Business Ethics

Businesses are especially concerned with these three things since they involve loss of money and the company's reputation itself. Business ethics is the application of ethical values to business behaviour. It applies to any and all aspects of business conduct, from boardroom strategies and how companies treat their suppliers to sales technique and accounting practices. Ethics goes beyond the legal requirement for a company and is, therefore, discretionary.

Many are not aware of the fact that the issue of business ethics is a happening and on the rise topic these days. This could be because we do not see headlines of business corruption or scandals on the local media that often. However, the former so-called boring subject of studies has become a major and important interest recently. With corporate scandals and multibillion dollar bankruptcies on headlines for more than a year and giant companies that were once considered as successful such as Enron and Worldcom on litigation, making business ethics a matter that have to be looked upon to in detail.

In the case of Enron Corp for example, they have failed to follow the basic principles of accounting for the sake to provide a false healthy view of profit generation in their organization. They had been using inappropriate accounting techniques to an elaborate use of special purpose entities to hide liabilities through off-balance-sheet accounting. This is indeed only one of their schemes. There were more that were obviously misleading and clearly providing only up to their own benefit and not the stakeholders.

On the surface, this topic could be view as universal at first; nevertheless there are still conflicting ideas of what should govern the solution to all business problems. There are parties that states although that the studies of business ethics is undeniably effective and relevant, the business and the internal control should be more focus on the what drives the business and understands it, in order to overcome many business conflicts and problem. In one way or the other, this should not be the issue because business ethics clearly states as an ongoing subject and deals with conduct directly. It is not merely a proxy of guidelines. It has its own grounds and value.

Besides further explaining the importance of business ethics in business organization, it is crucial to confine clearly and state the advantages of business ethics and how it works to combat many business problems. Thus, building the fact that business ethics should be the main tool in reducing company frauds and to restore the confidence of the public.

One issue that could be closely related to business ethics is fraud. The result to the research in the United States by the Association of Certified Fraud Examiners (ACFE) in 1996 and 2002 shows that the estimated losses from fraud and abuse to be 6 percent of annual revenue, approximately about $600 billion. This figure may have increased over the years until today. The truth is that the actual figure of the loss is difficult to quantify due to reasons such as not all frauds are detected and even if it is, not all are reported. There are many other reasons that contribute to this problem. It is believe that fraud is a hazardous problem that occurs in all firms without exception, whether it is direct or indirect. Fraud is indeed an inevitable constantly occurring problem. Fraud is a matter of moral issues, and it can resolve to business ethics for solutions. Hall (2004) stated that:

Fraud denotes a false representation of a material fact made by one party to another party with the intent to deceive and induce the other party to justifiably rely on the fact to his or her detriment. Fraud in the business environment has a more specialized meaning. It is an intentional deception, misappropriation of a company's assets, or manipulation of its financial data to the advantage of the perpetrator. In the accounting literature, fraud is also commonly known as white-collar crime, defalcation, embezzlement, and irregularities. (p. 126)

The most substantial issue here is the relationship between fraud and business ethics. There are claims that stated frauds are of nature and occur nonetheless with or without the existence of business ethics dues to many enduring external factors. These factors are described as opportunities which place a person in a situation that enables them to commit the intended fraud. These opportunities too are of external in nature. Likewise, meaning to say that fraud is something that is out of a person's control and anyone could have done it. However, come to the main concern that fraudulent activities and business ethics are of close relation because both have dealings with moral aspects. Also, moral aspects is part of the build of a person's personal characteristics and in one way or the other, effects how deep a person could be dragged down through situational pressure that may be caused by the external factors mentioned before.