What is ethics?
Ethics is a branch of philosophy that studies the difference between right and wrong. As professional accountants, you will have many opportunities to choose between right and wrong. And as you have seen in the business press, making the wrong choice can lead to serious consequences including corporate failure, loss of reputation, fines, and even jail sentences. The objective of this unit is to introduce you to different branches of ethics, in order to help you understand that people approach the topic with different points of view. You will learn about different ways of thinking through an ethical question. This will help you identify the way that you make decisions so that you can recognise your own personal ethics in any professional ethical problem that you may be faced with. In this way, you can mitigate any detrimental impact of your own personal ethics, with a view to a more objective approach. Perspectives on ethics
In very broad terms, there are three ways of looking at ethics that have developed over time: rules conformance, good intentions, and competence. One way of thinking about ethics is in terms of conformity to rules. From this perspective, ethics is understood as a list of things to do and to not do. Sometimes the list gets very long and complicated and needs to be interpreted by a whole institution of people. The ethical person, from this perspective, is the one who conforms to the rules. A second way of thinking about ethics is in terms of good intentions. From this perspective, a behaviour is considered ethical if it is based on good intentions. Good behaviour then follows from good thinking. The third perspective thinks of ethics in terms of competence. From this perspective, the ethical person is one who can make decisions based on principles and then act on them. This perspective is thought of as looking at competence, because ethics is thought of in terms of an ability rather than an attitude our duty to others
One way to think about ethics is to acknowledge that there are things that someone just does not do, as part of a duty to others. A limitation of this principle is that you have to decide what those things are that someone should not do. At least one philosopher (Immanuel Kant) has defined those duties by saying ‘act according to principles that everyone could follow.’ For example, if you disobey traffic lights, you should consider what would happen if everyone did so. The point is that we should recognise everyone as equals, and not assume that the rules are any different for ourselves than they are for other people.
As an accounting example, a professional accountant would not deliberately issue false or inaccurate financial statements. If everyone did so, no statements could be trusted and as a consequence not only would the profession be brought into disrepute, but all financial statements would have no value to their users. Ultimately the need for accountants and for financial reports would be called into question. Consequences
Another way of thinking about ethics is based on thinking about the consequences to different people. Briefly, consequentialism encourages you to make decisions based on the consequences — both positive and negative — for those involved. This category of thinking is the branch of ethics known as utilitarianism. This states that an action is right if it leads to the most good outcomes and the least bad outcomes for the greatest number of people.
One limitation of thinking about ethics in terms of consequences is that you have to agree on what sorts of consequences matter: for example, should you be trying to promote pleasure and avoid causing pain, or should you instead focus on promoting people’s actual well-being, regardless of whether doing so makes them happy?
A modern application of this point of view is the cost-benefit analysis, which involves assigning monetary values to the costs and benefits of an action and seeing how they...
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