Ethical Culture Analysis – Term Paper

Ethics Essay Introduction

In business, ethics is the level of degree to which an organization operates in a way that gets deemed as right by both the internal and external business (Clements, 2010). Therefore, an ethical, cultural analysis is the evaluation of whether a firm is operating within its ethical obligations or not.  A firm is expected to operate in a way both the employees, clients government and the general public will feel satisfied.  In that line, the extent to which an organization practices its ethical requirement is not only limited to its internal employees and clients but the general public. There is a relation between a business and members of the public who are not their clients. For instance, when a firm acts in an unethical way by emitting poisonous gasses, the effect of that gas will be felt by both the firm’s customers and non-customers. Business is directly linked to its clients or indirectly connected to non-clients. The more an organization venture into broader operations, the more its ethical boundaries expand.  Ethics defines the organization’s customer base and employee turnover (Liao, 2010). A good number of workers will be willing to work for an organization that is ethical compared to that which is not. Similarly, an ethical firm will have a wider customer base compared to that which is not. The external environment plays a significant role in defining an organization;s ethics; a firm is an open entity that relates to the external world (Clements, 2010). It implies that a company interacts with various objects as it tries to meet its operations; a firm will buy raw materials from the external parties as well as sell their final products and services to the same entities.; For a firm to be successful, there is need to develop a peaceful symbiotic relationship with both is employees and external entities ((Johnson, 2016). A good relationship will facilitate a smooth flow and interaction of factors of production thus boosting return.

Types Of Business Environment

On the boundaries grounds, various settings are either affected directly or indirectly by the firm’s operations.  To begin with, there is an internal environment that promotes the organizational ethical culture. However, as much as the internal environment promote the ethical business culture, they also directly get affected by its ethics (Clements, 2010). The internal environment is made up of individuals who work in that organization and the management.  The organization has a greater influence to its internal environment. A business efficiently controls what happens within its jurisdiction. This situation represents that body that is under the management control; employees are governed and monitored by policies that are drafted by top management. The workers have a mandate to adhere to the policies requirements.  The workers’ body are ambassadors of the organization to the external environment (Johnson, 2016). They create the image of the company thus there is the need for them to have an outstanding ethical culture. They are the face of the organization to the rest of the world. When an employee has unethical attributes, he will create a negative image of the institution.  For instance, an employee who is arrogant or mishandles the clients is termed as unethical. In such a case, the customer will develop a negative attitude towards the organization. Immoral attributes of the employees will lead to a reduction in customer base thus leading to poor performance. On the other side, there is an external environment that the business has minimal or no control over it completely. The external environment includes the government policies, demography, economy, and competitive environment. The ethical aspect in this context is set by the government. The government puts policies in place to govern how business is conducted within the external environment. Some organizations and firms do not adhere to ethical requirements. For instance, some companies make a false advertisement, overprice their commodities and sell goods and services that do not meet legal standards. In such a case, the government has a legal constraint that shapes the ethics of such businesses. Firms that fail to adhere the legal restrictions faces legal measures.  Government involvement in business helped create ethical entrepreneurial culture within some organizations. Ethical culture is a paramount attribute in any organization that is willing to thrive and expands its operations.

Ethical Culture Analysis For PricewaterhouseCoopers

Background information 

In this paper, I will defend the ethical culture of PricewaterhouseCoopers categorically. The firm is well known as PWC. In 1988, a merger between the Coopers & Lybrand and Price waters company firm led to the formation of PWC. The two companies assumed one brand name and operated as a single entity.  PWC is headquartered in the London United Kingdom. The company offers professional services the following services; auditing reports, consultation, tax advisory, actuarial, financial advisory and assurance. Among the four largest professional firms (KPMG, PWC, EY, and Deloitte), it is the second. PWC was ranked one of the world’s most prestigious accounting firm for seven consecutive years. By 2015 PWC had branches in 157 countries, 756 stations and over 223,000 employees. In their 2016 financial year, the firm had $35.9 billion revenue (www.pwc.com ). It is a global accounting company. Besides, it was ranked the fifth privately owned business in the United States by 2016.  PWC is a corporation that has an extensive network across the globe. It is amazing how the firm successfully deployed human resources across the 157 countries. Besides, it is the company that has drawn more attention on how it managed to outdo most of its competitors who have been in the accounting industry for an extended period. The high number of personnel the organization has employed makes it an imperative firm in the labor industry. Many researchers have developed an interest in understanding how the business has been able to withstand operational challenges in foreign countries.  The fact that the PWC got ranked as the top company to work for in North America is evident the firm has pleasing ethical culture.

