Ethics refers to a system of moral principles-a sense of right and wrong and goodness and badness of

actions and their motives and consequences. The definition of ethics is shaped by personal, societal
and professional values, all of which are difficult to specify.

They are also a set of moral principles or moral conduct that guides our behaviour. It may or not may
be written. ‘Ethics is a code of behaviour considered correct.’

Decision making based on intuition or personal feeling does not always lead to the right course of
action. Therefore, ethical decision making requires a criterion to ensure good judgment.

Ethics in Finance and Accounting:

For accounting and finance professionals it is extremely important to be ethical in their practices due
to the very nature of their profession. The nature of accountants ‘work puts them in a special
position of trust in relation to their clients, employers and general public, who rely on their
professional judgment and guidance in making decisions. These decisions in turn affect the resource
allocation process of an economy. The accountants are relied upon because of their professional
statues and ethical standards. Thus, the professional and ethical conduct is a key to maintaining
confidence of clients and the public is professional and ethical conduct.

Ethics in finance:

Ethics governs the course of action taken by a human that can be right or wrong.

Generally speaking, ethics form the person’s attitude to do right; and they can be specified in terms
of a profession or even an organization in the form of business ethics.

Since a company is primarily based on financial needs and directives, it must follow the ethics route
towards the future. This can be achieved both internally and externally, thereby resulting in a
suitable environment for employees, stakeholders as well as market position.

Ethics is one of the most critical and intricate aspects of an organization, especially in domains like
finances. There is either “right” or “wrong” associated with any human action based on the
organization’s conventional morality and business ethics.

Finance ethics is highly crucial because of the countless scandals and ethical issues of the financial
industry. Ethics in the finance sector mainly revolves around the handling of material non-public
information and reporting of the unethical act.

Upholding ethical standards in finance-related activities by being aware, educated, and holding high
moral standards in economic, corporate, business or finance activities. It resolves all sorts of
unethical act and interests.

Importance of ethics in finance

1. Provides a moral code of standard - In the financial market, some barriers range from
unequal information, misuse of power and resources, etc. In such cases and those which
involve third-party connections, there is a dire need for a proper code to be followed in the
industry. From investment to trading to stock to economical activities of the corporate or
finance system, all follow an ethical code in all their transactions
2. Ethics in finance channelizes confidence in business/corporate dealings - The main objective
of the financial industry is to have direct dealings with the industry. These directly connect
to their clients in the form of product or service delivery where they look forward to winning
their confidence. Despite the primary objective to maintain a competitive stature in the
 industry, they must do so on ethical grounds. In addition to such practices, being ethically
right will gives businesses good returns in the long term.
3. Ethics makes business/corporate behaviour and activities harmonious. In the financial
industry, we can expect many people to be part of an organization. Since these have to work
together at different levels and towards a similar core objective, there has to be a set of
ethical rules and guidelines that have to be follower. This will help in proper management
and higher productivity from the employees.

Ethics in accounting

Accounting Ethics is the basic requirement which is to be followed by the accountant while doing
accounts of an entity. It is like guidelines that are to be followed and it has been set by the
government authorized bodies. The accountant should follow the accounting ethics to take
precaution from any misuse of the financial statements. The accounting ethics are mandatorily to be
followed by each and every accountant and if they fail to follow then it may attract financial
punishments.

Importance of ethics in accounting

1. You’re dealing with sensitive information - As a business owner, you deal with sensitive
information on the daily. When it comes to your business books, you need to handle your
business bank account information, transaction totals, and other financial data. In addition
to recording your business’s finances, you might also be responsible for handling sensitive
employee data (e.g., SSNs and bank information). If you’re handling your business’s books
and dealing with sensitive company or employee information, keep that information
confidential and secure. To keep your accounting information secure, don’t email any
sensitive data, make sure your Wi-Fi is secure, have firewalls and other security precautions
in place, and be aware of phishing scams. And, don’t go around sharing sensitive
information. Use your head when you deal with sensitive employee and business
information. Follow best practices to ensure you’re as ethical as possible when you’re
managing confidential accounting information.
2. Your mistakes are on you - Think about this: if you’re caught being unethical in accounting,
who will be to blame? That’s right … you. When you make accounting mistakes or act
unethically because you’re not competent in accounting, it’s on you. If you don’t keep up
with accounting ethics and stay up-to-date with accounting rules, you’re bound to make a
blunder at some point or another. Sure, everyone makes mistakes. However, it’s one thing
to make an error accidentally, and another to get lazy and fail to keep up with accounting
regulations and standards. To avoid consequences down the road, keep up with the latest
accounting news, use your best judgment, and don’t overestimate your skills. If you find
yourself making mistakes time and time again and brushing off accounting ethics, it may be
time to seek help from a professional (e.g., accountant).
3. You’re at less risk for legal trouble - When you’re not compliant with accounting rules, you’re
bound to get into some legal trouble. It may start off with a few unethical accounting
practices here or there, but it can ripple into major problems. If you don’t follow accounting
ethics, you’re asking yourself for trouble. To avoid any legal problems in the future,
familiarize yourself with ethics and accounting. And, understand what kind of unethical
accounting practices put your small business at risk.
4. Your business is counting on you - As you can tell by now, there are numerous reasons why
ethics are essential in accounting. However, the most important reason of all is this: your
business is counting on you to be ethical. Just like how your customers and employees
expect you to be ethical in your day-to-day business operations, your business depends on
it, too. If you adopt unethical accounting practices, it will likely come back to bite you later.
Not to mention, if you get too comfortable following unethical accounting practices, your
business could suffer the consequences.

