Introduction In today’s world businesses and firms are required to uphold high levels of ethical behaviors for them to run successfully. There have been an overwhelming increased number of unethical behaviors in the accounting environment where a lot of accounting environment present accountants with many accounting dilemmas.
Accountants handling any financial information such as companies financial statement must be operate out rightly in an ethical manner because such information is critical to a company’s well being both legally and in a business perspective and also in the accountants own perspective as it determines his compensation and promotional opportunities. In understanding such dilemmas that face accountants in their daily accounting duties, we study critically the case of Daniel potter, a qualified AICPA accountant working at barker Greenleaf Company.
Dan has an acute familiarity with most of the professional guidelines that relate to morality as an accountant. This guideline not only defined his academic success but also his dignity as an auditor. However, he is faced with a situation where he is finding difficulty defining one of the ethical guidelines on materiality according to the AICPA guidelines. He clearly indicates that the valuation of the property has been altered and thus undervalued by up to 7% of its initial value.
But as his boss, Mr. Freeman asks him to omit his subject-to-opinion proviso, Dan feels the ethical conducts are being violated and thus refuses to alter the financial statement or his recommendations. In light with his superiors opinions, Dan feels the need to be loyal but again he knows very well that the accounting profession must uphold what it believes in and in asking him to give a different opinion on his clients property valuation, he was in violation of such conduct.
All accountants should at any one time in the business environment show an unwavering ethical behavior because “significant deficiencies” have been cited in line with individual accounting ethics. Such is Sam’s case with ruby. In this case, a professional accountant such as jimmy’s accountant is supposed to be conversant with all expertise knowledge associated with accounting according to professional accounting in the public interest, post Enron. Information such as taxation information should not have been a problem to Jimmy’s accountant as earlier seen which leaves Sam to share such vital information with ruby’s lawyer who not a rofessional in that capacity. Stakeholders involved Stakeholders are parties both internal and external who have who have any form of stoke in the business. Bottom line profits are not the only rationale behind which companies operate when it comes to stakeholder analysis. Stake holders may include managers, clients employees etc whose interest is deemed vital to the success of any business. In Dan’s case scenario, the stake holders include baker Greenleaf company and all its employees who are involved directly with its inside or outside dealings. The big eight accounting firm which ran audits for baker.
The real estate subsidiary which dealt directly with baker Greenleaf is also a stakeholder. Jimmy also comes in as a main stakeholder in when he decides to buy out Ruby’s business. Though with some ill intentions, and his as accountant disclosing the fact that he wasn’t in fact aware of how jimmy’s off book revenues were being treated and they could amount to tax evasion which he intended ruby to fully shield incase the deal went through. And finally Sam who is supposed to play a third party role and advice ruby on how to handle jimmy’s buy out transactions.
Its however critical to understand that the impact of stakeholders in meeting an organizations goal is critical to the organizations well being. According to chapter four of the professional accounting in public interest, the future success of any business depends on how well it’s able to meet its stakeholders’ ethical expectations. Ethical problems were potential problems for disaster in areas where they damaged part or all of the organizational reputation. Stakeholders such as freeman risk exposing the organization to clients who might easily judge them as account frauds.
Course of action Any unethical behavior is always meant to benefit an individual or an organization at the expense of some aspect in the society. They further argue that accountants have the responsibility to follow all the generally accepted accounting ethics. Auditors are also obliged to put forward opinions that are fair to the financial statements they put forward. Dan’s cause of action therefore is bound by the ethical code of conduct that’s defined by the American Institute of Certified Public Accountants (AICPA) whether it favors his superiors or not.
If organizations cannot streamline their employees to follow such conduct however, it can choose to develop its own rules as long as they are in accordance to those put forward by AICPA. According to Osmond, such organizations may choose to come up with rules and regulations that govern their employees when it comes to handling certain vital financial information. Dan however lacks a venue to air his grievances because baker doesn’t have a board with which disciplinary measures can be taken on employees such as Freeman.
However companies must make sure they enforce such laws and that they fully reprimand employees who fail to live up to the guidelines set. Having a strong disciplinary board is the only way such measures can bear fruit. In Dan’s case, having a board that is willing to take a stance against employees such as stakeholders such as freeman should produce appropriate solution. Such companies should resolve not to have any dealings with stakeholders who engage in inappropriate actions.
Accounting as a profession should be founded by positive philosophy and only a positive philosophical approach is capable of accomplishing this. Dan’s stand to stick by his word is appreciated but his loyalty questioned. Such influenced should be pursued positively by baker. Plante and Moran, the ninth largest public accounting firm in the USA accredits one of its employees, Frank Moran, for having brought about change in a philosophical approach that has seen ‘revolutionary innovations’ among the workforce and the workplace in general, operating on solid social and ethical values.
This can be borrowed by Dan whom, by standing by his decision can help revolutionalize the mentality held by long time serving accountants like freeman. Looking at the above case study, the four stakeholders clearly outline themselves. According to professional accounting in public interest post-Enron, this are divided into the four categories. •The self v/s others; this includes improper use of one’s influence and also misuse of information. Jimmy and Mr. Freeman fall into this category where they misuse the information given to them to mislead other stake holders.
This should be addressed critically because it has a high influence on the overall welfare of the company. •Self and others v/s other; the areas affected by these stake holders include all services they offer to other stake holders. Dan and Freeman, Jimmy and his accountants, Sam Ruby and her lawyer are such stakeholders. This should also be tackled with urgency because some of the company stakeholders will feel shortchanged and should be ranked as high. •Client v/s client; areas affected include services they offer.
Baker and the big eight accounting firm fall under this category. Should be ranked as high because any decisions taken by one client affects the other directly. •Employer v/s employer: areas affected include misuse of information and Dan and Freeman fall under this category. The board should address this directly in order to reduce the influence, especially negative ones, of some employees on others. Conclusion As seen earlier, most of the arguments support the upholding of accounting ethics by all practicing professional accountants regardless of their areas of profession.