Some of the reasons which encourage employees to act unethically are as follows:
- Emphasis on short term results: Company’s manipulated accounting entries to depict good profitability in order to raise further capital from the market. This is one of the primary reasons for downfall of companies like Enron, WorldCom, Satyam, etc.
- Ignoring small unethical issues: Tolerance of small lapses lead to larger problems. So, the companies should develop an environment where small ethical lapses are taken seriously so that they are not repeated in the future.
- Economic cycle: To prevent disclosure of ethical problems in times of depression, companies should be extremely careful & vigilant during good times. It must ensure itself that the effect of depression on the company’s financial statements will be limited & company will be able to bear losses & at the same time it makes the situation acceptable for the share holders.
- Accounting Rules: In the era of globalization, accounting rules are changing faster & becoming more complex. It becomes difficult to identify deviation from these complex set of requirements. The difficulty associated with identifying abuse are the reason which may promote unethical behaviour.
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