Reflection Ethical Dilemma In Financial
Ethics in financial accounts helps in preparation, presentation and disclosure of appropriate information.
Unethical financial reporting can cause loss, financial scandals or company’s fall.
With ethics accountants conduct their duties objectively and with integrity.
Ethics in financial accounting are designed to guarantee that certified public accountants act fairly and honestly in their work. In order to preserve public confidence, financial accounting ethics play a key role in the legal and regulatory framework. As a consequence of a lack of accounting ethics, a company’s reputation and financial statements become untrustworthy and consequently ineffective, increasing the likelihood of illegal activity and collapse of the company.
Fraudulent Financial Reporting
This is the most common accounting scandal
It can be in form of misstatement in the report to mislead investors.
Secondly to maintain corporates’ price.
This scandal will boost short-term company price but run term collapse (Beasley et al., 2000).
The deliberate falsification of a company’s financial statements in order to mislead investors about the operational performance and profitability of the company is known as fraudulent financial reporting. Earnings management is a scenario in which fraudulent financial reporting occurs. By changing accounting rules, or by changing how estimates are computed, management aims to enhance performance. in order to persuade investors that the business is not in debt and that it can meet its obligations in due time, a senior accountant may purposely falsify financial statements in order to enhance overall financial performance.
Fraudulent Financial Reporting Cont.…
It can be in form of disclosure violation
These are intentional errors of ethical omission
Failure to disclose facts to investors that might influence their investment decisions could be deemed dishonest financial reporting.
Operating costs are often treated as investment on the balance sheet by accountants or analysts in an effort to boost net profits. Accounting fraud may be seen by a lack of growth in cash flow, steady sales growth when rivals are suffering, and a dramatic increase in a firm’s earnings in the last accounting periods of the fiscal year.
Satyam Computer Limited which was once a rapidly growing IT industry in India was brought down financial crime
The accounting books were cooked up.
The fraud practices included; producing fictitious invoices for services not given, recognizing revenue on these fictitious receipts, manipulating bank balances (Bhasin, 2016).
As a result of the Satyam saga, attention has once again been drawn to the value of ethics in the workplace. To say that “the scientific method of conduct is unduly influenced in large by greed and selfishness, aspiration, and thirst for power and money,” as one of Satyam’s founders famously put it, would be an understatement. In the wake of numerous scandals and frauds, the need for ethical conduct has been demonstrated. In the Satyam case, the Indian government acted swiftly to protect investors’ interests, India’s credibility, and the country’s global image. Because of Satyam fraud, the government had to revise its accounting and auditing regulations and tighten their own.
Virtual and principles
Virtual and principles being affected by fraudulent financial reporting include;
Honesty, morality and integrity.
These principles ensures that; there is no biasness in accounting profession.
Employees demonstrate integrity at work
Investors can have confidence in the information they get from firms they invest in if they can rely on accounting practices that are honest and ethical. In order to operate a business without concern of biased reporting, business managers depend on honest accounting. Accounting is a profession that relies heavily on honesty in order for financial decision-makers to make the right decisions. In order to confirm that their financial reports adhere to generally accepted accounting standards and that the statistics disclosed in them are correct, public firms hire independent accredited accountants to audit their accounts. The integrity of a company’s accounting operations may make or break its representation.
Solutions to ethical dilemma
There is need for good conduct based on strong ethics.
Using internal audit and controls besides external auditor.
Companies should maintain high corporate culture.
Lastly, policies to prevent frauds are less expensive than the cost of frauds (Rezaee, 2002).
External auditing, regulations, and a board of directors that is free of corporate influence can all help reduce the incidence of false reporting. Fair financial reporting, on the other hand, requires a company to have an ethical culture.
Core concepts, sources and processes in Christian ethics
Christian faculty have much to contribute to accounting ethics.
The objective is to transform and integrate moral values and the power of scripture while making decisions.
Virtual such as integrity, honesty, trustworthiness taught in Christian ethics are likely to be adhered to compared to professional ethics due to the fear of God.
Accounting’s reintroduction of ethics education is yet in its formative years. There is still a lot of work to be done in this field. Since they offer a unique perspective, christian accountants should come out of their shadows and participate in the debate. These researchers seem to be in a unique position to design impacting goals, offer meaningful integration approaches into classroom ethical debates, and provide successful teaching materials for the greater academic community. The goal is to completely improve students’ lives by concentrating on holistic integration and exposing them to role models with strong moral character as well as the guidance of the Bible. As soon as it happens, accounting may begin the process of recovery. It’s possible that even more significant is that pupils will develop into the likeness of Christ.
Beasley, M. S., Carcello, J. V., Hermanson, D. R., & Lapides, P. D. (2000). Fraudulent financial reporting: Consideration of industry traits and corporate governance mechanisms. Accounting horizons, 14(4), 441-454.
Bhasin, M. L. (2016). Fraudulent financial reporting practices: Case study of Satyam Computer Limited. The Journal of Economics, Marketing and Management, 4(3), 12-24.
Rezaee, Z. (2002). Financial statement fraud: prevention and detection. John Wiley & Sons.