Question

Ethics is so important in financial accounting and reporting that the government has passed a law regulating ethical actions of businesses related to their financial reporting practices. Why is ethics in financial reporting so important for the country’s economy?

Answer 1

Answer:

The correct answer is Investors and creditors will no longer provide financial support to companies if they believe their financial information practices are unethical.

Explanation:

Ethics in the financial sector is one of the most discussed topics in recent years after the lack of morality in the performance of financial intermediaries. As a result, the opinion is increasing that the causes of potential losses and the generation of economic and financial crisis are the result of the failures of the moral virtues of financial institutions such as banks, hedge funds, supervisory and regulatory bodies, governments, rating agencies and central banks. Therefore, we seek to emphasize the relevance of the ethical issue in decision making, since everything is based on the choice of one or another option that can improve or affect social welfare. Financial ethics makes sense to promote professional and responsible behavior through a corporate culture that translates into an extended and effective practice of the moral values ​​assumed by the company. Similarly, ethics can have various functional approaches such as professional development as an entity, in corporate governance through Corporate Social Responsibility and a new system such as Ethical Banking.