Ethics and Finacial Reporting
Everyone has their own set of personal ethics based on different factors like their family, religion, or environment. These ethics then effect the decisions people make in the work place. Deciding what is right or wrong in the work place is based on each person’s individual ethics. What may be wrong to one person could seem right in the eyes of someone else. However, there are general guidelines in most places of business of what not to do, like steal from the company or commit fraud. So, what makes a person commit fraud when they know it’s wrong?
People’s ethics are usually developed early in life based on their surroundings. For example, someone who grew up Christian would have been taught that it’s not okay to steal, but someone who grew up on the streets may have learned how to steal in order to survive. Our ethics shape us into who we are and how we make decisions in the work place.
When it comes to fraud, most people immediately think that it’s wrong. However, even though a person’s ethics develop when they are young, they can change over time based on new situations that arise. For example, if a man working in accounting suddenly finds out his wife has stage 4 breast cancer, but his insurance won’t cover the costs, the man may just make a wrong decision in the work place and steal from his employer. Assume this man has always believed that stealing and fraud is wrong but is then hit with this situation, what is he going to do? He knows that fraud is bad, but he needs money to save his wife. This is where the fraud triangle comes in. The fraud triangle is based on rationalization, pressure, and opportunity. The man may rationalize stealing from his company because his wife is sick, and he needs money. He may also feel the pressure because his wife is going to die. He also has the opportunity because he deals with the finical reporting of the company. This is an example of a white-collar crime using fraudulent finical reporting.
Therefore, personal ethics and financial reporting go hand in hand. When making decisions in the work place, people’s personal ethics will always be a contributing factor. Ethics can also change over time due to certain circumstances and events. Those certain circumstances and events can cause people to do things they may not normally do. Overall, ethics always play a role in situations where fraud occurs.