Knowing Right from Left and Right from Wrong

May 1, 2012

As important as it is for the professional accountant to understand “right from left” in recording debits and credits of journal entries, it is even more essential for the accountant to understand “right from wrong” in meeting his or her professional responsibilities. Accounting professionals play an important role in society. They have been granted an exclusive right to provide certain services to the public; and in return, have made a promise to present the truth in a fair and accurate manner to protect the public’s interest. In meeting the demanding objectives of protecting the public’s interest in an ever-changing and complex environment, the accountant faces issues of ethical and professional conduct that require professional guidance in addition to the application of the individual’s personal values.

Just as it is important for the professional accountant to understand ethics in the work place, it is equally important for individuals in all levels of business to understand what it means to operate a business ethically. One of the essential elements of establishing an entity’s appropriate ethical climate within the entity is for entity management and those charged with governance to set the tone for the entire organization’s ethical climate. In designing the ethical framework for any entity, the chief executive officer (CEO) has the ultimate ownership responsibility for setting the right tone at the top ethically. One of the most important aspects of this responsibility is ensuring the presence of a positive internal environment. More than any other individual or function, the CEO sets the tone at the top that influences internal environmental factors and the ethical climate of an organization. The “right” tone at the top helps:

  • The organization’s people do the right thing, both legally and morally.
  • Create a compliance-supporting culture, which is committed to ethical risk management.
  • Navigate “gray” areas where no specific ethical rules or guidelines exist.
  • Promote a willingness to seek assistance and report problems before the point of no return.

The importance of proper ethical behavior by the CEO and the organizations leadership cannot be overstated. As seen in the aftermath of the high-profile accounting and business scandals of the twenty- first century, an absence of, or decline in, ethics and moral character leads to the loss of public trust, which undermines the very fabric of societal and economic beliefs and actions.

Over the years, I have had numerous opportunities as an auditor to examine numerous organizations governing boards and management teams from both a character and financial standpoint. I have also had the opportunity to speak on ethics to almost 100 different groups of individuals. Through all these experiences it seems that the entities that best understood “right from wrong”, have the best understanding of “right from left” when recording revenue and expenses appropriately. This “right from wrong” ethical culture both professionally and personally permeates everything these organizations are involved in. How would you define your current “right from wrong” ethical culture in your business today?

Article provided by D. Scot Loyd, CPA, CGFM of Swindoll, Janzen, Hawk & Loyd, LLC. Learn more about Scot at If you are interested in developing a more robust “right from wrong” ethical culture in your business or organization, please give Scot a call at (620) 241-1826.