Ethics Education in Accounting - Assignment Example

Name Class Unit Question 1 a) What are the ethical issues facing Jimmy? Jimmy is in an ethical dilemma. This is due to fact that the finance director wants Jimmy to ignore the fraudulent actions that the firm has engaged in for the benefit of business while ignoring dangers posed to stakeholders and ethics. The firm has been able to exceed their profit forecasts by launching a new product through shortcuts. The product did not go through scientific analysis to ensure its compliance with legislation. According to R&D manager, the product chemical formulation does not attain the government mandatory safety standards. This points out that the product may expose the users to harm since it does not comply with standards set. Based on Rodney response, it is clear that the intention is to engage in unethical launch that will lead to better performance in stock exchange. He can either say the truth to the auditors or keep quiet as asked by Rodney. The firm has engaged in deceit which is fraudulent to the investors and public. Jimmy is being pressured by Rodney to carry out aggressive accounting and ignore ethics. The business is engaging in fraudulent omissions (Onyebuchi, 2011). b) Recommend courses of action for Jimmy based on ethical egoism and utilitarianism. Justify your recommendations. Ethical dilemma such as the one Jimmy is in occurs due to conflicts of prima facie principles. Jimmy can use either ethical egoism or utilitarianism in taking a course of action. In some cases, people make decisions which are based on ethical egoist reasoning (Onyebuchi, 2011). According to ethical egoism, moral decisions are based on what is on the best interests for the actor. Ethical egoism is based on human motivation. In this case, the course of action that Jimmy should take based on ethical egoism is to keep quiet as asked by Rodney and not to mention firm fraud to the auditors. This will ensure that he is able to maintain a good relationship with the company as an accounting graduate as well as his relationship with Rodney who is the finance director. Being new in the company as an accountant graduate, he has little powers and acting as a whistle blower may damage his reputation and position. Being egoistic does not imply that his action will not benefit others (Armstrong, Ketz & Owsen 2003, p.12). In fact, his action will benefit the company while at the same time ensuring that he maximises his hedonic utility. Based on psychological egoism, human beings act in a way that ensures their own wellbeing (Shawver & Clements 2006, p.183). This is due to fact that human beings are motivated by desire for pleasure and aversion of any pain. Utilitarianism is a teleology approach where moral status of the action taken is determined by the consequences (Camic 1979, p.533). Acting based on utilitarianism implies that his action is right if its consequences lead to the greatest happiness to all affected (Langenderfer & Rockness 2006 p.346). The action should thus maximise happiness based on the outcomes (Van Staveren 2007, p.27). In this case, Jimmy has to consider all course of action and chose the one that leads to the greatest happiness. Jimmy should mention the company’s fraudulent act to the auditors and also tell them on the concerns raised by the R&D manager. The action to report the company will lead to maximum happiness to the audience who would have been negatively affected by chemical formulation on the product. Using utilitarianism, Jimmy can argue that reporting the company unethical conduct is for the good of the public and investors while only a few staff in the company will take it as bad (Langenderfer & Rockness 2006, p.346). c) What might critics of teleological ethics say about Jimmy’s courses of action identified in part b)? According to the critics of utilitarianism, the theory shows that the rights of an individual are not important as compared to those of many (Caliskan, Akbas & Esen 2014, p.246-248). In this case, Jimmy will have to disregard his own happiness for the happiness of the public. He has to ignore the fact that he can lose his job while looking for maximum happiness for the public. In addition, critics point out that happiness cannot be measured. It is hard to quantify maximum happiness since there is no way of calculating it. Thus, the critics can argue that it will be hard for Jimmy to determine the maximum happiness. Utilitarianism is also seen as impractical (Thomas 2012, p.412-418). This is due to fact that the theory is seen as too hard to apply since one cannot calculate the impacts it has on the individuals. While some of the critics claim that there is nothing wrong with egoism, they also see nothing ethical about it. This is due to fact that egoism cannot be substituted for morality (López Paláu, 2007). In this case, Jimmy decision will be based on self-love rather than