problem that can doubt on fairness of the
whole process are:
a) Unclear standards: No clearly explained the basis of evaluation like ‘good’,
‘outstanding’ or ‘superior’.
b) Halo effect: Factor influencing general impression on rating of employees on
basis of quality.
c) Central Tendency: rating on the basis of average.
d) Leniency or strictness: same rating on consistent basis
e) Personal basis: on the basis of age, race and sex which are different from
performance.
3. Discrimination: Employers should not discriminate on the basis of age, race, religion,
color, and sex, national with respect to employment. It’s an unethical employment
practice to take any decision on the basis of above factors.
It’s unethical to discriminate in any aspect of employment, including:
 Hiring and firing
 Compensation
 Testing
 Recruitment
 Transfer or promotion

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 Benefits
 Layoff
 Retirement plan or disability leave or
 Other T&C of employment.

4. Ethics on employment issues: HR decision is often require making decision in which

fairness plays a big role. Hire one reject one, promote one demote one; pay one more pay
one less etc. Companies where fairness and justice prevail also tend to be ethical
companies which mean company where employees are treated fairly less unethical
behavior is seen.
5. Employee Discipline: A fair and just discipline is based on three pillars: clear rules and
regulation, a system of penalties and an appeals process. Rule
says what is acceptable and what is not, clearly stating in writing when employees join
the company. A system of Penalties which may be in oral and writing to suspension from
the job to discharge. An Appeal process right to take action fairly and equitably.
6. Employee Privacy: The main factors of employees privacy violation are:
a) Intrusion(locker)
b) Private matter
c) Disclosure of medical records
d) Likeness for commercial purpose.
When an employer tests its employee then a balance between the right of the
employer and the right of employees should be maintained because employees
feel as long as it doesn’t impact the job performance employer have no right to
monitor but employer say they do mostly to improve productivity.

7. Downsizing and Restructuring (Mergers): Downsizing is reduction in the size of the

organizational structure. A Merger means two companies forming a single company.
Downsizing is a strategic move to serve best interest of the company. Decision to
downsizing is ethical means to determine whether the choice is appropriate with values of
those who would stay and who would have to leave the organization. Values here means
right, fair and good.
Four acronym are used to define the value set EPIC
 E= Empathy: caring about the consequence on ones decision who have no say in
the decisions
 P=Patience: Taking time to take decision and acting upon it
 I=Integrity: making choices that are consistent
 C=Integrity: To do what is right whether others say it’s right or not/ doing what’s
best for the organization.
8. Ethics in Dismissals and layoff: Dismissal is a disciplinary step taking by the managers
with special care and after all reasonable steps. This can be avoided if right decisions are
taken when employees are hired. A sound selection practice including background check,
drug testing and clear job description can reduce dismissal step.
A layoff is which workers are sent home for a short period of time when the management

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no longer requires them or when there is no work for the employees for that period.
Conditions under which employees are sent home are:
a) No work available
b) Management expects no work for short term
c) Management intends to recall when work is available..
A layoff is not termination it’s just a step taken during slowdown of business or
projects. Seniority may give way in such cases only when others are qualified
enough
9. Wage Empowerment: A formal social security program is not possible for workers and
their families so a need for wage empowerment arises to protect peoples capabilities and
to ensure society members meets the basic needs.
10. Whistle Blowing: It occurs when an employee informs the public about the illegal
activities happening inside the organization. It’s to protect the firm but its not justified
unless the following characteristic are present:
a) It’s done on moral motive
b) The individual as carefully analyzed the situation
c) To avoid moral violation
d) Proper evidence are present

Responsibility of Whistle Blower and Employer

 Clarify and verify before Whistle blower thinks it should be made public
 Regular forum and open discussion of possible abuses
 Participants should have equal and rights to question
 No penalty for participating in forum(Whistle Blower)
 W.B should be willing to come forward because accused way not be able to defend
 Regular discussion may create corporate problem
 Employer should examine the task before imposing, it should be morally possible
 Employees must also critically examine the position they are begin asked to assume
 Less attention should be devoted to bribery, price fixing etc rather attention on nature of
business.

