Institute of Management Accountants

Introduction 

The Institute of Management Accountants (IMA) identifies honesty, objectivity, responsibility, and fairness as the most important ethical principles in business. Honesty demands that managers rely on factual reporting and not falsehood and deceit in financial reporting. The first part of this study explores the four ethical principles and how they affect business performances. This report refers to the Bible in highlighting the benefits of strict adherence to ethical principles. The second part is a response to the analysis of cost accounting and financial accounting by Kay. The answer agrees that cost accounting influences internal decision making, while financial accounting guides investors in analyzing the performance of specific organizations. 

How the Four IMA Principles Relate to Biblical Principles 

Honesty 

IMA encourages individuals and businesses to enhance quality, high productivity, and financial accountability by upholding honesty. Honesty in financial accountancy and management encourages prudent resource control, which helps to lower administrative costs such as executive compensation, secretarial costs, and general accounting costs. A dishonest accountant is more likely to exaggerate selling costs for self-gain. Selling costs, such as advertising and shipping, are essential in securing customer orders (Otley, 2016). The scriptures indicate that “anyone who uses exact measures to report operations will live long in a land that God will reward them” (Deuteronomy 25:13, King James Version). Consequently, “a person who upholds justice and generosity in their transactions will lead a happier, more successful life” (Psalms 112:5, King James Version). 

Fairness 

The principle of fairness calls all managers and business leaders to treat all stakeholders in a manner that reflects their commitment to increase customer satisfaction. Higher quality production depends on non-discriminatory policies and processes. Managers should focus on creating better working environments and subject all employees to equal benefits. Workers such as supervisors, security guards, and janitors significantly contribute to the success of all business processes. Expenditures made in compensating these people do not relate to actual product unit costs; hence, they constitute manufacturing overhead ( Garrison, Noreen, & Brewer, 2018) . The Bible also emphasizes that a leader should not retain wages meant for hired workers for more than one day. It encourages managers to pay employee salaries as soon as they are due. 

Objectivity 

The principle of objectivity requires that accountants refer to factual pieces of evidence when preparing financial statements. Objectivity prevents managers and accountants from releasing biased reports that give a false projection of an entity’s future performance. Objective leaders do not make decisions affecting stakeholders until they have received all the necessary information for reference. If a company has a pending court case for which it expects to win and get payments for damages, a biased manager will accrue all amounts expected from the pay ( Garrison, Noreen, & Brewer, 2018) . Such revenue accrual leads to false reporting, given that there is no evidence as to side a court’s decision will favor. Objectivity encourages reliability in the evaluation of financial positions and cash flows. “Diligent leaders make plans that will bring abundance” (Proverbs 16:8, King James Version). The verse warns business people not to make judgments in haste, as impatience breeds poverty. 

Responsibility 

While organizations produce goods and services for sale to earn profits, they should align their activities with societal values, norms, and objectives. There should be a balance between the desire to increase sales and the need to help members of the society in addressing day-to-day challenges. According to Jen Boynton, corporate social responsibility improves business names, helps in brand building, and motivates all stakeholders. Boynton is a CEO at B Targeted Marketing Co. He adds that ethically responsible entities use environmentally friendly production processes. Cone Communications did a study which established that in America, up to 65% of the population believe that business organizations will soon lead to positive environmental growth, even without government support (Otley, 2016). The Bible discourages individuals and businesses from destroying what God created just for the sake of selfish gains (Romans 14:15-16, King James Version). Organizations can show love by engaging in practices that benefit society. 

Response to Kay 

Cost accounting and financial accounting mainly differ in their areas of operations. As you have indicated, cost accounting is of significant interest to internal management, while financial accountings are meant to guide investors in decision making. While cost accounting promotes prudent decision making, it is essential to note that it gives an idea of how the statement of financial performance would look (Otley, 2016). Therefore, cost accounting also guides managers in the formulation and implementation of policies that would woo investors. I agree with you that investors rely on financial accounting in making investment decisions. Managers employ both cost accounting and financial accounting in analyzing business processes to come up with an encouraging message to investors. On the other hand, investors will be focused on profit margin ( Garrison, Noreen, & Brewer, 2018) . I, therefore, hold that investors should focus solely on financial accounting when making investment decisions. 

The Bible inspires accountants to practice fair and objective reporting. Managers should not twist their financial statements to suit investors when they know too well that they made fewer profits. Accountants must espouse integrity in and refer to accurate information when making decisions. A good organization uses low-cost processes, has a great brand, and practices corporate social responsibility. The Bible encourages business people to spend as much as is required to be part of a great organization. Like the merchant who settled for the most beautiful pearl, business people must make sacrifices if they are going to make more significant achievements and be successful. 

Conclusion 

According to the Institute of Management Accountants, all companies should uphold the principles of honesty, fairness, objectivity, and responsibility. Honesty and fairness prevent companies from engaging in production solely for selfish gain. The Bible warns managers against focusing on profits so much that they forget worker needs. Objectivity and responsibility require that entities consider the impact of their decisions on future performances, relationships with investors, and the society at large. 

References

Garrison, R., Noreen, E., & Brewer, P. (2018). Managerial Accounting and Cost Concepts. In Managerial Accounting (16th ed.). New York, NY: McGraw-Hill Education.

Otley, D. (2016). The contingency theory of management accounting and control: 1980–2014. Management accounting research , 31 , 45-62.