PWS has shown a stable, ethical culture. The firm has a huge customer base in the line of the professional advisory. Many prospective investors approach the company to source for professional advice on the type of business they intend to venture in.  Besides, firms that have already ventured into business still seek professional guidance from PWC firm. Most of the firms seek professional advice from PWC so that they can reduce the excessive losses they make. PWC is branded as a savior company.  

Problem prevention

For the last seven years, PricewaterhouseCoopers (PWC) has gained global recognition as the most reputable accounting firm. Corporate fraud is, therefore, the biggest risk or problem that affects the business. Such lack of integrity in the workplace may cause severe damage to the company, including lower profits and permanently bruising the company’s reputation. It is in this light that in 2007, PwC carried out an Economic Crime Survey and developed techniques to avoid and manage fraud, thus reducing the risk of the impact of fraud in organizations as discussed below.

Board and audit committee supervision (PricewaterhouseCoopers Economic Crime Survey, 2007).The board is in charge of supervising and controlling the financial reporting done by the management. Audit committees review the power that the management has on activities such as financial reporting. The two parties should ensure that there are anti-fraud programs in place and that there is no override of controls in financial reporting. They must also ensure that professionals adhere to the principles of accounting. They should also schedule meetings with both internal and external auditors to discuss the risk of fraud. 

Training and procedures (PricewaterhouseCoopers Economic Crime Survey, 2007). There must be an effective control policy that is put in place to help prevent fraud. Such guidelines must be well-documented so that employees understand them fully. Furthermore, upon being hired, it is important to train employees on the dangers of dishonest behavior such as disobeying policy, suspicious reporting, corruption, and conflict of interest. PwC has established standards which who wish to continue working for the company must meet.

Screening upon employment (PricewaterhouseCoopers Economic Crime Survey, 2007). Statistically, about 71.4% of fraud in a company is traced back to its employees. It is therefore important to properly screen potential employees to establish their levels of integrity. Carrying out background checks, detailed checks and employing a specialist to investigate the databases of the potential employee all help in the screening process. 

Interior fraud controls (PricewaterhouseCoopers Economic Crime Survey, 2007). To prevent purchasing and payroll fraud, a company should file copies of tender invitations. Fraud in sales and inventory is averted by distinguishing responsibilities in sales, inventory, accounting and the processes of bank reconciliation. An independent party should conduct regular bank reconciliation of cash and cheque to avoid theft in this sector.

Ethical Beliefs and Culture

A strong ethical culture is paramount to any auditing firm that wishes to maintain high levels of integrity and a good reputation. PwC has chosen the values of excellence, teamwork, and leadership as the basis of a strong ethical culture in all its branches worldwide (www.pwc.com ). 

Excellence. The company is set to fulfill its promises to its clients, and to provide quality beyond the expected through innovation, learning, and agility (www.pwc.com ). It encourages innovation in that employees are encouraged to come up with creative yet practical means of solving problems. The company takes pride in the fact that it is the largest and most renowned auditing firm globally. Thus, it ensures to put in place only the well-developed ideas, and successfully at that. 

Learning is another booster to attaining excellence at PwC. The company provides a continuous means of broadening the employees’ scope of knowledge and skills to satisfy clients better. Agility means that the company is sensitive to change and is swift to deal with any issues that arise from it. This factor has enabled PwC as a business to survive and to stay ahead of its competitors (www.pwc.com ).