W.B is not ethically good because it as an option of last recourse. Rather than concerting on W.B
time should be better spent thinking about how to improve corporate and professional
environment so that employs and clients will not adopt W.B

Sexual Harassment (S.H)

A serious matter at work place which is a joke but it can make peoples live a misery and effect
personal and professional lives.
Managers are responsible for employees actions and take responsibility to prevent this serious
problem happening. OR Respond effectively when a complaint is made. Different laws
have been passed to protect women and too seek relief for violent S.H

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S.H at workplace

It’s illegal and not only unwanted physical contact or making obscene or suggestive
remarks. It can be:
 Dirty jokes
 Vulgar posters
 Eyeing someone up
 Making personal comments
 Following someone (opposite sex)
 Sharing personal information about sex life

Ethical Responsibility of Employers to Prevent Sexual Harassment

 Train staff on the policy and make them aware of the procedures of complaints. Training
program should run on regular basis and employees should be aware about what is
acceptable
 Publicize the policy and circulate to each and every person in the organization which
should contain all the procedures of complaints and penalty if found guilty \
 Providing training for a number of staff to deal with complaints and to seek advice and
support from and maintain confidentiality.
 You should have people of both sexes trained
 Monitoring on a regular basis
 Regular discussion should be made and participating in forum
 Managers need to take a “Zero Tolerance” which means managers should see to that
people understand that harassment is a disciplinary matter and to have a disciplinary
policy and procedure.

MARKETING ETHICS
Marketing is a human conduct and ethics is moral principles that guide the conduct. Marketing
ethics has two points of view first, “let the buyer beware” and “let the seller beware” Customer
satisfaction is taken to an extreme as whatever customer does it is OK!

Relationship marketing is the most believed by the ethicists as it allows both buyer and seller to
work together and it is a positive relationship. In the field of marketing each and every single day
new challenges are presented and most difficult issues marketing professional face in course of
work are:

 Bribery (gifts)
 Fairness (manipulation)
 Honesty (lying)
 Price issues (predatory pricing)
 Product (safety)
 Personal confidentiality

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 Advertising
 Manipulation of data

Ethical Issues in Marketing

A. Ethical issues related to Marketing Strategy

I. Confidential information or trade secrets: confidential information is the
valuable assets of the organization like personal data, customer lists, pricing and
cost data, technical information, plans. Research data, procedures, formula,
software etc. 1. Employees should not disclose any information to outside public
2. No employees should use knowledge of the company for personal use or
interest for personal gain or advantage.
3. Even after leaving the company the employees should maintain the secrets of
the company.
4. Employee should not accept any information from Competitor Company.
II. Fair competition: company should competition on basis of quality, service and
price. They should conduct their affairs honestly and fairly. The employees:
1. Must never discuss any company related information with the competitors eg: -
sales price, strategy, shares and polices.
2. Must never agree with a competitor to restrict competition by fixing prices or
market allocation.
3. Must not restrict other to buy from other company
4. Must never engage in bribery
5. Never refuse a deal with purchase of good and service because they are
competitor in other respects
III. Fair dealing:1. Employees should fairly deal with customers, suppliers and
competitor and each other.
2. All employees should follow trade law (by eliminating unfair trade practices,
monopolization, price wars)
3. Violation of such law may lead to severe penalties
IV. Accepting gifts: 1. Employees should not directly or indirectly accept or seek
personal gains which harms business(travel expenses(holiday), living or
entertainment expenses etc)2. Top level management shall not offer personal
courtesies in exchange of gains to customer or suppliers. 3. Benefits should to
employees given should be mentioned in contract or should not be accepted by
the employees in form of gifts, meals etc
B. Product related ethics:
I. Deceptive Marketing Practices: if customers feel they will get more
from a product or services than they actually receive. Deception can take
the form of: * misrepresentation, omission, misleading in any elements
of marketing mix (4P’s)
* false product or service claims
*mislabeled packages as to sizes, weight or use of information
*selling hazardous product without disclosing the danger
* not honoring warranty

