Ethics in Accounting: What You Need to Know

Introduction 

Ethics guide professionals in making effective decisions. It is, therefore, a critical aspect of every profession. The accounting occupation has become a topic of interest today. The main reason for this is due to the increase of accounting-related scandals, worldwide. Researchers argue that accountants are deficient of fundamental integrity, as well as an intense sense of commitment to their professions, which outcomes unethical behavior. Furthermore, researchers argue that there is also a lack of effective teaching strategies in business school, to equip accountants with the skills and competencies required, for ethical and professional accounting performance. Nonetheless, the problem does not lie in business school alone; it also lies in individual personalities, since ethical behavior is inherent in an accountant’s personality.

Question One 

Major Arguments in the First Paper 

Waddock (2005) expounds on the devastating issues facing the accounting occupation, as well as accounting education. The author argues that modern corporations are run by individuals who are lacking a sense of ethics and obligation. Additionally, Waddock (2005) emphasizes the vitality of corporate ethics and integrity. The author also stresses a number of main points in the article. First, the author argues that the contemporary management and accounting education is highly defective since it results in leaders with a limited capacity to critically think about the effects of their decisions, on various stakeholders, the community, and the natural environment. 

Additionally, the author argues that the current accounting education is also inadequate for equipping accountants with knowledge on the holistic issues, which should be effectively embedded in accounting statements. Furthermore, the author also puts across the point that competitive pressures which are imposed on managers, as well as the various policies in dominant accounting firms, foster the prioritization of short-term profit intensification in the modern world, as opposed to the past. Consequently, corporations, educators, and accountants have failed to prioritize critical societal issues like full-cost and environmental accounting, as well as to account for matters of organizational responsibility. The author emphasizes the vitality of analyzing the teaching strategies used by business schools to nurture future leaders, to reduce corporate and accounting scandals. Moreover, Waddock (2005) claims that contemporary leaders, as well as their advisors, are devoid of fundamental integrity. Integrity in the accounting profession is displayed when the financial statements issued by auditors are reliable. Nonetheless, contemporary accountants act without integrity, since financial statements are often re-stated, and scandals have become prevalent in the industry. 

I strongly agree that the education system in business schools is the major cause of the ineffective, unethical, and incompetent accountants in modern accounting firms. Additionally, I also agree that the lack of integrity in modern accountants is a major contributor to the frequent scandals faced in the accounting industry today. The need for more transparency in financial statements, as well as integrity in accounting, is dire. 

Strengths and Weaknesses of Waddock’s Analysis 

The main strength of Waddock’s article is that it gives comprehensive explanations to support the claims. Additionally, the information in the text is very realistic, rational, and depicts high levels of critical thinking. Furthermore, Waddock employs persuasive and strong language, to convince the reader of the truth behind her arguments. Nonetheless, Waddock fails to give sufficient evidence to support his points in the article. For instance, the text fails to effectively identify and address the ineffective teaching strategies used in business school, which the author argues are critical contributors of the lack of ethics, as well as poor performance in accountants. Furthermore, the author talks about scandals that have risen due to unethical and ineffective accounting, yet, adequate examples of these scandals are missing to prove the author's claims. 

The Implications of Past Frauds and Unethical Behavior on Waddok’s Claims 

Waddock (2005) attributes the prevalence of unethical conduct and ineffective accountant performance to the lack of effective teaching strategies in business schools, to equip students with professional skills, and a sense of ethics and responsibility. Nonetheless, the fact that frauds and unethical conduct were still present before the development of formal business school education proves that professors Waddock’s claims are ineffective and cannot be relied on. Furthermore, it implies that ethics cannot just be taught since it is inherent in a person’s personality. 

Question Two 

Moral Reasoning 

Warming-Rasmussen (2003) examines the tendencies of auditors, in the provision of just and impartial decisions, using the theory of developmental moral reasoning, by Kohlberg. The study indicates a 35.48 average level of moral reasoning (Warming-Rasmussen, 2003) in Danish auditors. The results imply that the auditors have a high probability of making unfair and unjust audit judgments in the future. The Danish auditors examined in the article have a high probability to deviate from the ethical norms for the purpose of obtaining personal benefits. Additionally, these auditors have a high potential of manipulating financial statements to participate in offenses such as fraud and tax evasion. Moreover, these auditors indicate a high potential for ineffective decision making, since altering financial statements makes them less effective for use in making decisions. 

