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IAI Actuarial Core Principles · Business Finance · Ethical responsibilities of owners and managers

In the study of business ethics, which statement best distinguishes ethics from the law?

Ethics concerns moral standards of right and wrong that can exceed legal requirements. An action may comply with the law and still be unethical, for example exploiting a loophole to mislead customers, so law and ethics are related but not identical.

  1. AEthics is concerned with standards of right and wrong conduct that may go beyond what the law requires, so an act can be legal yet unethicalCorrect
  2. BEthics and law always prescribe identical behaviour, so any lawful act is automatically ethical
  3. CEthics is enforced through criminal courts, whereas law relies on personal conscience
  4. DEthics applies only to individuals, whereas law applies only to companies
  5. Ethics changes with each statute passed, whereas law remains fixed over time

Explanation

Law sets the minimum enforceable standard of behaviour, while ethics covers moral standards that can be higher than the legal minimum. Hence a lawful action, such as exploiting a loophole to mislead customers, may still be unethical. The other options reverse or confuse the roles of law and ethics.

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