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II.Offensive materials and objectionable marketing practices: all
promotional messages must be carefully screened and tested and media
should be selected to match the taste and interest of targeted customers.
Some of the objectionable practices are:
1. Illegal sales letter
2. Telemarketing calls and television commercials are run too long
3. Targeting senior citizen or in experienced consumer
4. Sending junk mails
III. Ethical product and Distribution practices:frequent complaints about
product are quality, content, price, out of style, not same as promoted etc.
Some examples are:
1. Vendors are pressured to buy more than they need for high commission
from the manufacturer
2. Taking money to display product of manufacture over competitor
product
3. Promising delivery when knowing it’s not possible on a certain date.
4. Paying vendors to sell own product rather than other competitor product
IV. Marketing over focus on Materialism: marketing does not focus on the
product but only to pull customers towards the product. They target on life
style and standards which result for a customer to buy to maintain the
image in the society which results people to buy more than they desire or
can afford. Ex: Credit cards
V. Special ethical issues in Marketing to Children: children are the
marketing target for most of the products. This is a matter of ethical
concern because it’s not well developed as that of adults. Ex: Chips,
chocolates, fantasy world etc.
C. Competition Related Ethics
I. Predatory pricingalso known as Destroyer pricing is the practice of a firm
selling a product at very low price with a intention of driving competitors out of
the market or to prevent the new players. This may not be beneficial to a business
in the short run because it may result in loss, yet they engage in this practice as
they may be dominant player in the market
II. Price discrimination exists when sale of similar goods or product are provided at
different prices from the same provider. It leads lower prices for few and higher
price for others.
III. Price war isterm used in business to compete rivalry by reducing the price just
because the competitors have reduced the price of the product. But its beneficiary
for consumers has they take advantage of lower prices.
IV. Piracy in Marketing popularly known as black or grey market. Major affected
industries in India are FMCG, IT, Liquor, automobile, entertainment etc.

These are few ethical issues in competitive market as they try to eliminate the other players or to
prevent new entrants into the market.

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Ethics in Advertising

Advertisement is a non-personal verbal communication between the buyers and the sellers. The
field of advertising is extremely broad and diverse. It informs and it persuades.
An advertiser should be extremely careful while presenting advertisement to the customers
which means to say it should not harm values, belief, religion or any such related factors has its
termed to be un ethical. Product such as tobacco, alcohol, drugs related product cannot be
advertised either directly or indirectly.In a short advertisement needs to look into all the aspects
before coming up with an advertisement because even if there is a small loop then it’s going to
affect the company to large extent.

Harms of Advertising

 Economic: products are sometimes sold to the customer who persuades them to buy
which may not be relevant to the customer (useless goods, harmful, inconvenient). It’s
harmful to the economic majorly in economically less developed countries.
Ex: product which are advertised on status and standards which attract customer to buy
even if it’s not a necessity. Product which are not made in India as we have to pay the
foreign company in their currency.
 Political: Candidates in political advertisement try to harm the opponent rather than
stating their own views and records. Wealthy candidates try to harm opponent’s
reputation rather than being morally good.
 Cultural: though advertisement is indirect communication but sometimes it directly
harms the cultural values of a country. Advertisement are always made to tempt the
audience rather than focusing on the social needs of the people. Advertisement typically
concentrate on a particular group which is disadvantage in relation to others, this is true
in case of women’s (they are always treated as object of satisfaction but not as a person).
Rarely do we see advertisement about role of women as wife, mother and so on.
 Moral and religious harms:In country like India were moral and religious values are
valued the most advertiser use religious themes or images to sell the products, this may
be acceptable in certain cases but making it a practice exploits religion. On a second sort
advertisement use product to promote in a way which is directly related to moral norms.
Product which are harmful to health are promoted using moral norms such as “safe sex”,
“pills” etc.