morality. Based on the moral point of view egoism lacks moral basis hence cannot act as a moral guidance in making decision in this case. In addition, what is done on one best interests can be wrong or right when looked on ethical terms (Duska, Duska & Ragatz 2011, p.33). In this case, Jimmy failure to report the firm fraudulent activities may be ethically wrong and immoral. d) Recommend a course of action for Jimmy based on deontological theory. Justify why this course of action is based on deontology. According to deontologists, morality is an issue of duty. This is due to fact that people have a moral duty to do what is right. The right or wrong of an action is also based on the outcome (Langenderfer & Rockness 2006, p.346). In this case, the course of action taken by Jimmy should have a strict adherence to moral rules and duties. Jimmy has a moral duty to ensure that the company does not release a product which can harm users. He has to ensure consumer safety which cannot be compromised by the firm need for profits. The best course of action based on deontology is reporting the firm fraudulent activities to the auditors and ensuring that the firm follows the set safety procedures before relaunching the product (Van Staveren 2007, p.27-31). This is due to fact that there are concerns that the product may not have met the safety standards. In this case, he will have taken care for the product users and made a decision that will lead to maximum benefit. Question 2 a) Describe the key historical events that you think have shaped the development of accounting. In your answer you should justify why you have selected your events. Accounting development has been shaped by several historical events. Accounting traces its origin during the ancient human agriculture and civilisation. This is where communities started trading with each other hence needed simple accounting and credit methods. First, there was Lucia Pacioli who came up with the double entry bookkeeping in 1494 (Sangster, 2010, p.31-35). This was used by the Venetian merchants and the system could describe debits and credits. This acted as the basis of the modern accounting systems. Another historical event is the industrial revolution which led to invention of advanced accounting systems. Corporations led to the need for external capital providers which required public accountants. Public accountants led to the transformation of the accounting profession (Fleischman, Radcliffe & Shoemaker 2003, p.50). The management accounting can trace its origin back in 1812 during the industrial revolution with the rise of industries. The development of international standards in accounting is another historical event that has influenced the development of accounting. This is due to fact that it led to accounting being looked at as an international business language with a language that is understandable globally. It also made accounting to be understandable and comparable different countries (Fleischman & Radcliffe 2005, p.83). At the end of the 19th century, a series of events led to the development of international accounting standards. It was towards the beginning of the 20th century that several countries enacted laws that led to creation of a legal framework for accounting (Carmona, Ezzamel & Gutiérrez 2004, p.33-38). In 1972, a key historical event led to the proposal on international Accounting Standards Committee (IASC). This was the International Congress of Accountants which was held in Sydney Australia. Since 1973 to 2003, IASC was able to issue 41 standards which were referred as International Accounting Standards. After 2000, IASB named was changed to International Accounting Standards Board (IASB). This also led to the changing of standards name to International Financial Reporting Standards (IFRS) in 2001 (Carmona & Trombetta 2008, p.455-460). This was a major event as it led to harmonisation of the accounting standards. b) Describe the 'socially constructed' perspective of accounting history. What arguments and evidence is there to suggest that accounting is socially constructed? Accounting has a long history and has been demonstrated by some as socially constructed. This is due to fact that it is practised by people for people. Thus, the social constructed perspective looks at accounting as an art rather than a science. Traditionally, accounting has been seen to play a stewardship role. Accounting is seen as a social construct which does not have to conform to physical laws. In this case, accounting is not a technical apparatus and has a society dimension (Potter 2005, p.281). Accounting has an influence on the society and is also influenced by the society. It is through accounting that the society is served and public interests upheld. An example is the changes in the corporate arena that has benefited the society. This includes the Corporate Law Economic Report Program Act (1999) which served