Ethical Implications of Takeovers - Case Study Example

Ethical Implications of Takeovers Accounting is a profession that entails fundamental questions of right or wrong, owing to the fact that it is a profession where an accountant can still engage in unethical accounting practices, yet remain on the legal side. Thus, accounting is a profession where applied ethics is primarily essential, owing to the fact that moral judgments must be applied, as opposed to the mere determination of what is legal or illegal (AICPA, 2014). The organizational stakeholders are highly dependent on the fair and moral judgment of the company accountant, owing to the fact that accounting is a complex field that entails complex financial procedures and practices that the management and shareholders of the company may not fully understand, thus highly depending on the fair and moral judgment of the accountant (AICPA, 2014). Further, more than for the mere fact that the management and the shareholders of an organization are fully dependent on the moral and fair accounting practices of the accountant, accountants also have a responsibility to the people who use their professional services, to offer them genuine and honest services (AICPA, 2014). In this respect, Lisa Michaels does not only have the responsibility to offer honest and genuine accounting services to her organization, but also the duty to uphold the legal and professional requirements of the accounting profession. Ethical issues involved The integrity question is the major ethical issue involved in this case, where Lisa is torn between challenging Mr. Jeffrey Anderson for overlooking the accounting discrepancies that have been noted on the financial statements of the Fragrance Company. The issue becomes an ethical dilemma for Lisa, because on the one hand, she needs to be true to her profession and also loyal to her organization, while she also needs to keep the acquired team close to her, since it is among the organizational workforce that Lisa will be working with. Whichever decision that Lisa chooses to take, she will cause detrimental suffering to other parties. This is because; if she chooses to overlook the accounting discrepancies in the Fragrance Company financial statements, the Home and Personal Care Products will suffer the detrimental effects of inaccurate basis of acquisition of the Fragrance Company. On the other hand, if she chooses to challenge Mr. Jeffrey Anderson over the discrepancies, she is likely to distance herself from the newly acquired team that she will be working with, as part of the larger company. Stakeholders involved in the ethical issue The stakeholders involved in this ethical issue are many. First, there is the shareholders of the Home and Personal Care Products, who will be directly affected by the acquisition of the Fragrance Company. This is because, the Home and Personal Care Products shareholders will be losing financially if the acquisition is completed based on the fraudulent and misrepresented financial statements, since they will lose financially by acquiring a company whose financial statements are inflated, thus failing to represent the true financial position of the organization. The management of the Home and Personal Care Products is another key stakeholder in this ethical issue, since Lisa herself is the financial manager of this organization, and thus the decision to overlook the financial statements discrepancies or the decision to challenge the discrepancies will affect the management position on the acquisition of the Fragrance Company. Acquisition is a management decision that only requires the management input to decide whether to acquire or give up a potential business investment that might have the ability to grow and meet the future objectives of a business. Therefore, management are key stakeholders affected by the ethical issues, since Lisa’s decision to overlook or challenge the financial statement discrepancies will affect the subsequent decisions of the management to acquire or give up the acquisition of Fragrance Company. Fragrance Company is another stakeholder in this ethical issue, since it is the company pending acquisition by Home and Personal Care Products, and thus Lisa’s decision either to challenge or overlook the discrepancies in the Fragrance Company financial statements will determine whether the company gets acquired or not. Alternative courses of action The alternative courses of action under this ethical issue include challenging the discrepancies in the financial statement of Fragrance Company or overlooking the discrepancies and allowing the acquisition of the company. Challenging the discrepancies is a course of action that comes with some risks, since it will affect the future relationship between Lisa and the accounting team acquired from the Fragrance Company. Challenging the discrepancies is also an alternative course of action that may poses the risk of causing the Home and Personal Care Products lose a potential investment in acquisition of Fragrance Company, since once the discrepancies are voiced, the parent company may refuse to acquire Fragrance Company, citing its fraudulent and misrepresented financial statements. The second course of action is overlooking the discrepancies noted in the financial statement of Fragrance Company. This course of action would affect the shareholders and the management of the parent company adversely, since they will acquire another business on the basis of fraudulent and misrepresented financial information. The best course of action for Lisa The best course of action for Lisa is to challenge the discrepancies that she has noted on the financial statements of Fragrance Company. This is because; the decision to challenge this decision would be moral, ethical and also legal, since Lisa would be upholding the integrity principle of accounting professional code of conduct which requires the accounting professionals to be honest and candid (AICPA, 2014). Additionally, an accountant has the responsibility to do what is right and just for the organizational stakeholders, by providing them with truthful information and maintain the confidence invested by the stakeholders (AICPA, 2014). This will be beneficial for the management of the parent company, shareholders and also the accounting profession. Conclusion Accounting is a profession that is primarily concerned with applied ethics. Accountants are highly depended upon by organizational stakeholders to make both moral and fair judgments regarding the financial situations of the company. Lisa’s case is a case of ethical dilemma, since she has to decide whether to overlook the discrepancy in Fragrance Company’s or to challenge the discrepancies. Either way, she may lose the good relationship with the newly acquired accounting team, or cause her parent company to incur losses by acquiring another company based on misrepresented and fraudulent financial information. However, the best course of action for Lisa is to challenge the discrepancies, and thus adhere to the integrity principle of the accounting profession code of conduct, while saving the parent’s company management and shareholders from incurring financial losses through the acquisition. Reference American Institute of Certified Public Accountants (AICPA) (2014). AICPA Code of Professional Conduct. Web. November 4, 2014. < http://www.aicpa.org/research/standards/codeofconduct/Pages/default.aspx> Read More