Few charges against the advertiser are:

 They sell dreams which confuses people dreams with reality

 They persuade to sell those which are bad for us
 They tell us to buy things we don’t really need.

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Ethical principles especially relevant to adverting
A. Truthfulness in Advertising
*never mislead or deceive directly
* never use untrue advertising
* do not so things assumed to be true without relevant facts Advertisement should
be relevant with proper supporting the facts, they should never directly try to mislead and
whatever has been communicated should be within the limits set by law.
B. The dignity of the Human Person
*do not spoil the inner feelings by using appeals tp envy and greed, lust and other human
weakness
* give special care to weak and dependable such as children, youths, elderly, poor and
culture.
Much advertisement are directed to children and they try to attract them as they
believe it easily and in turn they put pressure on the parents to buy the products which is
of no benefits at all. Ex: chocolates, chips etc. and on the other hand some advertisement
are directed to elderly persons or culture which play around their fears and which makes
them to invest their limited resources on good or service (targeting emotionally) ex:
retirement plan, gold etc.
C. Advertising and social responsibility: social responsibility is a very broad concept but
only few of the many issues andconcerns are relevant to the question of advertising:
* products harming the economy * reducing human progress by acquiring high end
product targeted to life style. Few other issue which harmful to the individual and society
alike. Ex: a resent example of a case of nestle company product Maggi.

Some steps to be taken by Advertisingindustry

1. Applying ethical codes voluntary
2. Periodical updates of codes and involving public
3. Government should also interfere and look to that false advertising banning.
4. The media of news and information on a regular basis should inform the public about the
world of advertisement. They should review and critique performance of advertiser just
as they do for other groups which influence the society (politician, movies, celebrity etc)
5. Apart from the above points it a self-responsibility of the advertiser to ensure ethical
practices are present in the profession. Advertiser should try to eliminate its socially
harmful and having a high ethical standard on regards to human dignity, truthfulness and
social responsibility by which they will make a special and significant contribution in the
development of humans and the society.

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ETHICS IN FINANCE
Success of any business depends upon the combination and contribution of all the important
functions of the management. All the factors (finance, marketing, HR) and interrelated and
business cannot survive in the absence of any one of the factors. Of the all Finance is the life
blood of the business as without a proper financial system which directly or indirectly involves
use of funds. Finance functions in the following way:

1. Investment decision
2. Financing decision
3. Dividend decision
4. Liquidity decision.
Finance manager is responsible for shaping the fortune of the organization
has he is the one who maintains and keeps all the finance related details of the company.
His action has a major impact on profitability, growth, size and success of the
organization. Apart from fulfilling primary objective (customer and owner satisfaction), it
is the responsibility to take measure to protect interest of employees, creditors,
government and society. Being ethical defines the company by itself.

Unethical Practices in Accounting and Finance:

Finance, Accounting and Ethics: Ethics in finance and accounting is the utmost importance to
accounting professional (CA and other professionals) and those who rely on their services. Apart
from being well qualified they should possess a high degree of professionalism as people reply
on them for most important decisions.

Service provided by these people to the society should gain confidence as society places a high
level of confidence in professionals.

Codes of professional conduct are framed to address these which tell members to maintain a
level of self-discipline which is beyond laws and regulations.

The most frequently occurring ethical violation in finance relate to:

1. Insider trading: it refers to trading in securities of a company to take advantage of

“inside” information about the company that is not available to the public. It’s done for
extraordinary personal gain. It gives an unfair advantage to the trader over other traders
of same security. To prevent such practices SEBI has issued a regulation which gives
power to SEBI to investigate and to imitate criminal prosecution.
2. Stake holder verses Shareholder interest: An ethical dilemma situation for financial
manager has they need to satisfy either of one party, so they may indulge in unethical
practices to impress upon one or the other party.
3. Investment management: In order to attract public investor sometimes the company
will hike the share price which creates an impression in the market and stating few claims
(foreign collaboration) which may not have happened in order to show high returns in
market.