Teamwork. PwC is built on long-lasting relationships with its staff and customers. Mutual respect and sharing strengthen these relationships (www.pwc.com ). It is crucial that the company maintains long-term relationships with its clients and employees to ensure both employee and client loyalty. To PwC, the end results rely on how the people element of the company treats each other. Respect entails appreciating other people’s opinions, groups, and cultures. This aspect is essential because the company is based in 157 countries, with employees of more than 35 languages. The firm also encourages its employees to share resources, skills, and opportunity (www.pwc.com ). It also shares knowledge with its customers, which has led to continuous success in its operations.

Leadership. With both clients and employees. The elements of courage, vision, and integrity have enabled PwC to motivate its staff and its clients. Courage requires grabbing the opportunity and having a positive attitude towards the responsibility that comes with the initiative. Anyone, at any level, can be a leader. Leaders should be able to speak their minds, be seen and air their suggestions boldly. Employees are encouraged to be creative. However, it is important that they learn to be accountable for their actions (www.pwc.com ).

Vision entails perceiving what is beyond the expected. One must recognize the bigger picture. The company encourages its staff not only to be courageous but also to set achievable goals. In other words, think big. The virtue of integrity involves being a person who can be trusted by others. A professional must be honorable. This attribute translates to the entire community at PwC. The business is built on honesty and transparency as well as being accountable for its actions. As an auditing firm, employees must adhere to independence as well as objectivity, which are core in the daily activities of the business (www.pwc.com ).

Ethical Drivers

As an auditing firm, PricewaterhouseCoopers has the following ethical drivers (Satava & Richards, 2006):

Self-interest (Protagoras, et.al). At PwC, it is firmly held that the society would be a much better place if each pursued their interests without breaching the rights of other people. The ultimate moral responsibility of a company towards its employees is to ensure that they improve their skills, gain experience and grow at a personal level. Individuals are encouraged to pursue their interests so long as there is no bias or conflict of interest with company goals.

Utilitarian benefits. This involves seeking the common good, such that decisions are made based on what is best for the net society. This ethical driver suggests that whether the goals are short-term or visionary, so long as they result to the betterment of the welfare of the majority, they are implemented. It is important to weigh every decision to determine its pros and cons and to shun those decisions which bring about greater harm than good to the society.

Personal virtues. Integrity and courage play a vital role in developing personal attributes. These characteristics are also necessary for the auditing business to succeed. It is important that individuals set standards that dictate how to relate with other people. Treat others as you would like them to treat you. It is the right of any human being to receive proper treatment.

Religious values. This calls upon individuals to have the virtues of kindness, tolerance, integrity and honesty. Workers must be compassionate towards each other and to their clients. Reciprocation of these virtues leads to unity within the corporate firm. The religious construct is considered a golden rule that guides the auditing industry.

Government requirements. As a firm that has spread out to 157 countries, it is key to its survival that PwC observes government rules and restrictions in each of its host countries. Such national laws may include those guiding the interaction of the company with its surrounding community and the responsibility of the company towards society. Most governments employ a rule-based approach in issuing such legislation. Here, social responsibility plays a significant role. Governments are keen to observe companies, especially international private firms, to determine the benefits that such businesses will bring about to the immediate society and the nation at large.

Universal guidelines. There are globally acceptable rules that govern the activities and conduct of auditing firms. Such guidelines aim to do away with selfishness and self-interest that create undue tension among homogenous industries. These principles apply to the community as a whole. To realize the common good, these rules and policies must intertwine and work together.

Personal rights. This entails the rights and freedoms that are entitled to humanity. They protect people against any form of inhumane or illegal action that may be carried out against them. Nowadays, the rights of stakeholders are becoming more and more recognized although they were not initially formally deemed essential.

