Every firm in the corporate world strives to establish itself in a highly competitive market. All organizations strive to increase their revenue, which helps them make a higher amount of profit. Making more revenue and profits increases the financial health of the organization. The financial status of an organization contributes to its success or failure. More often, an organization with excellent financial health attracts more customers and investors compared to poorly performing organizations. Investors are very beneficial to the organization as they help raise capital for the organization. The firms use various strategies to increase their market power and reach more customers to beat their competitors, such as marketing and promotions. The greed and need to achieve success has driven some of the organizations to use unethical means for proving the financial health of their organization. The most common means is through financial statement fraud. This is the act of manipulating the balance sheet, cash ratios, cash flow, and revenue to deceive people who read them, such as investors. Businesses that are doing badly often apply this trick to keep their business afloat. The capitalistic nature of the corporate sector brings the need for people to use unethical means to survive and make profits. Most organizations do not care about investors or employees working for them but care for the profit they get. Dirty games and tricks are a common occurrence in the corporate world for survival. The Lehman brothers company became bankrupt due to various accounting frauds. The management of the organization brought new assets to the organization to make its loans look like assets (Montgomery, n.d.) . Various laws have been implemented to regulate how businesses operate. Accountants are required by the law to keep all financial audit report for five years after the audit, according to section 1520 (Ceresney, 2013) . The punishment of being involved in any accounting fraud if fine or imprisonment. Concealing of any financial information is a violation of section 78j (Federal Accounting Fraud Crimes, 2019) .
Manipulating financial statements is unethical and morally wrong. Virtue theory supports this moral position. This theory is among the three major theories of ethics. It emphasizes on morals and positive character of individuals. It contrasts with the other theories in that it does not place much emphasis on duties and rules or the outcomes of an action (Virtue Ethics, 2016) . The virtue theory is based on virtue and practical wisdom. Virtue can be defined as a commendable trait. It is deep-rooted to its possessor. Virtue is based on reasoning and making decisions by the possessor. The decision is not affected by another force but is rather internal and voluntary. Practical wisdom, on the other hand, is the ability of an individual to analyze a situation and make the best decision based on their virtue. The decision made is guided by virtue of the person and rational. The wise people are able to view and analyze a situation and all its variables and determine the disadvantages of taking a certain action or benefit of taking another. The practically wise people, therefore, understand a situation and determines the important and highly advantageous choice and perform it to promote better and fair living. This theory is highly applicable in financial statements manipulation to falsify the financial health and capability of the organization. When calculating and announcing financial statements, accountants, auditors, and the administration of the organization should employ virtue ethics to release the actual figures. Financial information is used by investors to buy shares and identify the risks and determine whether they should invest in the organization. Virtues such as honesty should be used to help the investors and other stakeholders see the real information. Honesty creates transparency. Investors and shareholders can, therefore, make the best decisions based on the actual financial statement figures.
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Manipulating financial statements reduces transparency. Transparency is very important in business. Transparency of the organization improves the image of the organization to both the stakeholders and the customers. Transparency involves revealing the right information about anything, whether it is financial or a product. Financial statements are very important to the investors, shareholders and potential investors. Information regarding the financial statements should, therefore, be transparent. When the management of the organization applies the virtue theory, the correct financial statements are displayed, which increases transparency between the management, shareholders, and investors. The correct financial statements enable investors and shareholders to make the right decision regarding their investment. In cases where the financial statements show the health of the organization is deteriorating, all the stakeholders can come together and discuss ways to improve the performance of the organization. Since two brains are better than one, a solution may be obtained, which may save the organization from a difficult situation. Failing to provide accurate financial statements misleads the investors and other stakeholders, which is against virtues such as honesty. In addition, manipulating the financial statement falsifies the actual position of the organization. People who would have helped get the organization out of the mud are unaware, which causes the status of the organization to deteriorate further.
Manipulation of financial statements misleads all the stakeholders. There are very many stakeholders in the business world. Some of them are the shareholders, investors, and the government. Altering the financial statements to falsify the condition of the organization makes all the stakeholders make the wrong decisions. Good financial health will trigger investors to buy more shares and invest more in the organization while they are unaware that they are risking huge losses. The shareholders have false hopes regarding what profit to expect from the organization. In simple terms, accounting fraud inconveniences every individual involved in the business. Huge losses occur to the stakeholders if the condition of the organization does not improve even after they invested in the organization. The organization's image would be highly damaged if such an accounting fraud is uncovered. A poor image of the organization reduces its customers since the public trust has been lost (Gerety & Lehn, 1997) . According to the virtue theory, this is unacceptable. The management should consider the investment of all the stakeholders and apply honesty in announcing the financial position of the organization and the expected trend. Displaying honesty boost the image of the organization and increases public trust. This results in an increased number of customers and investors.
The application of the virtue theory provides a better solution to this ethical problem compared to the other theories. The virtue theory protects all the stakeholders in the organization and the organization itself by providing a different option rather than fraud to prove the financial health of an organization. The theory offers transparency and honesty as a key route to achieving better help and boosting the image of the organization. Revealing the poor performance will result in a sit down where solutions that could help improve the situation can be formulated by all the stakeholders together. Applying the deontological theory, which bases the morality of a certain decision or action on rules, would not provide a solution to the organization. Basing the solution to positive virtues displays the dedication of the organization to honesty and transparency. Deontological ethics does not show the strength of the organization but rather shows the power the rules and regulations have over the organization.
References
Ceresney, A. (2013). Financial Reporting and Accounting Fraud. Washington, D.C.: American Law Institute, Continuing Legal Education. Retrieved from https://www.sec.gov/news/speech/spch091913ac
Federal Accounting Fraud Crimes. (2019). HG . Retrieved from https://www.hg.org/legal-articles/federal-accounting-fraud-crimes-5074
Gerety, M., & Lehn, K. (1997). The Causes and Consequences of Accounting Fraud. Managerial and Decision Economics , 587-599.
Montgomery, A. (n.d.). Seven Pillars Institute . Retrieved from Seven Pillars Institute Website: https://sevenpillarsinstitute.org/case-studies/the-dearth-of-ethics-and-the-death-of-lehman-brothers/
Virtue Ethics. (2016, December 8). Stanford Encyclopedia of Philosophy . Retrieved from https://plato.stanford.edu/entries/ethics-virtue/