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4. Fraudulent financial dealings: brokers and agent will use confusing language which
hides the financial risk in dealings that is they won’t include commission and brokerage
to deceive clients.
5. Cheating customers of their trading profits: broker sometimes don’t maintain proper
accounts of the clients and trade in customers’ accounts for more earning rather than
giving the same to the customers.
6. Unauthorized accounting transaction: unethical transaction can be delay in payment of
wages, salaries, interest, cheating employees, personal benefits outside the company.
7. Frauds and manipulation in markets: manipulation in buying and selling of securities
in order to create a misleading impression about the prices and to attract investors to buy
or sell the securities, it happens either information is not available in market or company
doesn’t disclose the information
8. Unequal barging power: all parties should have equal bargaining power.Some investors
get information free of cost where else other pay money and utilizes time for the
information.
9. Unethical practices during takeovers and mergers: when a firm comes to know it’s
going to be taken over then they take huge internal debts or they may issue a high risk
bond in order to repurchase stocks. Its consider to be unethical practices if its only done
for the purpose of takeovers or mergers.

Accounting Scandals

The most common problem of our country over the years has been scandals in accounting and
other related fields.

Accountant and auditor work for the interest of the public and audit for a company. They should
operate according to standards set. But due to recent scandals critics stated that when asked by
client “what is 2+2=” the accountant or auditor would ask “what would you like to be?” Each
and every company is trying to play around with the profits and all books are roasted or cooked.

Various companies are been caught for scandals including the most famous one SATYAM. The
owner of company created fakes accounts and a fake company without physical existence known
as MAYTAS (exact reverse of SATYAM) and transferred all the funds to fake accounts and in
turn not paying salary to employees and declaring company is under a huge loss.

Other recent examples of Scandals are Sahara, 2G scam and many others.

Causes of Unethical Accounting:

 Self interest
 Inappropriate professional judgment
 Lack of ethical sensitivity
 Improper leadership
 Ill culture
 Threats
 Lack of support

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For example: If an auditor has an issue with an account he/she is auditing but is receiving
financial incentives to ignore these issues the auditor may act unethical.

Codes of ethics & SEBI

one of the most important and powerful official regulatory agencies for the securities industry in
India is SEBI which is in charge of implementing federal securities and to set up rules and
regulation for proper conduct of professionals such as brokers, accountant, advisers, accountant
and others.

The SEBI cancensures, suspend, or bar professional who are improper or found to be unethical.

Apart from SEBI various professional associations like Institute of Chartered Accountants of
India, RBI and AICPA also set principles, rules and regulation of conduct for its member. These
principles provided general guidelines which members should follow.

Ethical Responsibilities: Both internal and external auditors should be mindful of their
obligation to the public. The responsibilities placed on accounting professional require:

 Competence
 Confidentiality
 Integrity
 Care
 Diligence
 Objectivity

Ethics enforcement

The accounting profession is self-regulated through professional association rather than being
regulated by the government. The AICPA and ICAI enforce the ethics the reason being extreme
importance in case of disciplinary manner should be taken a care of. Any unethical practice done
by the professional which will result in revoking (cancelation) members license to practice on
temporary basis or even permanent basis.

Ethical Issue in Information Technology

IT which revolutionized the world today. With the help of computer and more users connecting
to the internet we are able to reduce time and distance and increase the speed of communication.
Internet technology is having a major impact on companies through networks called Intranet.

IT of cause a very much a taken for granted of everyday life today. It has impact beyond any one
organization. Use of IT may involve unethical action to gain competitive advantage.

Ethics has to do with making a principle based choice between competing alternatives. In simple
words

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Ethical dilemmasare a choice between right and wrong. Ethics are often very subjective and
connected to our emotions and our basic sense of right and wrong. Computers are not unethical
but rather there are ethical situations in which computers are involved.

