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In contrast to laws, ethical standards represent beliefs about moral and immoral
behaviors. Because beliefs are inherently personal, some differences in moral perspectives
exist among all individuals. However, the moral perspective is generally
more homogeneous within a given society than it is across societies. In a business
context, ethical standards are norms for individual conduct in making decisions
and engaging in business transactions. Also, many professions have established
ethical standards for their practitioners such as those promulgated by the IMA

In general, ethical standards for business conduct are higher in most industrialized
and economically developed countries than in less developed countries. But
the standards and their enforcement vary greatly from one industrialized country
to another. Thus, because of the tremendous variations, companies should develop
internal norms for conduct (such as a code of ethics) to ensure that certain behaviors
are consistent in all of its geographical operating segments. There must
also be respect for local customs and traditions if they do not violate the accepted

ethical and legal standards of the company and its domicile country. One cannot
categorize all business practices as either ethical or unethical; there must be a
moral free space9 that allows managers and employees to make decisions within
the bounds of reason. The accompanying News Note about Texas Instruments (TI)
addresses this issue.
It is important for an organization to have and support a code of conduct that
promotes integrity of behavior at all organizational levels. Companies can use a
variety of methods to communicate corporate ethical values to all employees. For
instance, in 1997, Lockheed Martin developed an interactive board game featuring
Scott Adams’ Dilbert character and a multitude of potential, practical ethical challenges
to be addressed by employee teams. Texas Instruments uses an alternative
method, an ethical “quick test” for its employees facing an ethical decision:
• Is the action legal?
• Does it comply with our values?
• If you do it, will you feel bad?
• How will it look in the newspaper?
• If you know it’s wrong, don’t do it!
• If you’re not sure, ask.
• Keep asking until you get an answer.


The high quality of international competition today requires managers to develop
systematic, disciplined approaches to running their organizations. As shown
in Exhibit 1–2, managers have four primary functions to execute in which accounting
information is consumed. These functions are planning, controlling, decision
making, and evaluating performance. The first function, planning, requires
management to develop a road map that lays out the future course for operations.
This road map also serves an important role in the design of the organization’s accounting
and control systems.