Ethical problem areas in accounting and finance

Fraud A fraud is a dishonest act by an employee that result in personal benefit to the employee
at a cost to the employer

example = a bookkeeper in small company diverted Rs. 700,000 of bill payments to a personal
bank account over a three-year period.

Misleading financial statement Before investing money investor want to know the company’s
financial position and performance. They want to see the balance sheet and income statement.
So financial companies sometimes intentionally prepare false financial statement to improve
their chances of getting invested.

Insider Trading A trading of corporation’s stock or other securities by individual with access to
non-public information about the company the company it is unfair would destroy the security
markets by destroying investor confidence

Codes of conduct in finance and accounting

Accounting:

1. Integrity. A professional accountant should be straightforward and honest in all

professional and business relationships
2. Objectivity. A professional accountant should not allow bias, conflict of interest or undue
influence of others.
3. Professional Competence and Due Care. A professional accountant has a continuing duty
to maintain professional knowledge and skill at the level required to ensure that a client
or employer receives competent professional services based on current developments in
practice, legislation and techniques. A professional accountant should act diligently and
in accordance with applicable technical and professional standards when providing
professional services.
4. Confidentiality. A professional accountant should respect the confidentiality of
information acquired as a result of professional and business relationships and should
not disclose any such information to third parties without proper and specific authority
unless there is a legal or professional right or duty to disclose. Confidential information
acquired as a result of professional and business relationships should not be used for the
personal advantage of the professional accountant or third parties.
5. Professional Behaviour. A professional accountant should comply with the relevant laws
and regulations and should avoid any action that discredits the profession.
Finance

Different moral codes that are supposed to be followed the finance-related behavior of a
company towards its employees, customers, public and other stakeholders-

1. Acting with honesty and integrity while handling dilemmas of the world of finances
2. Not associating with any real/clear conflicts of interest in personal, or company
relationships
3. Providing information that is full, accurate, fair, complete, relevant, objective,
understandable, and timely in and for different documents and reports
4. Acting in accordance with all the applicable rules, laws, and regulations of governments
along with other relevant public/private regulatory agencies
5. Acting responsibly and in good faith with due care, carefulness, and competence without
any sort of misrepresentation of material facts
6. Respecting the confidentiality of information which is acquired in the business course
and such information should not be used for the personal benefit
7. Promoting ethical behaviour among all the associates and stakeholders of a company
8. Adhering and promoting a code of ethics in the company

Conclusion

Ethics is one of the most important factors in the world of finances. In the financial industry, the
participating organizations must follow a proper ethics code. This is necessary for the internal
functioning of the organization as well as external decisions that affect it.

Accounting Ethics on the other hand is also a critical concept according to which every person
associated with the accounting has to follow certain types of rules and guidelines set by the
different governing bodies having the power to set the same. These rules and guidelines prevent
the misuse of the different powers given to the various accounting professionals.

Ethics has become a most topical issue of concern in accounting and finance at present owing to
the series of corporate scandals that had taken place in the world affecting the credibility of the
accounting profession. These scandals have placed in doubt the effectiveness of contemporary
accounting, auditing and corporate governance practices, for which accountants are responsible.
Thus, the ethical code of conduct is closely linked with the accounting profession. Hence, we can
say that the ethics has become an essential part for accounting professionals.

Also, in the areas where the proper accounting ethics are followed, there is decreased legal
liability as almost all the things are taken care of well in advance by the concerned persons, and
it creates a better Professional Environment as everyone has the proper mindset of maintaining
the high level of ethical standards.