Ethics in Accounting and Audits

Chapter 1
key concepts in
professional ethics
Contents
After studying this chapter, you should be able
to:
1. What Is Ethics?
2. Ethics or morality
3. Ethics and values
4. Moral dilemmas
5. Business ethics
6. Professional ethics
7. Why Study Ethics?
1. Concept and meaning of ethics

 The words “ ethics ” and “ morals ” have a

number of meanings. Webster ’ s Collegiate
Dictionary gives four basic meanings of the
word “ ethics: ”
 1.the discipline dealing with what is good and

bad and with moral duty and obligation

 2. a set of moral principles or values
 3.a theory or system of moral values
 4.the principles of conduct governing an

individual or group
 Ethics may be defined as the set of moral
principles that distinguish what is right from
what is wrong.
 There are different definitions of morality.
People gather people's moral and literally
means and procedures to be used.
 Dehkhoda dictionary meaning of moral

behavior is expressed.
 English word in the Webster's dictionary

(Webster) means the study of human behavior

is right and wrong.
 The main objective of the mission as the
great prophet of Islam cultivate and nurture
the human population, and the education of
ethics, It can be said that the divine
revelations and raising people's introduction
to the issue of self-purification is what the
original purpose of the ethics Form.
 Ethics is one of its components, including

rules and procedures that are acceptable to

be used in a career.
 There are several definitions from ethics.
 Ethics is plural form of word that means

mood and temperament. Mood (Kholgh,

plural: Akhlagh) stands for habit and conduct.
 The English equivalent term that has been

mentioned in Webster Dictionary means study

on proper and erroneous ways on human’s
behavior.
 Likewise, the Prof Morteza Motahari in his
book, called “Practical Wisdom”, introduced
term “Ethics” as knowledge of life or the
science of how to live and he divided it into
two branches of how to be and how to behave
by adding that how to behave is related to
actions and deeds (including speech) while
how to be, might influence in moods and
substances of behavior on way of
temperaments and states and the moods in
relation to quality of human’s existence.
 Ethics seeks for finding principles and rules that
employing them results in goodness and salvation for
human.
 Whereas the main objective of arising of Islamic Holy
Prophet was purification of one’s existence and training
of humans and developing well morality so it can be
said that divine verses (Quran) and signs are deemed as
an introduction to subject of purity of soul and training
of humans that contain the main goal in ethics.
 Professional ethics is one of its elements and it
includes good rules and methods, which are adapted in
a profession.
 Ethics, in all its forms, is concerned with right
or wrong, good or bad.
 It is either a set of principles held by an

individual or group or the discipline that

studies those ethical principles.
 The task of that discipline is the analysis and

evaluation of human actions and practices.

 For example, according to some people or

groups, assisted suicide is ethically

acceptable.
 The discipline of ethics examines what “
assisted suicide ” means (analysis) and what
reasons can be given in support of or against
the practice (evaluation)
Islamic Ethics
 meaning of ethics
 Ethics means the principles or standards of

human conduct, sometimes called morals

(Latin mores, “customs”). It is a normative
science for it is concerned with norms of
human conduct, as distinguished from the
formal science, such as mathematics and
logic, and the empirical (experimental)
science, such as chemistry and physics.
 Within an Islamic context, the term most
closely related to ethics in the Qur’an is
khuluq. The Qur’an also uses a whole array of
terms to describe the concept of goodness:
khayr (goodness) birr (righteousness), qist
(equity), adle (equilibrium and justice), haqq
(truth and right), ma’ruf (known and
approved) , and taqwa (piety).
 Muslim scholars such as the philosophers and
jurisprudents had discussed some very important
questions of Islamic ethics , such as the meaning of
ethical terms, the sources of ethical knowledge, and
the basis of moral obligations.
 Islamic ethics does not refer only to the practices of

the prophet Mohammed s.a.w and his companions

and social values developed by the second and third
generations.
 Any ethical value could be considered Islamic as long

as it does not clearly contradict reason and the literal

meanings of the holy Qur’an.
Ethics or morality
 Generally, the terms ethics and morality are
used interchangeably, although a few different
communities will occasionally make a
distinction.
 Both morality and ethics loosely have to do with

distinguishing the difference between “good

and bad” or “right and wrong.” Many
 people think of morality as something that’s

personal and normative, whereas ethics is the

standards of “good and bad” distinguished by a
certain community or social setting.
 Ethics focuses on the decision-making
process for determining right and wrong,
which sometimes is a matter of weighing the
pros and cons or the competing values and
interest. 
 Morality is a code of behavior usually based

on religious tenets, which often inform our

ethical decisions.
Ethics and values
 Values are the foundation of a person's ability
to judge between right and wrong. 
 For example, if someone's value system is

founded upon honesty, they would probably

make a proper judgment between cheating
on a college entrance exam (wrong) and
studying hard to ace a college entrance exam
(right).
A Moral Dilemma

