ETHICS IN FINANCE
Meaning of Ethics
Ethics is the study of human behavior which is right or wrong. In general, ethics means doing right things to others, being honest to others, being fair and justice to others. Even ethics in finance is a compartment to general ethics. Ethics are very important to maintain constancy in social life, where people work together with one another. In the process of social development we should not be conscious of ourselves but also conscious to take care of others.
WHAT IS FINANCE
Finance means fund or other financial resources; it deals with matter related to money and the market. The field of finance refers to the concept of time, money and ...view middle of the document...
Peoples who involved in finance activity have to serve both their company and their customers at utmost good faith.
Code of Ethics in Finance
1. Act with honesty and integrity, avoiding real or clear conflicts of interest in personal and professional relationships.
2. To provide information which is full, fair, accurate, complete, objective, relevant, timely and understandable, including in and for reports and documents that the Company files with, or submits to, the other public communications made by the Company.
3. Act in accordance with all applicable laws, rules and regulations of governments, and other appropriate private and public regulatory agencies.
4. Act in good faith, responsibly, with due care, competence and carefulness, without misrepresenting material factor allowing my independent judgment to be subordinated.
5. Respect the confidentiality of information acquired in the course of business except when authorized or otherwise legally obligated to disclose the information. It should not be used for personal advantage.
6. To promote ethical behavior among our associates.
7. Adhere to and promote this Code of Ethics
Ethical issues in Finance
* Fraud in Financial Statements
* Fictitious Revenues
* Concealed Liabilities and Expenses
* Fraudulent Asset Valuations
* Improper or Fraudulent Disclosures or Omissions.
Example: Satyam Computer Services Scandal
The Satyam Computer Services scandal was a corporate scandal that occurred in India in 2009 where Chairman Ramalinga Raju confessed that the company's accounts had been falsified. CID told in court that the actual number of employees is only 40,000 and not 53,000 as reported earlier and that Mr. Raju had been withdrawing 20 crore (US$4 million) every month for paying these13,000 non-existent employees.
Duties of an Auditor
* To give an accurate statement to the members about the state of affairs of a company
* To meet the objectives of the Companies Act1956 and also the Articles of Association.
* To be reasonably skilful and careful in identifying the true nature of the accounts.
* Ethical Issues in Financial Markets
* Deception: An act of misrepresenting relevant information
* Churning: Excessive or inappropriate trading for client account by a broker who has control over the account with intent to generate commissions rather than to benefit client.
* Unfairness in Markets
Example: HARSHAD MEHTA SCAM
Harshad Shantilal Mehta the rise in the Bombay Stock Exchange in the year 1992. Exploiting several loopholes in the banking system, Mehta and his associates siphoned off funds from inter-bank transactions and bought shares heavily at a premium across many segments, triggering a rise in the BSE Sensex. When the scam was exposed, the banks started demanding the money back, causing the collapse. He was later charged with 72 criminal offenses and more than 600 civil action...