It is crucial for financial statements to have high levels of precision and truth, so that end users can make use of the statements in decision making. When the statements are tainted, they impede proper decision making. As a result, a company’s reputation is dented, and the lack of trust becomes prevalent in an organization. Additionally, the auditors in the study have a high potential to be influenced by client preferences. For instance, an auditor such as the ones depicted in the article may accept bribes from clients, so as to alter financial statements, based on their preference. Nonetheless, such actions are highly unethical, unprofessional, and may be detrimental to the company’s reputation, success, and the company’s relationship and levels of trust with its stakeholders. Auditors who do not make a priority of the provision of impartial audit judgments perform unethically, and put in jeopardy, their professions, the reputation and success of an organization and most importantly, trust between the organization and its diverse stakeholders. 

Question Three 

Ethics Intervention at the College Level 

I believe that ethical interventions are the key to ensuring that my ethical framework is appropriate for the roles that I will be expected to perform, as a professional in this field. Ethical interventions teach accountants to be mindful and conscious of outcomes. Additionally, these interventions enable professionals to think comprehensively about the effects of unjust and unfair actions and decisions before they implement them. Additionally, ethical interventions are critical in equipping professionals with personal integrity and integrated thinking ( Waddock, 2005 ). Consequently, the accountants are able to make more effective decisions since they are able to critically analyze the potential impacts, and gauge whether their actions are ethical or not.

Additionally, the interventions equip accountants with a sense of intense commitment to their jobs and their companies, which is vital in the promotion of impartial services, as well as competency. Moreover, ethical interventions are also useful in enabling accountants to voices their own opinions ( Waddock, 2005 ) in matters pertaining to their jobs, while depicting an intense sense of sensitivity to the opinions of others. Furthermore, the interventions promote the acquisition of immense knowledge and understanding of the most productive strategies to deal with ethical dilemmas when they arise. Consequently, accountants are able to devise impeccable solutions to potential dilemmas before they emerge. Ethical interventions would be extremely beneficial in impacting positive transformations within an organization.

Question Four 

Ethical Dilemma 

Ethical dilemmas are common in the accounting profession. A good example of an ethical dilemma is when the management of the organization in which a person works for, requests him/her to record false transactions. For instance, a firm with a 31st December year-end, calendar year enters into an agreement with its clients, to provide services. The organizations accounting principles indicate that the revenue for a single month, in this case, December, should be recorded. Furthermore, the income balance is, therefore, to be recognized the in the next year's financial statements. Nonetheless, the accountant is instructed by the company superiors to indicate the complete amount in the contract for December, to intensify revenues for the present year-end, which is against the company’s policies.

In such a case, I would be tempted to comply with the management’s instructions. Nonetheless, as an ethical accountant, I would do what is required of me, and indicate only the amount for the month of December, so that the remainder of the revenue can be indicated in the financial statements of the following year. Being an ethical accountant means doing what is right, despite the intensity of temptations to act in an unethical manner. My reaction to this dilemma would cause immense rivalry between me and my superiors, making the workplace environment very hostile. Furthermore, my actions would ensure that trust is maintained between the organization and the clients that it has signed the contract with. Moreover, my actions would protect the company from potential lawsuits, as well as denting its own image. Based on these consequences, the positive ones are more than the negative ones, due to the maintenance of ethical conduct in the workplace.

Conclusion 

The need for a transformation in management and accounting is dire. Ethical interventions should be employed to equip accountants with effective decision-making skills so that they can deal productively with potential ethical dilemmas. Additionally, a transformation in the teaching strategies of business schools would ensure that accountants are nurtured into ethical professionals, with the ability to think rationally and critically on the potential outcomes of their actions, so that the best courses of actions are selected. Nonetheless, it is critical to note that ethical behavior cannot just be taught because it is intrinsic in an individual’s personality. Companies should develop more effective motivational strategies to encourage their staff to practice with morality and integrity. Consequently, a positive transformation would be achieved.

References

Waddock, S. (2005). Hollow men and women at the helm… hollow accounting ethics?.  Issues in Accounting Education ,  20 (2), 145-150. 

Warming-Rasmussen, B. (2003). Danish evidence of auditors' level of moral reasoning and predisposition to provide fair judgments.  Journal of Business Ethics ,  47 (2), 77-88.