Business Ethics AGA/Richmond Chapter 14 February 2007 Ruth W. Epps, Ph.D., CPA Virginia Commonwealth University

Business EthicsBusiness Ethics

AGA/Richmond Chapter14 February 2007Ruth W. Epps, Ph.D., CPAVirginia Commonwealth University

I am ethical I am ethical because…because…

RWEpps Virginia Commonwealth Univeristy

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I am…I am…

• LoyalLoyal

• TruthfulTruthful

• RespectfulRespectful

• HonestHonest

• DependableDependable

• Have integrityHave integrity

Government ScandalsGovernment Scandals Make Headlines Make Headlines

Halliburton's CorruptionHalliburton's Corruption

Fannie Mae Accounting ScandalFannie Mae Accounting Scandal

The Real Costs of WarThe Real Costs of War

These events have heightened everyone's These events have heightened everyone's awareness of ethical business practices.awareness of ethical business practices.


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Why Business Ethics?Why Business Ethics?

• AICPA Professional Code of ConductAICPA Professional Code of Conduct

• IIA Code of Ethics: Rules of Conduct IIA Code of Ethics: Rules of Conduct (Professional)(Professional)

• Core Values (Self)Core Values (Self)


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Ethics and Business Conduct CodesEthics and Business Conduct Codes• Code should include:Code should include:

– Definition of and procedures for handling, Definition of and procedures for handling, conflicts of interest;conflicts of interest;

– Prohibition against use of corporate Prohibition against use of corporate information, property or opportunity for information, property or opportunity for personal gain; personal gain;

– Confidential information;Confidential information;

– Compliance with laws;Compliance with laws;

– Reporting of illegal or unethical behaviorReporting of illegal or unethical behavior


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The State Employee Fraud, Waste, and Abuse Hotline

1-800-723-1615

NO - YOUR NUMBER DOES NOT SHOW UP ON A CALLER ID!!

Comptroller's Memorandum to Heads of State Agenciesand Institutions of Higher Education


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Types of Fraud To ReportTypes of Fraud To Report

• Illegal or Fraudulent Conduct Illegal or Fraudulent Conduct • Waste of Funds Waste of Funds • Abuse of State Property or Abuse of State Property or

Resources Resources • Gross Mismanagement Gross Mismanagement • Gross Neglect of Duty Gross Neglect of Duty


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IIA Code of EthicsIIA Code of EthicsPrinciplesPrinciples

IntegrityIntegrity

ObjectivityObjectivity

Confidentiality

Competency


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IIA Code of Ethics—IIA Code of Ethics—Rules of ConductRules of Conduct

1. Integrity; Internal auditors:

• Performance of work

• Observance of the law

• Shall not knowingly be a party to any illegal activity,

• Shall respect and contribute to the legitimate and ethical objectives of the organization.


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2. Objectivity; Internal Auditors:

• .1 Conflict with the interests

• .2 Accept anything that may impair or be presumed to impair their professional judgment.

• .3 Shall disclose all material facts


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3. Confidentiality; Internal auditors:

1.Shall be prudent in the use and protection of information

2. Shall not use information for any personal gain or in any manner that would be contrary to the law.


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4 Competency; Internal auditors

1. Shall engage only in those services for which they have the necessary knowledge, skills, and experience.

2. Shall continually improve their proficiency and the effectiveness and quality of their services.


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A key point to A key point to remember about remember about business ethicsbusiness ethics

• State Agencies do not make State Agencies do not make ethical decisionsethical decisions

• True or False????????True or False????????

• TrueTrue

• Individuals make the ethical choices!Individuals make the ethical choices!


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Question: Question: When it comes to When it comes to

business ethics, which business ethics, which activities, functions, activities, functions,

decisions and/or decisions and/or behaviors are really behaviors are really

important?important?


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Answer:Answer:

All of them!All of them!

BEWARE,BEWARE,

Everything you do Everything you do definesdefines if if you are ethical. you are ethical.


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When is it okay to be When is it okay to be unethical?unethical?

• NEVER!NEVER!

• What are the parts of your job - and What are the parts of your job - and your human interactions - to which your human interactions - to which fairness, honesty, respect, and "doing fairness, honesty, respect, and "doing right" don't apply? right" don't apply?

• THERE ARE NONE!THERE ARE NONE!


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Ethics AssessmentEthics Assessment


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Six basic guidelines for Six basic guidelines for ethical business ethical business

operationsoperations• LawsLaws

• Rules & ProceduresRules & Procedures

• Values Values

• ConscienceConscience

• Promises Promises

• HeroesHeroes


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LawsLaws• Is the action you are considering legal? Is the action you are considering legal?

• Do you know the laws governing the activity? Do you know the laws governing the activity?


