My field of study is business administration with a concentration in finance. Et

Question

My field of study is business administration with a concentration in finance.

Ethics has been broadly defined as concerning certain issues or situations as being fair/unfair, right/wrong, or just/unjust according to the values adopted by a given culture or society. These values act as the acceptable standards developed and nurtured by society. As societies have developed and become more knowledge-oriented and socially alert, the need for social responsibility has increased. According to Davis and Blomstrom (1975), social responsibility is “the obligation of decision makers to take actions which protect and improve the welfare of society as a whole along with their own interests” (p. 39).

Throughout the course of your graduate studies, you have studied a variety of social problems and issues. Specifically, identify the top five (5) ethical issues confronting your field of study. After you have briefly addressed each ethical issue, then rank them according to the literature in your field of study and/or by the importance placed upon them by the current media. As you rank them, please document your sources and justification for the ranking. Finally, analyze each ethical issue according to its impact on the field, relevance to the current and future stakeholders in the field, and make any and all recommendations for improving such ethical issues, situations or dilemmas that impact your field of study. During this analysis, please consider the issue of social responsibility and how leaders in your field have addressed these ethical issues.

Explanation / Answer

I would like to throw light on ethical issues in finance and accounting. As we all can see that ethical issue in finance and accounting have posed a great threat to the society a number of times wether it is the sub prime mortgage crisis or collapse of Enron or the recent Scandals in accounting. Ethics in accounting is concerned with how to make good and moral choices in preparation and presentation of financial statements.

1. Fraudulent Financial Reporting: The recent Scandals have been witnessed mostly due to fraudulent reporting, which is used by the managers to mislead investors and put the stock prices high. The consequences were dire in long run.

This was resolved by the FASB and IASB by providing new and improved accounting standards,so as to have consistency and eliminating Loop holes that were exploited earlier.

Sarbanes Oxley act and new auditing standards were also introduced.

2. Misappropriation of assets : When the company's assets are put up for purposes other than company's interest. Otherwise called as embezzlement or stealing.

This is done at all the levels in a company.

Addressed by better corporate ethics education, sense of responsibility among employees, warning signals to them, reporting.

3. Disclosure: These are errors of ethical omission. Intentionally recording the transactions in a manner which misleads the investors.

Proper disclosure requirements are mentioned by the accounting and auditing standards with respect to every segment of business.

4. Pressure from management: Accountants many a times feel pressure from.management to alter the financial records. This may leads to short term prosperity but ultimately this becomes the cause of downfall when SEC discovers fraud.

5. The effect of Greed: The accountant whose eye is on his own bank account rather than the company's welfare becomes a liability for company. He can anytime embezel funds or lured by bribes.

The CPA community has addressed these issues by providing proper work ethics guidelines.

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