Academic journal article The Journal of Government Financial Management

THE UNIVERSE OF ETHICS: The Buck Stops with You!

Academic journal article The Journal of Government Financial Management

THE UNIVERSE OF ETHICS: The Buck Stops with You!

Article excerpt

High-profile cases of ethical failures cross the boundaries of all sectors of our economy, cause devastating financial results and erode public trust. The Association of Certified Fraud Examiners (ACFE) annually reports survey findings on ethical failures and dilemmas. The ACFE's 2014 Report to the Nation on Occupational Fraud and Abuse found that the number of fraud cases in the governmental and public administration sector reached 10.3% of the total - second only to the Banking and Financial Services Industry.1 In support of the ACFE findings, Johnson, Hartong and Kidd presented multiple examples of government office employee fraud and essential internal controls as preventative measures.2 Notwithstanding the importance of fraud prevention in the workplace through internal controls, the core solution to reinstating public trust is ethical decisionmaking on the part of organizations, executives, management, or the individual employee.

What is the universe of ethics? As we move through life, making ethically responsible decisions is perhaps the most serious challenge we face.3 Understanding the universe of ethics includes the overlap and integration of laws and regulations, educational efforts, professional codes, organizational culture, and individual development and reasoning. This article posits that these facets of the universe of ethics must be integrated into the ethical decision-making process.

Laws, Rules and Compliance

The creation of laws and regulations that impose specific courses of action on other governmental entities, businesses, professions, educational institutions and individuals is one method to affect decision-making. For example, in direct response to the Enron and WorldCom scandals, the U.S. Congress passed the Sarbanes-Oxley Act (SOX) in 2002. SOX was established to help increase the transparency, integrity and accountability of public companies.4 Similarly, each state addresses conflicts of interest through constitution, statute or rule to direct the actions of their respective state legislators.5 Many state and/or local governments also have conflicts-of-interest regulations for their municipal employees.

Specific regulations requiring or prohibiting certain actions do not ensure certainty in the application of those regulations. When ambiguity is perceived, leadership must make a judgment weighing the effects on the organization's mission. Similarly, many employees at all levels of the organization may not perceive the existence of conflicts of interest while conducting business. "Conflicts of interest arise when an employee benefits at the expense of the organization or cannot exercise independent judgment because of an investment, activity, or association."6 Professional bodies and organizations have created professional codes of conduct and/or ethics departments that monitor compliance with standards of conduct and provide ethics training to improve the awareness of the existence of conflicts of interest in employees' daily activities.7

Professional Codes of Conduct

Many professional associations have an established code of professional conduct. For example, the American Institute of Certified Public Accountants (AICPA), the International Federation of Accountants and AGA each have codes that include similar principles: public interest, integrity, objectivity and independence, due care, confidentiality, professional behavior and technical standards.8,9,10

The existence of codes of conduct does not ensure ethical decisions will be made. Professional bodies have been called upon to enhance their education role to address the range of ethical issues encountered by accountants in business and government organizations.11 State legislation regarding ethics has also affected specific professions and the related education requirements. State boards of accountancy have continuing education ethics requirements and some have added pre-qualification ethics education requirements. …

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