Ethical Decision Making Essay

Ethics One definitionEthics is the code of moral principles and determine that governs the behaviors of a person or group with respect to what is right or wrong. Ethical Decision Making The Gut TestMost of the time youll do if something is right or wrong. If it feels fishy, it probably is. Common Ethical Principles UtilitarianismAn ethical choice is one that leads to thegreatest good for the greatest number of peck. Decision takes into consideration of cost and benefits to society, not just for the decision maker or those close to him.JusticeAn ethical choice is one that distributes benefits and burdens equitably. Under this principle, both processes and outcomes can be evaluated. adjectival Justice fairness in the process of deciding/doing/distributing Distributive/Outcome Justice equality of outcome/result. DisclosureA decision is ethical if the mankind would think it is right. How would I feel if my behavior was revealed on (e. g. , The WSJ, nightly news) or to (e. g. , my p arents, my pastor, my children)? CoCo Framework Control assure comprises those elements in an geological formation that can raft in the achievement of the organic laws objectives. The elements in an plaque includes its resources, systems, processes, culture, structure, and tasks. OrganizationPeople working in pursuit of objectives. An transcription can be a legal entity, a system or process that produces the outputs to meet a particular objective. The smallest unit of an organization is the individual person.A person make outs a task, channelise by an understanding of its purpose (the objective to be achieved) and supported by potency ( discipline, skills, resources, and supplies). The person will need a sense of commitment to perform the task well over time. The person will monitor his or her performance and the external environs to learn about how to perform the task break up and about diversenesss to be made. The same is true of any team or work group. In any organiz ation of people, the essence is purpose, cap superpower, commitment, monitoring, and learning.General Categories of Objectives Effectiveness and aptitude of operationsRelated to organizations goals, such as customer service, economic use of resources, profitability and meeting kind obligations. This includes safeguarding of the organizations resources from conflicting use or loss and ensuring that liabilities are identified and managed. Reliability of internal and external reportingMaintenance of proper accounting records, the reliability of information use at heart the organization, and of information published for third parties.This includes the protection of records against two main types of fraud the concealment of theft and the distortion of results. Compliance with applicable laws and regulations and internal policiesIncludes objectives connect to ensuring that the organizations affairs are targeted in accordance with legal and regulatory obligations and internal polic ies. Control is utile to the extent that it provides reasonable assurance that the organization will achieve its objectives reliably. Control includes the identification and mitigation of risks. both more fundamental risks to the viability and success of the organization Failure to maintain the organizations capability to identify and exploit opportunities Failure to maintain the organizations resilience. Resilience refers to the organizations capability to respond and adapt to unexpected risks and opportunities, and to make decisions on the basis of telltale indications in the absence of definitive information. Important Concepts in Understanding of Control (a) Control is affected by people doneout the organization. wit of directors, steering, and all other staff. b) People are accountable for achieving objectives as well as efficaciousness of control that supports the achievement of objectives. (c) Organizations are everlastingly interacting and adapting. Organizations are co nstantly adapting in response to changes in the external environment and changes in the internal environment. For control to be effective, the control elements must fit with the organizations objective, change and adapt. When changes are contemplated to any aspect of the organization, the control consequences should be considered. (d) Control can be expected to provide only reasonable assurance, not absolute assurance.Two reasons absolute control is not possible, even with due diligence exercised First is limitations of human capabilities. Faulty judgement, human error. Second is cost/benefit considerations. (e) Effective control demands a balance be maintained i. Between autonomy and integration. The balance between centralization of decentralization, imposing constrains to achieve consistency and granting liberty to act. ii. Between the location quo and adapting to change. The balance between demanding greater consistency to gain efficiency and granting greater flexibility to r espond to change.The four pillars of CoCo framework Purpose Establishment and conversation of objectives Identification and assessment of significant risks Establishment of policies that support the organization in achieving its objectives and managing its risks the policies must be communicated and practiced, so that people know what is expected of them and their scope of freedom to act The organizations plans to achieve its objectives should be communicated and established Objectives and related plans should include measurable performance targets and indicators.Commitment Shared ethical values should be established, communicated, and practiced throughout the organization gentlemans gentleman resource policies should be consistent with the organizations ethical values and with the achievement of its objectives Clear definition of authority, responsibility, and righteousness they should be consistent with an organizations objectives so that decisions and actions are taken by the appropriate people An atmosphere of mutual trust should be fostered to support the flow of information between people and their effective performance towards achieving this organizations objective.Capability People should seduce the necessary knowledge, skills and tools