Throughout upholds a poor corporate culture, then everything

Throughoutthe recent years, the relationship between fraudulent financial reporting andthe tone at the top of an organization has stimulated momentum globally. The expression,’tone at the top’, refers to the ethical culture that is created in theworkplace by an organization’s top management and then trickles down throughthe rest of the organization. If the tone set by the senior manage-ment upholdsoperating values that reflect commitment to integrity, employees will be inclinedto reinforce that ethical culture. However, if the senior management upholds apoor corporate culture, then everything else will fail. Consequently, tone atthe top is a fundamental philosophy for setting the foundations of an ethicalcorporate culture as it is the glue that holds an organization together. The toneset by management is an essential internal control that is necessary forpromoting investor confidence and ensuring the mitigation of emerging risks.

Accordingto the report, Center for Audit Quality, 72% of executives acknowledged that theprincipal reason for economic crimes is a poor corporate culture. Undoubtedly, theethical tone set by top management determines the values and norms of anorganization. However, if top management’s sole objective is profit maximizationat all costs, it sends employees the signal to do whatever it takes to pursueprofits ultimately creating a workplace culture of fraud.Thus, byimplementing a strong corporate culture that creates an expectation foreveryone to do the ethical thing, organizations can counteract the pressures ofemployees succumb-ing into unethical behaviours to achieve short-term goals.