What Is Ethics?
The term ethics is derived from the Greek word ethikos, which itself is derived from the Greek word ethos, meaning “custom” or “character.” Morals are from the Latin word moralis, meaning “customs,” with the Latin word mores being defined as “manners, mor- als, character.” Therefore, ethics and morals are essentially the same.
In philosophy, ethical behavior is that which is “good.” The Western tradition of ethics is sometimes called “moral philosophy.” The field of ethics or moral philosophy involves developing, defending, and recommending concepts of right and wrong behavior. These concepts do not change as one’s desires and motivations change. They are not relative to the situation. They are immutable.
min622IX_ch01_001-053.indd 5min622IX_ch01_001-053.indd 5 09/08/13 4:46 PM09/08/13 4:46 PM
6 Chapter 1 Ethical Reasoning: Implications for Accounting
In a general sense, ethics (or moral philosophy) addresses fundamental questions such as: How should I live my life? That question leads to others, such as: What sort of person should I strive to be? What values are important? What standards or principles should I live by? 13 There are various ways to define the concept of ethics. The simplest may be to say that ethics deals with “right” and “wrong.” However, it is difficult to judge what may be right or wrong in a particular situation without some frame of reference.
Ethics must be based on accepted standards of behavior. For example, in virtually all societies and cultures, it is wrong to kill someone or steal property from someone else. These standards have developed over time and come from a variety of sources, including:
• The influence of religious writing and interpretations • The influence of philosophical thought • The influence of community (societal) values
In addition, the ethical standards for a profession, such as accounting, are heavily influenced by the practices of those in the profession, state laws and board of accountancy rules, and the expectations of society. Gaa and Thorne define ethics as “the field of inquiry that concerns the actions of people in situations where these actions have effects on the welfare of both oneself and others.” 14 We adopt that definition and emphasize that it relies on ethical reasoning to evaluate the effects of actions on others— the stakeholders.
Norms, Values, and the Law Ethics deals with well-based standards of how people ought to act, does not describe the way people actually act, and is prescriptive, not descriptive. Ethical people always strive to make the right decision in all circumstances. They do not rationalize their actions based on their own perceived self-interests. Ethical decision making entails following certain well- established norms of behavior. The best way to understand ethics may be to differentiate it from other concepts.
Values and Ethics Values are basic and fundamental beliefs that guide or motivate attitudes or actions. In accounting, the values of the profession are embedded in its codes of ethics that guide the actions of accountants and auditors in meeting their professional responsibilities.
Values are concerned with how a person behaves in certain situations and is predicated on personal beliefs that may or may not be ethical, whereas ethics is concerned with how a moral person should behave to act in an ethical manner. A person who values prestige, power, and wealth is likely to act out of self-interest, whereas a person who values hon- esty, integrity, and trust will typically act in the best interests of others. It does not follow, however, that acting in the best interests of others always precludes acting in one’s own self-interest. Indeed, the Golden Rule prescribes that we should treat others the way we want to be treated.
The Golden Rule requires that we try to understand how our actions affect others; thus, we need to put ourselves in the place of the person on the receiving end of the action. The Golden Rule is best seen as a consistency principle, in that we should not act one way toward others but have a desire to be treated differently in a similar situation. In other words, it would be wrong to think that separate standards of behavior exist to guide our personal lives but that a different standard (a lower one) exists in business.
Laws versus Ethics Being ethical is not the same as following the law. Although ethical people always try to be law-abiding, there may be instances where their sense of ethics tells them it is best not to follow the law. These situations are rare and should be based on sound ethical reasons.
min622IX_ch01_001-053.indd 6min622IX_ch01_001-053.indd 6 09/08/13 4:46 PM09/08/13 4:46 PM
Chapter 1 Ethical Reasoning: Implications for Accounting 7
Assume that you are driving at a speed of 45 miles per hour (mph) on a two-lane divided roadway (double yellow line) going east. All of a sudden, you see a young boy jump into the road to retrieve a ball. The boy is close enough to your vehicle so that you know you cannot continue straight down the roadway and stop in time to avoid hitting him. You quickly look to your right and notice about 10 other children off the road. You cannot avoid hitting 1 or more of them if you swerve to the right to avoid hitting the boy in the middle of the road. You glance to the left on the opposite side of the road and notice no traffic going west or any children off the road. What should you do?