usiness owners and other decision makers require detailed and objective data when evaluating the operations of their company and making important decisions, regardless of whether or not the information is positive or negative. Therefore, it is critical that accountants are held to high ethical standards since they are usually privy to confidential business and sometimes personal information. It is important that these individuals are trustworthy since ethical standards require that information be reported in full, and without bias, regardless of the effects of the information. Accountants who reveal or use internal information for their personal benefit can break trust and set the business up for serious legal implications (Luft, 1997, p. 216).

Business owners may determine that unethical behavior does not translate to being illegal, a reasoning that creates a gray area within the organization. This perception could lead managerial accountants to potentially behave unethically when preparing and/or reporting financial information for the organization, thinking it isn’t doing any harm.  However, it may raise a red flag to auditors who may begin to question the accounting practices of the company. An example of this could be a firm consisting of an owner-manager and two subordinates (divisional managers) who trade with each other and are rewarded based on divisional profit. One of the divisional managers with private information may conceal it from the other divisional manager to gain an advantage in bargaining if he or she expects the resulting increase in profits to exceed the time and effort costs of additional negotiation (Luft, 1997, p. 216). This type of behavior provides that manager with a potential edge when performance bonuses are calculated; whereas, the other manager’s division could appear unprofitable and could result in job loss or a shutdown of the entire unit.

Accountants have the option of joining the IMA (Institute of Management Accountants) to not only enhance their knowledge but also to follow the ethical guidelines set forth by the organization whe