 Given the personal nature of morals, someone

might deem an action to be "good" even if it's
breaking a law.
 Moral dilemmas are situations in which the
decision-maker must consider two or
more moral values or duties but can only honor one
of them; thus, the individual will violate at least one
important moral concern, regardless of the decision.
 A moral dilemma is a conflict in which you have to
choose between two or more actions and have
moral reasons for choosing each action. 
Professional ethics
 Professional ethics are principles that govern
the behaviour of a person or group in a
business environment.
 Like values, professional ethics provide rules

on how a person should act towards other

people and institutions in such an
environment.
 Professional ethics is concerned with the

standards and moral conduct that govern the

profession and its members. 
 Professionally accepted standards of personal
and business behavior, values and guiding
principles.
 Codes of professional ethics are often

established by professional organizations to

help guide members in performing their job
functions according to sound and consistent
ethical principles.
 Professional ethics is defined as the personal
and corporate rules that govern behavior
within the context of a particular profession.
Business ethics
 Business ethics is the study of appropriate
business policies and practices regarding
potentially controversial subjects including
corporate governance, insider trading,
bribery, discrimination, corporate social
responsibility, and fiduciary responsibilities.
 Business ethics , sometimes referred to as

management ethics or organizational ethics,

simply limits its frame of reference to
organizations.
V. Why Study Ethics?
 Why should an accountant get involved in this study
of ethics? Surely, every accountant already has a set
of moral beliefs that he or she follows. Even so,
there are several reasons for studying ethics:
 First, some moral beliefs an individual holds may not

suffice because they are simple beliefs about

complex issues. The study of ethics can help the
individual sort out these complex issues by seeing
what principles operate in those cases.
 • Second, in some situations, because of conflicting

ethical principles, it may be difficult to determine

what to do.
 In these cases, ethical reasoning can provide
insights into how to adjudicate between
conflicting principles and can show why certain
courses of action are more desirable than
others. The study of ethics can help develop
ethical reasoning skills.
 Third, individuals may hold some inadequate
beliefs or cling to inadequate values. Subjecting
those beliefs or values to critical ethical analysis
may show their inadequacy. Let ’ s look at a few
examples:
 • A fourth and very important reason to study
ethics is to understand whether and why our
opinions are worth holding. Socrates philosophized
that the unexamined life is not worth living. Have
you examined your life? As an accountant, what are
your basic goals? Are they compatible with other
values that you have? If you need to choose
between keeping a job and violating your
professional responsibilities, what would you do?
When your responsibility to family clashes with your
responsibility to your job, how do you resolve the
conflict?
 A fi nal reason for studying ethics is to identify the
basic ethical principles that can be applied to
action. These principles should enable you to
determine what should be done and to understand
why. When you are faced with a decision about
what to do in a diffi cult situation, it is helpful to
have a checklist of basic questions or
considerations you can apply to help determine
what the outcome should be. In engineering, we
must learn the principles of construction so that
we can apply them to certain activities.
 In accounting, we must learn the principles of
accounting so that we can apply them to
specific situations. So, too, in ethics, we must
learn the principles of ethics, which govern
human behavior, so that we can apply them
to the difficult ethical situations we face.
Thereby, we can ensure that we have
examined the issue adequately, using all the
ethical principles available.
 The study of ethics can make us aware of the
principles to use in determining what we
should do in a situation involving ethical
matters. Because ethical issues grow ever
more complex in an ever more complex
world, it behooves us to have a grasp of the
underlying structure of ethical reasoning to
help us navigate the ethical sea.
 A caution is in order at this point: Just as some
people excel at golf without knowing the
principles of a good swing, some people can
act ethically without knowing the principles of
ethics, or without knowing why an action is
ethically “ right. ” But just as most of us can
improve our golf game by learning the
principles of a sound swing, it follows that we
can improve the ethical decision - making
dimension of our behavior by studying why
certain actions and practices are correct.
 For example, well - meaning people are often led astray
by their intuitions without understanding the concepts
that justify those intuitions, or without appreciating the
complexity of the situation. If you feel your only
responsibility as a businessperson is to make a profit,
that simple, yet inadequate, view will blind you to
additional responsibilities you have to employees,
employers, clients, and others in the community in
which you do business. If you feel your responsibility as
a management accountant is simply to do what is in the
interest of the company, even though it gives a false
picture of its financial affairs, you are ignoring other
responsibilities.
 END

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