Four Ethical Issues of Information Age

PAPA

PRIVACY ACCURACY PROPERTY ACCESSIBILITY

Privacy: one of the most debated topic in IT world. The law of any country makes it illegal to
use information about the customers, which means no firm can sells its data to another company
for marketing purpose. Two main forces threating our privacy are:
Firstlythe growth of IT in terms of speed, communication, storage and retrieval
Secondlyinformation used in decision making which makes the policy makers to use
unethical means to acquire information of others.(invading others privacy)

Accuracy: IT is extremely complex. There is always a possibility that systems (computers) may
fail, which may cause inconvenience. A proper analysis should be done in order to check
whether the system design is reliable and accurate. To check the acceptable level of reliability
and accuracy and cost benefit analysis need to be done.

Property: with the help of IT any information can be obtained easily without even destroying
the original, which means to say any information can just be copied without even causing any
harm to the original file. No action can also be taken against someone for using information
which can be done for paper (documents, files etc) information.

Accessibility: In an information society a citizen must possess at least three things to be

literate:Firstlyskill to deal with information, Secondly must have access to IT which store,
convey and process information (TV, radio etc). Finallyone must have access to information
itself. Unfortunately these levels are being neglected by people in the world today.

Reasons for crimes in IT

1. Lack of personal contact: there is lack of personal contact because communication

does not take face to face in IT system. A code of ethical practice has developed when
communicating through email without these codes no one address any other person.
2. The speed of computer: the speed of computers is also an disadvantage apart from
being an advantage. Any email sent in hurry to wrong person cannot be retrieved back.
3. Fragile information:information is more fragile in IT than in paper. Any information
can easily be changed no property rights is applicable in IT.
4. Lack of authorization: no information can be authenticate in IT
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5. Inadequate rewards: people are sometimes forced by themselves to adopt unethical
means when they don’t get any reward for their work in term of bonus, incentives, job
security, promotion etc.
6. Inadequate management control: when management fails to communicate expected
standard of the job related behavior, roles and responsibility which can lead to unethical
means of the job apart from these if they don’t reward the employees which can also
become a major cause.
7. Inadequate operation standards: management doesn’t counsel when performance of
an employee’s fall below accepted level, inadequate audit, inspection and follow
through to ensure whether policies of company have been followed can also lead to
unethical practices.
8. Inappropriate behavior: management of any organization will fire or throw out any
persona for unethical behavior but no bothered whether the same person will remain
unethical for others, which means to say when an employee is fired from the company
no complaint is made against him to police. Failure to control or unfairness in selection,
promotion and appraisal can be just another reason for unethical behavior of employees.
The following are the most common problems for computer crime motivation:
 Inadequate selection process
 Inadequate training and development
 Inadequate control of job related stress
 Failure to verify prior employment history
 Financial problem
 Personal status

Ethical Dilemmas in IT

1. Plagiarism:which means the work of others is copied but presented by others as their
own original information. This is the most highly unethical practice which is very much
common in today’s world. It means taking of ideas, drawings, words or other similar
property created by others and presenting ay your own. it may not be a legal issue but
certainly an ethical one.
2. Piracy:50% or more programs in computers are pirated. Pirate in IT means information
or software which is copied from the original copy and circulated in lesser price than the
original one
Ex: games, movies etc.
3. Hacking: it’s a process of modifying computer hardware and software. People who
engage in this activates are called hackers.It can be done either to destroy, make money,
and understand how a system works or to protect. But some argue that there are ‘hacker
ethics’. Because hacking is not just breaking any door but it requires skills, most of the
company is today employee hackers and pay a huge sum to prevent their software and
information. Google is one of example of company who employee hackers.

4. Computer crime: creating a graphic image, copy or alter document etc the ethical
dilemma such as whether copying such files is as bad as stealing something.

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5. Viruses: The most common word in IT, spreading virus is consider to be unethical
because they can cause a serious consequences which may damage the smooth
functioning of any organization such as hospital which cause people to die. But a lot of
anti-virus software are available to prevent the same.

