Ethics is a term that refers to a code or moral system that provides criteria for evaluating right and wrong. An ethical dilemma is a situation in which an individual or group is faced with a decision that tests this code. Many of these dilemmas are simple to recognize and resolve. For example, have you ever been tempted to call your professor and ask for an extension on the due date of an assignment by claiming a fictitious illness? Temptation like this will test your personal ethics.

Accountants, like others operating in the business world, are faced with many ethical dilemmas, some of which are complex and difficult to resolve. For instance, the capital markets’ focus on periodic profits may tempt a company’s management to bend or even break accounting rules to inflate reported net income. In these situations, technical competence is not enough to resolve the dilemma.

ANALYTICAL MODEL FOR ETHICAL DECISIONS

Ethical codes are informative and helpful. However, the motivation to behave ethically must come from within oneself and not just from the fear of penalties for violating professional codes. Presented below is a sequence of steps that provide a framework for analyzing ethical issues. These steps can help you apply your own sense of right and wrong to ethical dilemmas:⁴¹

Step 1.	Determine the facts of the situation. This involves determining the who, what, where, when, and how.
Step 2.	Identify the ethical issue and the stakeholders. Stakeholders may include shareholders, creditors, management, employees, and the community.
Step 3.	Identify the values related to the situation. For example, in some situations confidentiality may be an important value that may conflict with the right to know.
Step 4.	Specify the alternative courses of action.
Step 5.	Evaluate the courses of action specified in step 4 in terms of their consistency with the values identified in step 3. This step may or may not lead to a suggested course of action.
Step 6.	Identify the consequences of each possible course of action. If step 5 does not provide a course of action, assess the consequences of each possible course of action for all of the stakeholders involved.
Step 7.	Make your decision and take any indicated action.

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