the public interests. This also includes accounting efforts which caters for the corporate social responsibility through disclosure. Without the society, there would have been no accounting. The society needs, values and interests led to the creation of the current accounting (Gray et al., 1997, p.356-360). The maintenance and modifications of the current accounting is based on the society. Another example is the passing of the accounting standards which were meant to serve the global needs in accounting as business became global (Carmona, Ezzamel & Gutiérrez 2004, p.35-41). c) What alternative perspectives can be used to explain the history of accounting? Do you agree with these perspectives? Justify your position. The history of accounting can be explained based on several perspectives. First, there is Marxist perspective on the history of accounting. This is a view against the transactional cost economics where the role of accounting is economic efficiency. This a perspective that uses labour processes where accounting and budgeting are used in controlling labour and financial reporting is seen as a tool for allocating surplus values in different areas of capital (Bryer 2005, p.45-50). The next perspective on accounting is Foucault who stressed the existing relationship between power and knowledge. This is an approach that tends to standard costing as a part of government discourse as they try to seek more detailed administration on the public. The perspective concentrates on ways in which accounting has made various human life activities visible (Miller & O'leary 1987, p.250-259). Another perceptive is economic approach. The proponents of the economic perspective explain the origin of accounting of the private enterprises support for the business operations. This is where accounting was used for business record keeping. The industrial revolution acted as a driver for accounting development where accounting was used to enhance business processes efficiency. The business required to come up with both financial and management records. The non-economic approach looks at accounting in the 19th and early 20th century. This is where accounting was developed for academic and disciplinary purposes. The proponents of this perspective argues that accounting was not developed to support business operations but for support of disciplinary purposes. I agree with the economic perspective on the history of accounting. This is due to fact that accounting can trace its origin since the communities started trading with each other. There has been evidence of accounting dating as early as 2,000 in Mesopotamia. Mathematical calculations were adopted over time (Walker 2005, p.240-250). References Armstrong, M. B., Ketz, J. E., & Owsen, D. (2003). Ethics education in accounting: Moving toward ethical motivation and ethical behavior. Journal of Accounting education, 21(1), 1-16. Bryer, R. A. (2005). A Marxist accounting history of the British industrial revolution: a review of evidence and suggestions for research. Accounting, Organizations and Society, 30(1), 25-65. Caliskan, A. O., Akbas, H. E., & Esen, E. (2014). Ethical Dilemmas and Decision Making in Accounting. 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(1997). Struggling with the praxis of social accounting: Stakeholders, accountability, audits and procedures. Accounting, Auditing & Accountability Journal, 10(3), 325-364. Langenderfer, H. Q., & Rockness, J. W. (2006). Integrating ethics into the accounting curriculum. Accounting Ethics: Theories of Accounting Ethics and their Dissemination, 2(1), 346. López Paláu, S. (2007). Ethical Evaluations of Accountants: An Empirical Study of Latin America and THE United States. The globaljournals.gcbe.us. Miller, P., & O'leary, T. (1987). Accounting and the construction of the governable person. Accounting, Organizations and Society, 12(3), 235-265. Onyebuchi, V. N. (2011). Ethics in accounting. International Journal of Business and Social Science, 2(10). Potter, B. N. (2005). Accounting as a social and institutional practice: Perspectives to enrich our understanding of accounting change, Abacus, 41(3), 265-289. Sangster, A. (2010). Using accounting history and Luca Pacioli to put relevance back into the teaching of double entry. Accounting, Business & Financial History, 20(1), 23-39. Shawver, T. J., & Clements, L. H. (2006). The intention of accounting students to whistleblow in situations of questionable ethical dilemmas. In Research on professional responsibility and ethics in accounting (pp. 177-191). Emerald Group Publishing Limited. Thomas, S. (2012). Ethics and accounting education. Issues in Accounting Education, 27(2), 399-418. Van Staveren, I. (2007). Beyond utilitarianism and deontology: Ethics in economics. Review of Political Economy, 19(1), 21-35. Walker, S. P. (2005) Accounting in history, Accounting Historians Journal, 32(2): 233-259. Read More