Question

Identify how ethics and fraud issuesreflect on an organization

Answer 1

Fraud is a deceptive act by one person, group, or organization that causes another to part with something of value or to surrender a legal right. Fraud includes occupational fraud (employee misuse of company resources), accounting fraud and marketing fraud.Fraud is a prominent business ethical issue.

Sometimes a little bit of misleading can help a company save money - that is, until they are found out. Fraud describes circumstances in which a company obscures the truth from public knowledge. As you'd imagine, fraud can happen on a lot of different levels. It could be as simple as a sandwich maker advertising 10-inch submarine sandwiches as being a foot-long or as complicated as making changes to accounting practices that result in more competitive interest rates and lower taxes. In any event, once a fraud is discovered, it will have severe costs for the company perpetrating the fraud. From public mistrust to official investigations of legal wrongdoing, any allegation of fraud can wreak havoc with a company's stock price and its future.

Organizational ethics is the ethics of an organization, and it is how an organization responds to an internal or external stimulus. Organizational ethics is interdependent with the organizational culture. Although it is akin to both organizational behavior and industrial and organizational psychology as well as business ethics on the micro and macro levels, organizational ethics is neither organizational behavior nor industrial and organizational psychology, nor is it solely business ethics (which includes corporate governance and corporate ethics). Organizational ethics express the values of an organization to its employees and/or other entities irrespective of governmental and/or regulatory laws.

Companies must vigorously instill an exemplary code of conduct at every level, not only because it’s right to do so, but — in the current political environment in which governments and their regulatory agencies are becoming increasingly aggressive and less tolerant of violations — it’s simply good business. Companies must not just talk the talk; they must walk the walk by implementing strong internal controls and establishing an ethical environment for conducting business.

The roots of a fraud rarely can be traced to a single unethical individual operating maliciously in a vacuum. A fraud is perpetrated when that person meets a specific environment. Companies can control those environments by defining both formal and informal rules and by understanding the mostly unseen, unexplored ecology of their organization. More than ever before, that understanding is not a “nice to have”; it’s a “must have.”