6. Digital divide:our society is divided into two those who have access to information and
those who don’t have access to any information. Those who don’t have may feel
excluded because IT provides information about almost everything (political, economy).

7. Issue of data collection, storage and access: the issue arising here is should one seek
permission from or inform those whose records are on the file

8. Speed of computers: speed of computers may also cause ethical problems, it can allow
unethical issues which can be performed easily ex: transfer of money, browning sites
which are not authorized. It can also mean that people do not give enough consideration
before performing various actions.

9. Vendor-client issuevendor the computer supplier and client the person buying the
computer. Trust lacks when it comes to the software or hardware part where the client
may or may not believe the service performed by the vendor. It can only depend on
peoples moral consciences.

Damages caused by computer crime:

1. Data damages: an hacker can steal credit card number, password and destroy bank
accounts, legal or personal files.
2. Business failure: computer crime can also ensure business failure. By hacking a
company’s website and not allowing any transaction to take place or causing an error
when customer is trying to access.By which business lose their credibility and consumer
look elsewhere for the services.
3. Unauthorized access:someone who is unauthorized could gain access to any network
through operational system of the server.
4. Threat to security and integrity of computer systems: there have been many cases of
business houses and research institutes who are in online business as many customer
information are not safe. The secure payment system is a major concern.

Preventing Computer Crimes

1. Passwords: Using Alphanumerical and special character for password and this password
should be changed regularly. A password should be a combinationof various characters
such as upper case, lower case. (Raj@0809). Now a day’s a new hardware’s are designed
which gives a fingerprint and other new technologies.
2. Compartmentalization: whichrestrict the users to a specific file and job related needs to
access.
3. Automatic log off and random checks: this is the best measure to prevent any
unauthorized access when user fails to log off. A random check question that only

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authorized individual can answer and denies until right answer is received. This can be a
very effective technique.
4. Effective internal controls: surprise inspection, audit by trained personal, computer
security etc. Apart from job rotation even access codes of employees have to be changed.
Feedback mechanism should be set for employees to report problems in control. Polices
and procedure for control should be documented in writing.
5. Firewalls: the use of firewall and similar safeguards prevent unauthorized access
through internet. These are only effective way when they are properly configured and
sited.
6. Upgrade software whenevernewsoftware is available to orevent majority of
problems. The user also use anti-virus.
7. Security checks a proper security to handle computer crimes organization need to take
proper measure such as funds, train, staff etc. Many business are also hiring good guy
hackers to prevent bad guy hackers.
8. Training and fundingbetter employee training and funding should also be done to help
catch criminals. Most government agencies have inadequate personnel for catching
computers criminals and need to train and fund better and more qualified people should
be employed at this job.
9. Logging and follow up: a proper system of logging and follow up of exception should
be designed and implemented for unusual activities. A proper follow up procedure should
be in place to follow up the exception such as sequences, priority, out of standards,
function, application etc.
10. Developing awareness and sensitivity among employees awareness of employee
attitude and satisfaction levels should be developed and maintained. Sensitivity should be
developed and maintained to report that particular are having problems.

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Professional Ethics
Professional ethics helps a professional choose what to do when faced with a problem at
work that raises a moral issue. Professional is a self-regulating occupational group
capable of legally prohibiting others from practicing and a profession would possess the
following elements:
 Group
 Shared education
 Social service
 Uncommon knowledge
 Special knowledge
To meet this description one is not a professional until one is a member of a group
of colleagues who have a set of standard and values and can enforce them.
Professional ethics encompass the personal, organizational and corporate standard
of behavior expected of professional.
Professional have their own professional code of ethics which provide practical
guidelines.
Professional ethics for manager
1. The manager-The person: Manager have personal responsibilities and should:
 Demonstrate integrity and see whether the principles of human right avoiding all
discriminatory practices including race, sex, religion etc.
 Acting loyal and being honest to the society
 Not to injure or attempt to injure reputation of others
 Maintain confidentiality of organization information
 Keep learning to develop and implementing new ideas and technology
 To respect codes and responsibilities
 When asked for an opinion it should be professional and objectively.
2. The manager and the organization: managers should take effective actions to achieve
the goals and objective of the organization. These action should include
 Effective management of available resources
 Appointment, training and development of employees
 Creation of healthy, safe and satisfying working environment
 Developing effective communication and cooperation between all employees
 Proper delegation of work
 Fair and equitable treatment of employees
 Frequent review of management objectives
3. The manager and the community:managers should recognize the interest of the
community and act accordingly. This include
 Improving quality of life within the organization
 Exclusion of corrupt practices
 Participating in public affairs
 Respecting culture and moral standard
 Providing employment opportunity