to support the achievement of the organizations objectives Communication process should support the organizations values and its achievement of objectives Timely communication of sufficient and germane(predicate) information to enable people to perform their assigned responsibilities The decisions and actions of different pars of the organization should be coordinated Considering the organizations objectives and risks, control activities should be designed as an integral part of the organization.monitor and Learning External and internal environments should be monitored to obtain information that may signal a need to re-evaluate the organizations objectives or control movement should be evaluated against the targe ts and indicators identified in the organizations objectives and plans The assumptions behind an organizations objectives should be sporadically challenged Information needs and information systems should be reassessed as objectives change or as reporting deficiencies are dentified Follow-up procedures should be established to ensure appropriate change or action occurs Management should periodically assess the effectiveness of control in its organization and communicate the results to those to whom it (management) is responsible. Ouchi Framework Control is interpreted by some authoritative persons as the sum of social influence relations in an organization. It is equivalent to power. Ouchi about control The problem of organization is the problem of obtaining cooperation among a collection of individuals or units who share only part congruent objectives.Market Control In a market, prices convey all of the information necessary for efficient decision-making. Markets deal with the control problem through their ability to precisely measure and reward individual contributions. The firm can simply reward each employee in direct proportion to his contribution. The market instrument permits individuals to move non- organizational goal, but at a personal loss of reward. The market mechanism can be very effective only if strict conditions apply.Contributions must be measurable, and a norm of reciprocity assures that, if one party in a transaction attempts to cheat another, the cheater, if discovered, will be punished by all members of the social system, not only by the victim. The severity of the punishment will typically far exceed the crime, thus effectively deterring potential future opportunities. If an agent of an organization cheats to yield higher reward, once discovered, it is the organization that will suffer the punishment. Bureaucratic Control Involves close personal surveillance and direction of subordinates by supervisors. Strict rules and expressed work routines apply.Employees are evaluated based on compliance to rules. Bureaucracies rely on a mixture of close evaluation with a socialized acceptance of mutual objectives. Supervisors have the right to direct the effort of subordinates on an ad hoc basis. Ad hocformed, arranged, or done for a particular purpose only. Rule contains less information than a price. It is an arbitrary standard against which a comparison is yet to be made. Compliance In exchange for pay, an employee gives up autonomy in certain areas to his organizational superiors, thus permitting them to direct his work activities and to monitor his performance. legitimate right to command Bureaucratic mechanism is not as efficient as market mechanism in terms of administrative overhead consumption.It also relies heavily on monitoring, which can offend peoples sense of autonomy, which will have a negative effect on their motivation. Cultural/Clan Control Attains cooperation by selecting and socializing individual s so that their individual objectives substantially overlap with the organizations objectives. works best in an environment where task performance is inherently ambiguous, and teamwork is common, so that precise evaluation of individual contribution is impossible.The clan mechanism involves internalization of objectives through activities such as ceremonies, stories and rituals, and socialization process. It requires social cartel on values and reliefs. This mechanism reply upon a relatively complete socialization process which effectively eliminates goal incongruence between individuals. The clan lacks explicit price mechanism of the market and the explicit rules in bureaucracy, it relies for its control upon a deep direct of common agreement of what constitutes poor behavior, and requires a high level of commitment on the part of each individual to those socially prescribed behaviors.The clan mechanism cannot cope with miscellanea and high employee turnover. Such disadvantages make it infeasible as a central control mechanism in modern organizations, but it can be efficient if the social requirements can be met. Social and Informational Prerequisites of Control CoSo Framework Internal ControlInternal control is a process, effected by an entitys gameboard of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories Effectiveness and efficiency of operations.Reliability of financial reporting. Compliance with applicable laws and regulations. Internal control is a process and is effected by people at every level of the organization. It can be expected to provide only reasonable assurance. It is geared to the achievement of objectives in one or more separate but overlapping areas. Objectives falls into three categories Operationsrelating to efficient and effective use of the entitys resources. (EPS or cash-flow targets, process efficiency) Financial reportingrelati ng to facility of reliable published financial statements.Compliancerelating to the entitys compliance to applicable laws and regulations. Components Control Environment The atmosphere in which people conduct their activities and carry out their control responsibilities. Related to the entitys peopletheir integrity, ethical values, commitment to competence, and the environment in which they operate. The environment includes aspects such as board of directors, audit committee, managements philosophy and operating style, organizational structure, assignment of authority and responsibility, human resources policies and practices.An effective