Ethics and its connection to Financial Reporting

How does someone develop ethics? I believe that our environment creates an individual set
of ethics, and characteristics that we act upon. Some are molded by a difficult upbringing, that
enables them to value ethical behavior. Or maybe that difficult upbringing has caused the
person to not value ethical behavior, because they have had to face intense situations that
caused them to act in an immoral way and leave ethics in the rearview mirror. Parents and
friends are also part of the environment that helps us disseminate who we are going to be, and
how we all are going to act. Our parents give us an education at home. They teach us good from
bad to their best of their abilities. Their example propels us to act ethically, or in some cases
immorally if they set a bad example. Once we leave the comfort of our home, we enter the real
world where we create friendships. The friends we associate with also can influence weather
we act ethically, or unethically based on the actions we decide to join them in. I’m sure that at
some point in our lives we have all had our parents tell us not to hang out with certain people.
This is because our parents know that bad friendships can corrupt us and disrupt the teachings
that our parents have left us with. Our environment is the key to the development of ethics.
Ethics is defined as moral principles that govern a person’s behavior or the conducting of an
activity. When thinking of financial reporting, company want to hire people who they find
trustworthy, responsible, and held to a high moral standard. Fraud is a billion-dollar industry
that cripple’s company’s and a plethora of people every year. Hiring a person that does not
value ethical behavior could cost a company millions of dollars. It can be easy to misappropriate
the assets of a company, or even fraudulently fix financial reports to hide money that does not
belong to them if the people working on the reports act unethically. Companies can’t
necessarily analyze the environment the employee grew up in, or cant extrinsically look into a
persons being to see if that individual is someone that acts with pure intentions while working
for them. They take a risk based on certain factors like background checks, criminal history, and
references made by other people for the employee.
Referring to the Fraud triangle, once someone is hired, they have the opportunity to commit
fraud. Sometimes in life things happen where people can feel the pressure to misrepresent
assets on financial statements for their own benefit. A rationalization starts to happen where
they can decide to help themselves to some money, to fix their situation or take the correct
route and tough it out. It is here where the environment that we grew up comes into play.
Subconsciously the values that were taught to us by our parents, or the ones we picked up in
our life with friends or situationally make the person who they are. It may be the C.E.O of a
company, the head of a department, or an employee that makes these decisions, but ultimately
they are all subject to living in some type of environment that causes them to act ethically
when dealing with financial reporting.