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Professional ethics for functional managers
1. Professional ethics is marketing
 To tell the truth in all situation and in all times to customers and stakeholders
 To accept the consequence of marketing decision and strategies
 To represent the product in clear way in selling, adverting and other forms of
communication
 To respect the customers and improve satisfaction level
 To create a transparent marketing operation
 To fully disclose price deals and adjustment
 To act as a rightful citizen
 To do as promised
2. Professional ethics in HRM
 Fair and just method of recruitment and selection
 Ensure fair allocation of pay and benefits
 Ensure equal opportunities to employees
 Ensure safe working environment
 Maintain employee work life balance
 Deal effectively with all forms of harassment
 Ensure fair and honest in their dealings with employee, client and customers.
3. Professional ethics in Finance
 Managers should accept responsibility and act in a way that will serve the public interest
 Act according to rules, procedure and policies of the company, government and legally
 To maintain public confident
 Be honest to client and maintain confidentiality
 Be right and just
 Manager should have technical and ethical standard and improve competence and quality
 Manager should impose diligence to render service promptly and carefully
 Should not disclose any confidential client information

Ethical decision making

Ethical decision making refers to the process of evaluating and choosing among
alternatives in a manner consistent with ethical principles. In making ethical decisions, it is
necessary to perceive and eliminate unethical options and select the best ethical alternative.

Some of the criteria of ethical decision making should be considered

 Legality: will the decision somehow affect the legal status?
 Fairness: how will the decision affect those involved in it?
 Effectiveness: will the decision achieve the aim for which it is being taken?

Any decision that is not legal, not fair and not effective should not be taken. It is only a YES
response to all three questions that allows decision makers to take the next step. A No
response to any of the three questions ends the matter.

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The process of making ethical decisions requires:

 Commitment: the desire to do the right thing regardless of the cost.
 Consciousness: the awareness to act consistently and apply moral convictions to
daily behavior.
 Competency: the ability to collect and evaluate information, develops alternatives,
and foresees potential consequences and risks.

Steps in ethical decision makings

a) Gather the facts: the first step in making an ethical decision is to gather the facts. It
means before take any kind of actions means they have collect all truth full information
and correct full information regarding the subject with the available sources.
b) Make predication: it is nothing but guessing about the future. A prediction is based on
facts that are relevant to the situation at hand. If you do this, you increase your chances
of reaching the desired results. You can never know the future for certain, but some
things are more probable than others.
c) Identify the feelings: if you predict something about your decision means you have
some kind of feelings on particular decision. Some people call it intuition, some call it
conscience. When our feelings have been cultivated by compassion, they sometimes
highlight what our rational and conscious minds have overlooked. Feelings are one way
to check to see whether you are rationalizing.
d) Question oneself: ask whether you could live with yourself if you made that particular
choice. Would you be willing to let other people know what you did? Would you feel
worse or better about yourself? Would you feel guilty or ashamed? Or would you feel
proud and wish that others would do the same under similar circumstances? Would you
want everyone to act the way you did?
e) Explain the reasons: you should be able to explain your reasons to other people and be
willing to engage with others in a moral conversation about your choice. This is similar
to the method scientist’s use as a way of advancing knowledge. They develop a
hypothesis, then test it, reach a conclusion, and finally submit it to others in their field for
scrutiny. You should be willing to do no less with your ethical judgments.

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