control environment is a environment where competent people understand their responsibilities, the limits of their authority, and are knowledgable, mindful, and committed to doing what is right and doing it the right way. They are committed to following an organizations policies and procedures and its ethical and behavioral standards. The control environment encompasses technical competence and ethical commitment. Evaluation Criterions Integrity and ethical valuesExistence and implementation of codes of conduct and other policies egarding acceptable business practices, conflict of interest, and expected standards of ethical or moral behavior. Dealings with employees, suppliers, customers, investors, creditors, competitors, and auditors, etc. Pressure to meet unrealistic targets. Commitment to efficiencyFormal or informal job descriptions, knowledge and skills to adequately perform jobs. Board of directors or audit committeeIndependence from management frequency and seasonableness of meetings with management, sufficient and timely communication between management regarding significant organizational activities and financial performance/position.Managements philosophy and operating styleWhether management is risk adverse, risk neutral, or risk seeking. Frequency or interaction between senior management and operating managem ent. Attitudes towards financial reporting. Organizational structurecorrectness of the entitys organizational structure, and its ability to provide the necessary information flow the manage its objectives. Adequacy of definition of key managers responsibilities, and their understanding of these responsibilities. subsidization of authority and responsibilityAssignment of responsibility and delegation of authority to deal with organizational goals and objectives, operating functions and regulatory requirements, including responsibility for information systems and authority to implement changes. Human resource policies and practicesDeals with policies and procedures for hiring, training, promoting, and compensating employees, management of employee retention and turnovers.Risk Assessment A precondition to risk assessment is establishment of objectives. Risk assessment is the identification and analysis of relevant risks to achievement of objectives. There are three categories of object ives Operations objectivesrelate to achievement of an entitys basic mission, the fundament reason for its make itence. Financial reporting objectivesaddress the preparation of reliable financial statements. Compliance Objectivesentities must conduct their activities in accordance with applicable laws and regulations.Financial Reporting Objectives Existence or OccurrenceAssets, liabilities, and equity exist at a ad hoc date, and recorded transactions actually occurred. CompletenessAll transactions, events, and circumstances in a specific period that should have been recorded have been indeed recorded. Rights and ObligationAssets (rights) and liabilities (obligations) are recorded. Valuation and AllocationAssets, liabilities, revenue, and expense components are recorded at appropriate amounts in conformity with relevant accounting principles. minutes are mathematically correct and appropriately summarized, and recorded in the entitys books and records. Presentation and DisclosureIte ms in the financial statements are properly described and justly classified. Overlap of Objectives An objective in one category may overlap or support an objective in another. Example Close quarterly within 10 workdays. Primarily an operation objective, but can also be a financial reporting and compliance objective, as the firm is required to file away financial statements timely in accordance with SEC regulations.Evaluation of Objectives Entity level The entity-wide objectives provide sufficiently broad statements and guidance on what the entity desires to achieve, yet which are specific enough to relate directly to this entity. These objectives need to be communicated to employees and the board of directors. Business plans and budges need to be consistent with the entity-wide objectives and current conditions. Activity level Strong linkage of activity-level objectives with entity-wide objectives and strategic plans.Important objectives (the critical success factors) need to be identified. tc. Once goals and objectives are determined, identify risks that threaten goals. Stated and implied risks External and internal factors Entity to activity level Risks at the entity level include those associated with external and internal factors. External factors are very much like the economic factors that affect demand for a product, such as Technological development Changing customer needs or expectations, which can affect product development, production process, customer service, pricing and warranties.Competition tonic laws and regulations Natural disasters Economic changes Other extraordinary events Internal factors involve the internal conditions of the entity, such as Disruption in information systems Quality/competency of personnels employ Change in management responsibilities Nature of the entitys activities Ineffective board or audit committee Activity level involve the potential risks occult in the normal course of business. Example objective is to main tain adequate raw material inventory.The risks to not achieving the activity objective might include goods not meeting specifications, or not being delivered in needed quantities, on time, or at acceptable prices. Analyzing risksrisk mapping. Likelihood (frequency) and magnitude. Managing Change changed operating environment (regulatory or economic), new key personnels, rapid growth (existing systems may be strained to the point where controls break down), new technology, new lines, products, activities Evaluation of Risks The firm needs to have adequate mechanism to identify risks arising from both external and internal factors.These risks need to be thoroughly assessed in terms of estimated significance based on the likelihood of occurring and magnitude of impact on goal achievement. Then, needed actions must be determined. Significant risks for each significant activity-level objective also need to be identified.