The Importance of Ethical Behavior in Financial Business - Essay Example

Ethical Behavior Table of Contents Introduction 3 Case 4 Case 2 6 Case 3 6 Bibliography 7 Introduction The changing terms and the tricks of trade in the ongoing business scenario have called for greater vigilance in the business all across the globe. The recent financial crisis and the global meltdown have shown the importance of the regulatory measures to all the concerned quarters of the world once again. In order to ensure that the business is within the periphery of the law and is following all the fair measures to enhance the share holders’ and the stake holders’ value, the audit firms has undeniable role to play. The legal duties to ensure that all the things are in place and there are no such manipulations in the scheme of things are bestowed upon the auditors in general. Case 1 Once informed about the cooking up of books of accounts in the XYZ Securities, it would have been prudent for the auditor to be the whistle blower. But the case of Arnold is found to be much different. As Arnold was promoted as the partner of the auditing firm and the growth that he experienced was a sort of fast – track, he also had a change in the lifestyle. It was observed that the person has a major shift in his wardrobe and also acquired a BMW. Being a partner of the auditing firm, the changing life style also called for extra expenses. It was found that the card debts of Arnold exceeded US $ 40,000. All these external facts along with the peer pressure to perform put Arnold in the edge of his profession. Also, the fact was that the company that Arnold represented as well as Arnold individually, both were new to the segment of auditing for a security company. Therefore, Arnold observed a mis-statement in the books of accounts of the client company much after the financial statements were prepared for the previous year. As he called up the clients, he was advised to keep his mouth shut and was threatened to be screwed up if he pretended to be the whistle blower. Arnold, himself being under tremendous pressure, succumbed to the threats of the clients as he thought, being a privately held company, the shifts of the financial loss of the company from the previous year to the next year would not hurt any external parties. Also, Arnold was repeatedly told by the management of the XYZ Securities that the company is functioning well and has perfect financial health. But being professional, it can be said that Arnold violated the ethical behavior that was expected out of him. Moreover, he went much further to request financial assistance from the client. The XYZ Securities paid him US $ 15,000 by immediate cheque and also provided security for a bank loan of further US $ 45,000. If one considers this financial assistance with the facts that was suppressed by Arnold, it can be concluded that Arnold was bribed and purchased by the clients. With the shoes of Arnold in my foot, I would have surely obeyed the professional ethics and would have taken measure to flash the mis-statements at the very first place even if I would have been threatened to be screwed up. The professional requirements of ethical behavior would have been prioritized by me in any situation whatsoever. Case 2 Bob Smith has been the tax auditor for Oakes in the year of 2007. As Bob Smith audited the figures of the financial year of 2006, he found that an amount of US $ 15,000 was transferred to Arnold by him. The matter definitely led to suspicion as Arnold, being auditor of the XYZ Securities, should not have had any sorts of financial dealings with the company or the owner of the client’s company whatsoever. As Bob enquired the issue from Arnold, he broke down and informed Bob about the original happenings. But with time, it was found that even Bob aligned with the conspiracy to save XYZ Securities and Arnold and promised to keep his mouths closed. Such suppressing of the fact by the tax auditor, Bob Smith definitely pertains to be unethical with respect professional requirement. But analyzing the previous happenings, it can be well understood that the behavior of Bob has been directed to save Arnold from the scam. Arnold, being partner of the company where Bob is employed, holds immense importance to the tax auditor. Also, Arnold is much senior to Bob in the industry. It was also true that if Bob would have revealed the conspiracy in between the XYZ Securities and Arnold, the auditing firm of Bob and Arnold would had to bear the brunt for the scam. Therefore, Bob, upon advice of Arnold, decided to remain silent over the issue. Case 3 In the highly responsible professions like financial regulations and auditing, the ethical behavior should be provided with top priority. Also, it is true that the line of distinction in between the ethical and the non-ethical behavior is very thin. With respect to the particular case of the auditing, it can said without much hesitation that the behavior of Arnold commenced to be unethical as he suppressed the fact that his audit revealed in terms of mis-statements and cooking up of the books of the accounts. The unethical behavior rose to further heights when, the assigned auditor, Arnold indirectly asked for bribe to keep his mouth shut regarding the manipulations of the books of accounts in terms of shifting the loss from 2006 to 2007. As Arnold seeked for financial advice, he was offered instantly offered a payment of US $ 15,000 and was also paid a loan of US $ 45,000. Such financial dealing for the auditor with the client party is also deemed to be grossly unethical. Thirdly and most importantly, Arnold teamed up with Bob Smith, the tax auditor, to suppress the conspiracies that their auditor firm has been party too. Such behavior is also unethical. Therefore, it can be concluded saying that the punishment that Arnold is facing in lieu of imprisonment is justified and apt. Bibliography Robertson, Jack & Davis, Frederick. Auditing. Business Publications, 1982. Ed 3. Read More