Economic efficiency. The goal of any business is to minimize costs and maximize profits. Revenues must be compared against costs so as to implement decisions that will ensure achievement of maximum levels of output. Economic efficiency is necessary for the auditing industry to prosper because misrepresented or biased financial reporting causes great harm to society as a whole.

Distributive justice. This implies that management must be careful not to implement decisions or activities that harm even the minimum number of people in the community. It is crucial to consider the disadvantaged before any decision is arrived to, to avoid further inconveniencing them. In auditing, financial misrepresentation may cause irreparable harm to society whether immediately or eventually. 

Contributing liberty. This ethical driver speaks against selfishness. Individuals must be careful to avoid activities which impeach on other people’s freedoms and rights. A person must follow legislation that defines such rights. It is the duty of an auditor to ensure the protection of the interests of the society in line with their rights and freedoms.

Ethical Issues

There are four major ethical problems that accountants and auditors at PricewaterhouseCoopers are bound to experience, just like any other accounting firm (Lister, et.al).

Management pressure. Many auditing and accounting firms face the burden of high expectations to perform well. Such high hopes create stress and tension among accountants and auditors, who are in charge of formatting financial statements and making financial reports (Lister, et.al). Due to pressure to succeed, management may pressure these professionals to alter their statements about profits and losses, assets, and liabilities of the firm. Ethical professionals will maintain accurate financial reports of the enterprise and not cave into management demands. However, some who fear for their jobs or accept bribes will change financial records and overstate the success of the company. In the short term, this may benefit the company. However, the Securities and Exchange Commission may finally find out about such fraud, leading to failure of the business (Lister, et.al).

Accountants’ morality. The Financial Accounting Standards Board requires accountants to blow the whistle on any form of discrepancy they encounter while carrying out their duties. However, the results of such reporting are devastating. Upon the notification of a violation, the government is required to intervene and review the financial records of the firm. Furthermore, once the press gets to hear of such a scandal, the company’s incompetence will be made public. The reputation of the company will go down the drain, leading to entrepreneurial suicide (Lister, et.al). Needless to say, many of the employees of the firm will be laid off. Moreover, the company’s management including executive officers will be prosecuted and either fined heavily or jailed. 

The ramifications of greed (Lister, et.al). The finance industry involves making a lot of decisions concerning money. When the professionals in this field are greedy, they will find ways around rules and regulations that guide their activities so as to make extra cash. Greed is a total disregard of professional ethics. An accountant is urged to be competent enough not to let greed overpower their moral and professional values. The vice of greed is an enemy to the business, and an accountant should not let it interfere with financial reporting. An accountant who is more concerned about making more money for themselves at a cost to his/her company is self-centered and is a burden to his/her firm. Giving in to greed results to violating the principles of accounting, and the SEC will have to intervene (Lister, et.al).

Failure to report some financial records.  The management may ask the accountants or auditors not to report certain financial figures on the balance sheet. Such information may be one that lowers the reputation of the company either in the eyes of the shareholders or the public (Lister, et.al). Many professionals may not hesitate to follow these directives since omission does not necessarily mean altering figures on the balance sheet. However, such oversight goes against the principle of integrity. A competent professional must be able to represent all given information truthfully, whether positive or negative (Lister, et.al). They must remain vigilant for the sake of ethics.

PWC social performance

Every organization has to put priorities on both the strategic plans and operation risks that come along while dealing with the general public and other agencies. Besides, the top managers must figure out how to build a stronger relationship with their clients and external environment. Also, the firm must consider the cost of allocating their resources in corporate social responsibilities.  PWC has a comprehensive program for corporate social responsibility and stakeholder’s engagement team (PricewaterhouseCoopers Economic Crime Survey, 2007).  The program is purposely suited to meet the client’s requirements and satisfaction.  To begin with, PWC has a helped other forms set their development programs and assisted them in the implementation process. PWC helps their prospective clients implement different lines of strategy in their management team.  They have assisted other firms in managing risks and helped them retain a brand image for an extended period (Johnson, 2016). PWC has worked with their clients in promoting social ethics in their organization through environmental, safety and community management programs. Also, the firm has a stakeholder engagement program; it is not only accountable to the investment community and shareholders but also the employees, consumers, material distributors, and regulators who have an impact on the company’s image.  In such a case, engaging the stakeholders has enabled the firm gain competitive advantage. Besides, the consultant team and project management team at PWC has been helping the host countries in initiating and evaluating national and international projects (Johnson 2016). Also, they help the host country in interpreting and analyzing the international policy requirements in establishing projects. Furthermore, the project management team has been in the forefront helping the investors and governments in host states in strategic environmental protection programs. It is clear that PWC is much concerned with the performance.

