Last month Berkshire Hathaway released to company shareholders, as well as a very interested general public, the annual letter written by its chairman, Warren E. Buffett. Interestingly, there was an appendix to the letter, a memo written by Buffett to the Berkshire Hathaway Managers, whom he refers to as "The All-Stars."

In the letter, Mr. Buffett describes his ethical expectations of his managers. As a member of IMA's Committee on Ethics, those expectations are of particular interest to me.

In our recent political and financial environment, we have witnessed a meltdown of our banking and financial institutions, a crisis in our mortgage markets and a general malaise of Wall Street. Amidst all of this, a letter encouraging managers to behave ethically is highly reassuring.

Mr. Buffett tells his managers to zealously guard Berkshire's reputation, stating that Berkshire can afford to lose money, even a lot of money, but they cannot afford to lose a shred of reputation. The notion that "everyone else is doing it" does not provide justification for a business decision. To reiterate the somewhat obvious, any activity or decision that has the slightest odor of impropriety should be avoided.

While Berkshire Hathaway already has a publicly posted Code of Ethics that lays out the rules of conduct, the letter from Buffett outlines the expected behavior beyond the written code. To drive his point home, he suggests that there is plenty of money to be made in the center of the court, so stay away from the edges.

Most business and financial practitioners understand the "general rule of ethics" is to do what is right, yet we continue to witness and read about practices that are often close to or over the edge of expected ethical behavior.

In recent years, we have watched numerous ethical lapses that had ripple effects across the global economy. The Enron and World Com crises, to name just two, not only destroyed those companies but also took the world's largest accounting firm, Arthur Andersen, down with them.

We witnessed a financial crisis that caused the downfall and consolidation of many financial institutions, partially caused by the collateralization and packaging of mortgage loans. Currently, we seem to be uncovering the financial fraud that destroyed Lehman Brothers, allowing companies to dance on the edge of good financial reporting, many times approved by their auditors.

As an accounting professor, I include discussions of ethics in the classroom and try to make students aware of expected, professional, and ethical behavior. In fact, many managerial accounting and cost accounting textbooks include some discussion of ethics and basic scenarios for students to analyze. However, as business continues to change, there needs to be increased awareness of real-world ethical dilemmas, both for students as well as those facing these situations in the workforce.

Maybe it is time that we all take a step back and recognize that our behaviors run deep, become aware of our actions that may impact society as a whole, and read again Mr. Buffett's advice and counsel to his "All Stars."

Lee Nicholas is a member of the Institute of Management Accountants’ Committee on Ethics. He also serves as Assistant Professor Emeritus of Accounting at the University of Northern Iowa, teaching cost accounting and the principles of managerial accounting.