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RULES & PROCEDURESRULES & PROCEDURES

• How does your planned action How does your planned action compare to what is stated in the compare to what is stated in the company's policies and company's policies and procedures? procedures?


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VALUESVALUES

• Values in operation - ask yourself: Values in operation - ask yourself: "Does the action I'm considering "Does the action I'm considering follow not only the letter of the law, follow not only the letter of the law, but also the 'spirit' of the law? but also the 'spirit' of the law?


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CONSCIENCECONSCIENCE • Will your actions make you feel Will your actions make you feel

guilty? guilty?

• Can you truly justify your actions to Can you truly justify your actions to yourself? yourself?


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PROMISESPROMISES

• Will your action live up to the commitment Will your action live up to the commitment that you made to the other person (customer, that you made to the other person (customer, client, supplier, employee, employer) in the client, supplier, employee, employer) in the business relationship?business relationship?

• Will your action build more trust? Will your action build more trust?


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HEROESHEROES

• Is your action what your hero would Is your action what your hero would do in the same situation?do in the same situation?

• How would your hero act?How would your hero act?


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These six guidelines will These six guidelines will help you take action that help you take action that

is ethicalis ethical • LawsLaws

• Rules & ProceduresRules & Procedures

• Values Values

• ConscienceConscience

• Promises Promises

• HeroesHeroes


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""3R's" to point you 3R's" to point you and your employees and your employees in the right ethical in the right ethical

directiondirection..


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The first "R" of business The first "R" of business ethics is RESPECTethics is RESPECT

• Treating everyone (customers, co-workers, Treating everyone (customers, co-workers, vendors, etc.) with dignity and courtesyvendors, etc.) with dignity and courtesy

• Using state supplies, equipment, time, and Using state supplies, equipment, time, and money appropriately, efficiently, and for money appropriately, efficiently, and for business use onlybusiness use only

• Protecting and improving your work Protecting and improving your work environment, and abiding by laws, rules and environment, and abiding by laws, rules and regulations regulations


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The second "R" of The second "R" of business ethics is business ethics is RESPONSIBILITYRESPONSIBILITY

• Providing timely, high-quality goods and Providing timely, high-quality goods and services. services.

• Working collaboratively and carrying your Working collaboratively and carrying your share of the load. share of the load.

• Meeting all performance expectations and Meeting all performance expectations and adding value. adding value.


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The third "R" of business The third "R" of business ethics is RESULTSethics is RESULTS

• You are expected to get results legally and You are expected to get results legally and morally, by being ethical. morally, by being ethical.

• Do the “ends” justify the “means”?Do the “ends” justify the “means”?

• If you lose sight of the distinction, you If you lose sight of the distinction, you jeopardize your job and your career. jeopardize your job and your career.


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Take a stand!Take a stand!

How To Say 'NO' With How To Say 'NO' With TactTact


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FirstFirst

• Don't accuse the other person of being Don't accuse the other person of being unethical. unethical.

• Instead, use "I" statements to describe Instead, use "I" statements to describe your feelingsyour feelings


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State Your Objection And State Your Objection And Concern Without Concern Without

Indictment.Indictment. • I have serious concerns about that, and I have serious concerns about that, and

I need your understanding ...I need your understanding ...

• I honestly believe it is wrong because ...I honestly believe it is wrong because ...

• I can't do what I feel is wrong ...I can't do what I feel is wrong ...


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Propose An Alternative Propose An Alternative Action That You Feel Is Action That You Feel Is

EthicalEthical

I think I know what you want to I think I know what you want to accomplish, and I feel there's a accomplish, and I feel there's a better way to do it. better way to do it.

How about ... How about ...


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Handling Ethical Handling Ethical SituationsSituations

• Arrogant Employees/ ColleaguesArrogant Employees/ ColleaguesYour colleague ignores procedures Your colleague ignores procedures

and precedents and tries to gain and precedents and tries to gain power on his/her own or through a power on his/her own or through a clique.clique.


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Common Common rationalizations for not rationalizations for not

doing what's right:doing what's right: • "Everyone else does it." "Everyone else does it." • "They'll never miss it." "They'll never miss it." • ““Nobody will care." Nobody will care." • ““The boss does it." The boss does it." • ““No one will know." No one will know." • "I don't have time to do it right." "I don't have time to do it right." • "That's close enough or good enough." "That's close enough or good enough." • "Some rules were meant to be broken." "Some rules were meant to be broken." • "It's not my job." "It's not my job."


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Ethics MottoEthics Motto

Documents

Business Ethics AGA/Richmond Chapter 14 February 2007 Ruth W. Epps, Ph.D., CPA Virginia Commonwealth University