PWC Diversity and Citizenship

The PWC is a multinational corporation which has many branches all over the globe.  In such a case, it has its sub-headquarters in the many countries where it has extended its operations.  Besides, the firm has diversified its operation in a variety of accounting services. The top management has devolved few of their top managers in the foreign countries. Most of the directors and executive officers are from the host countries. The role of the devolved managers to foreign countries is to assist the host country’s employee in cultivating and promoting PWC ethical culture. The PWC firms in foreign countries have an obligation to follow the policies and rules stipulated by the host states. They operate within the law requirements of that particular state.  PWC just like any other firms in the host country adhere to tax policy, wage policy, pricing policy and environmental policies among others. Besides, the firm has been I the forefront of promoting the culture and practices of the people of the host country. In a way, the company assumes the activities of the host countries and get integrated into its social practices. However, the firm being an international professional business, it has to meet the international requirements of operation regardless of the host countries it is operating from (Liao, 2010). In such a case, the strategic team in PWC Company has been able to evaluate and set an ethical culture that is universally accepted.

Conclusion and recommendation.

From the above analysis, it’s evident that PWC is a successful multinational firm. The success of PWC is derived from its accommodating ethical culture, corporate social responsibility and dedicated staff, PWC is one of the companies that have been adhering to the policy obligations of the host countries that has enabled them to succeed in their operations. It is one of the firms that is of great interest to many researchers since it has been in a position to outdo their competitor who has been in the auditing profession for a long time. The firm’s strategy of preventing problem occurrence and solving disputes in its many branches in case of phenomena is quite remarkable. PWC is one of the firms that have that has successfully built a good relationship with the prospective clients and the general public. The good relation has enabled the firm to carry its operations smoothly thus leading to its success. Its outstanding ethical culture has resulted in the increase in some clients to the firm. I would like to work at PWC firm. PWC is one of the few organizations that offers an ample working environment to their employees. Employees feel how important they are to an organization when they constantly get consulted and incorporated in decision-making (Liao, 2010).  PWC is a firm that guarantees and individual career development. I would recommend working with PWC to anyone who is willing to grow his career. However, as much successful PWC is, there is a need for them to diversify their business. I would recommend the company to venture into another line of production preferably a different industry like clothing or mining activities. In such a case, the company will expand their customer base and boost its corporate image. Besides, diversification enables the business to meets operational risk in a case where one industry is facing a downfall.

References

Clements, P. J. (2010). Business ethics today: A review of timeless principles that apply to the financial industry. Corporate Finance Review.

Johnson, C. E. (2016). Organizational ethics: A practical approach. Sage Publications.

Liao, W. C. (2010). The relationship between ethics training and employee satisfaction: A mediator of corporate responsibility practices. The Journal of Human Resource and Adult Learning.

Lister, Jonathan, et.al. Ethical issues facing the accounting profession. Small business; accounting and book keeping. 

PricewaterhouseCoopers Economic Crime Survey (2007). Fraud prevention techniques- Some easy-to-implement fraud prevention techniques. Fraud A guide to its prevention, detection and investigation. 

PricewaterhouseCoopers. Our Core Values. Retrieved from www.pwc.com.

Satava, D., Caldwell, C., & Richards, L. (2006). Ethics and the auditing culture: rethinking the foundation of accounting and auditing. Journal of Business Ethics.