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Important of ethics of accounting
Important of ethics of accounting
Important of ethics of accounting
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Case Study Examination and Ethical Questions Ethics plays a vital role in developing accurate and high quality financial statements for management, financial institutions, and investors. As management utilizes financial statements to make decisions regarding the operations of the business, it is necessary to review accurate financial statements to make strategic decisions about the future of the organization. Investors and financial institutions require accurate financial statements to make informed decisions upon whether to invest funds into the organization or the wisdom of lending funds to said organization.
In the case of Cleveland Custom Cabinets, James Leroy is the sole owner and is of the opinion that providing inaccurate statements
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James Leroy, the company’s sole owner is disappointed in the performance of his company as he intended to present the first quarter financial statements to the bank to acquire a $1 million loan to expand the company. Upon review of the statements it is explained by Mr. Leroy’s accountant Marcus Sims that the cost of company overhead doubled compared to the previous year due to a rise in rent, utilities, and repairs and maintenance of machinery causing the unexpected reduction in net profit. Mr. Leroy, despite his understanding of the determination of net profit, is not pleased and instructs Mr. Sims to ‘tweak’ the numbers as he is the sole owner of the company and ‘owns the board of directors’ making the adjustment of the financial statements acceptable in his opinion. Is it acceptable that the numbers be adjusted because Mr. Leroy is the sole owner? No, it is not as Mr. Leroy has the responsibility to the board of directors to provide them with accurate financial statements as the board of directors has invested in this company and have the right to make informed decisions about the future of the company. Said decisions cannot be accurately made when provided with inaccurate financial …show more content…
When presented with a statement “There is a difference between what we have the right to do and what is the right thing to do,” it is a variance of what is legally beholden, and the morality of adhering to ethics by taking the correct path. What we have the right to do is interpreted by what is legally authorized by federal, state, or local government laws. The right thing to do is guided by personal conscience that tells the individual the correct thing to do (Mintz & Morris, 2014). It becomes a personal choice. Beyond rights are ethical obligations, honesty, and truth-telling. Honesty and truth-telling are ethical obligations which are similar yet different. Honesty is a trait or character possessed by an individual. Honesty is the clerk in a shop who inadvertently overcharges a customer and refunds the excess while admitting their error. Truth-telling is an actual act of not fabricating facts, the facts as they exist are told by an individual. Truth-telling is the act of the honest clerk telling the customer of their
While right-versus-wrong are easily distinguish, right-versus-right dilemmas often include one of four dilemmas in choosing what it truly right. The first is truth versus loyalty.
Ethics are the basic concepts and principles of human conduct that relate to morals. Ethical decisions, or unethical decisions, play a highly influence the culture of a society or organisation. In a business environment, ethical behaviour is highly important because not following ethics can lead to negative effects on businesses overall and its stakeholders. The importance of ethics can be observed through an incident that occurred regarding HealthSouth, a healthcare provider in the United States. From 1992-2003, HealthSouth was involved in the embezzlement of financial reports to portray their financial position as better than it was. The founder, Richard M. Scrushy, the executive team, and many employees were involved in this process, all
Verschoor, CMA, Curtis C. "Ethics: Do The Right Thing." Strategic Finance (2006). Retrieved on 18 September 2006 .
Ethics or rather morals entail mechanisms that defend, systematize as well as recommend conceptions of right or wrong. Many organizations develop ethical codes to ensure employees and employers understand the difference in doing good or bad. In that respect, ethics are an essential aspect of successfully running of any organization or government. Ethics ensure employee’s productivity levels are up to the required standards. It also assists them to know their rights and responsibilities. Additionally, employers, as well as any persons in management, are guided by them to ensure they provide transparent leadership. Ethics also defines how customers should be handled. Ethical codes govern the relationship between customers and an
Reynolds states “ethics is a set of beliefs about right and wrong behaviour within a society” with most being universally understood. Certain behaviours such as cheating and lying are commonly considered unethical, but personal opinions about what ethical behaviour is can vary dramatically. We live in a society that sets laws and boundaries of behaviour that is considered acceptable. These rules and laws are expressed into beliefs on how people should think and behave and fit together into what is called a moral code in how a society functions. Unfortunately, we all experience times in our lives where we get caught in conflict or uncertainty about which rules to follow. For example, you catch your friend cheating in a test; you may get caught in a conflict between telling the truth or loyalty. Often we do not want to snitch on our friend so we decide to be loyal to him or her and keep quiet about the situation. Some of us, however, feel more pressured to tell the truth so we feel better about ourselves. Occasionally the rules and laws do not cover new situations, so we must determine how to make new laws or apply to ones that already exist. Many ethical issues are not as simple as being right or wrong but rather it involves choices between right vs. right (Reynolds, What is Ethics?,
Joseph L. Badaracco, Jr.’s book, “Defining Moments”, focuses on the ethical decision making process of “right versus right” from a management standing point. In reality, ethical decision making has two types of conflicts:”right versus wrong” and “right versus right”. “Right versus right” decisions are considered as the “grey” areas of ethical decision making. Badaracco saw the need to focus on it as “right versus right” decisions play a large role in ethical decision making for managers in real –life. To do so, he written “Defining Moments” as a way of showing the significance of “right versus right” decisions, their effect on decision making, and methods on resolve the dilemma posed by “right versus right”. Badaracco mention that “right versus right problems typically involve choices between two or more courses of action, each of which is a complicated bundle of ethical responsibilities, personal commitments, moral hazards, and practical pressures and constraints” (Badaracco, 6). It is considered a distressful and difficult moment for managers as they have to juggle between their personal values and the expectations of others. It is also what Badaracco interprets as “defining moments”.
The 3 percent decline in sales causing a 21 percent decline in profits can be attributed to the identification of the accounting concept of operating leverage. Operating leverage is what business managers apply to boost small changes in revenue into sizable changes in profitability. Fixed cost is the force managers use to attain disproportionate changes between revenue and profitability. Therefore, when all costs are fixed every sales dollar contributes one dollar toward the potential profitability of a project. Once sales dollars cover fixed costs, each additional sales dollar represents pure profit. A small change in sales volume can significantly affect profitability (Edmonds, Tsay, & Olds, 2011). So, therefore, if sales volume increases,
Accounting ethics has been difficult to control as accountants and auditors must keep in mind the interest of the public while that they remain employed by the company they are auditing. The accountants should take into account how to best apply accounting standards when company faces issues related financial loss. The role of accountant is crucial to society. They serve as financial reporters to owe their primary constraint to public interest. The information provided is critical in aiding managers, investors and others in making crucial economic decisions. An accountant is responsible for any fraudulent financial reporting. Some examples of fraudulent reporting are:
Jeremy Waldron begins with the clarification that if we take moral rights seriously than we must accept the possibility that an individual may do something that is wrong from a moral point of view. I will begin to illustrate what Waldron means by such a right. Before we even look at the meaning of “a right to do wrong”, Waldron clarifies that he is looking at “wrongs” from a moral view not a legal view. “A right to do wrong” means that an action is morally wrong but it is an action that an individual has the moral right to do. It is suggested that an individual should not act in an immoral way but has the choice to do so. Waldron wishes to answer the inconsistencies in the paradox of the moral right to do wrong. One way Waldron says we misunderstand the moral right to do wrong is ...
The importance of business ethics should be obvious throughout every area of the business. When a business is known for dealing honestly with all people, from its employees and customers to shareholders and vendors, it is often more likely to become successful. While ethics is a subjective topic that may mean different things to different people, it's still very important in all types of corporate settings(Cory, 2006:21).
It has more to do with character and the nature of what it is to be. human, than with the rights and wrongs of our actions. Instead of concentrating on what is the right thing to do, virtue ethics asks how. you can be a better person. Aristotle says that those who do lead a virtuous life, are very happy and have a sense of well-being.
The Natural Law stated that humans have a moral knowledge/reason that makes us able to decide what’s right. This has caused various debates on whether people did the right because it was the right thing to do or whether they did it because that’s
In the business world there are many fundamental aspects and situations that can lead to several issues. In order to find an optimal and professional solution, business decision makers need to apply moral and ethical standards. And it is at that moment in which business ethics perform its role. Business ethics, which is in charge of examine how companies and individuals should act in business situations, is very essential in order to reach a common agreement and to work within the laws of business and solve an arisen dilemma. Working of the hand of ethical business companies, employees, investors, directors, and even individual officers can be beneficiated and obtain most favorable outcomes.
Ethical dilemmas create a challenge between two or more equally alternative problems requiring moral judgment. This creates both an obligation and dilemma for those involved. Living in such a globalized world with cross-cultural borders, races, and ideas; negotiating what is considered morally “right” can sometimes be very difficult. Both religion and laws have a major impact in ethical duties. What an individual may presume as right cannot be guaranteed by the government or political party. The Overcrowded Lifeboat is just one example in which all the ideas above come to play in ethical decisions.
Plenty of lifetime happens in the kitchen. Regardless of how various our own life styles might be‚ lots of exercise centers round the kitchen area such as cooking‚ preparing a fast snack‚ eating breakfast every day or even a 3 course dinner along with family members or even friends. Nearly all of us interact socially in the kitchen, interacting with friends and family more than a cup of coffee or even a cup of wines‚ your kitchen is one location that should be each wonderful plus useful. This increases a dual challenge associated with do is plus do not is within kitchen design layout floor plan. Whatever the kitchen area style designs‚ organization plus layout are crucial within your kitchen area design. Because of this experts warn all of us regarding the some mistakes we ought to prevent to get each useful plus classy kitchen area design.