Objectivity Accounting Information example essay topic

AbstractWhat's ethics got to do with accounting? Everything! Believe me, everything. When the word ethics is mentioned, what readily comes to mind is the question of deciding between doing what is right and doing what is wrong. But doing what is right versus doing what is wrong within what context? The idealist will say that decisions of ethics should not be conditional.

But it is not as simple as it sounds, for what constitutes 'right' to one person, may be 'wrong' to another person. What bridges the gap, guides, and clearly distinguishes the line between right and wrong in political, economic and social systems are traditions, culture, laws and regulations. Even then, what is unethical may not necessarily be illegal, even though there exists a close relationship between the two. These dynamics apply to almost every legal profession, accounting not exempted. This paper examines the issues of ethics in accounting.

It also looks at the differences and similarities between financial accounting to managerial accounting. Introduction According to Marshall et al, (What the numbers mean, 2003) accounting involves 'identifying, measuring, and communicating economic information about an organization for the purpose of making decisions and informed judgments. ' This definition clearly shows that there are stakeholders in the information generated by accountants. These include managers, shareholders, oversight and law enforcement agencies, and the general public.

Since these entities rely on the reports generated by accountants for critical decision making, it is important that the information be reliable, objective, and presented in an easy to understand format. Ignoring or circumventing these values renders the information generated unreliable. It can lead to devastating consequences as evidenced by events which led to recent legislation such as the Sarbanes-Oxley Act which seeks to make top management of organizations accountable for the financial statement produced by their organizations through the internal controls they develop and enhance, and to oversee auditors who hitherto could have business interests other than auditing in the organizations they were responsible for auditing. Financial versus Managerial accounting Managerial accounting refers to the management of company resources while applying management accounting principles in decision making. One important characteristic of management accounting is that, it is internal to the organization even though external information such as financial accounting reports will have some amount of influence. Financial accounting refers to the identification, recording, computation, and reporting of financial information to users who may have a stake in the information reported.

An important characteristic of this information is that it is geared towards users external to the company. A financial accountant generates information for external consumption. These products include the income statement, the balance sheet, the statement of cash flow, and the statement of owner's equity. These statements are used to help stakeholders make critical decisions related to the business.

A management accountant on the other hand, generates reports such as the schedule of cost of goods sold, and may use reports generated by the financial accountant. The schedule of cost of goods sold is used to evaluate and record internal costs associated with the production process using various methods. This is important for employees to understand how their actions impact the overall production costs. The income statement can be instrumental in helping employees understand the direction the business is headed in terms of profitability.

Ethical values The public and oversight organizations have expectations as far as ethics are 0 concerned. This guarantees a reasonable amount of reliability and dependability of the information they rely on to make critical decisions. These expectations include professional competence, confidentiality of stakeholder information where necessary, objectivity of the information reported, and the integrity of accounting practitioners. Competence All accounting professional should have the requisite skills to effectively execute. In my capacity as a disbursing clerk in the United States Navy, I attended the Naval Technical Training Institute in Mississippi, where I was fully trained in the duties of the disbursing clerk.

Updates to this training are also offered while on the job in the form of workshops and messages in addition to the hands on training received when a member starts working. Confidentiality Stakeholder information should be protected from illegal use or disclosure. If there is an institution which is very conscious about the security of its information, it is the military. This extends beyond accounting into other realms of professional realms of endeavor.

The privacy act also limits us from disclosing any information about a member's account until they have voluntarily disclosed some personal information for identification purposes and have authorized the release of their accounting information either in person or over the phone. Objectivity Accounting information should be fairly and objectively communicated to the public. This function in my workplace is supported by the training we have received and the checks an balances comprising supervisors and auditors. Each has an oversight role to play, thereby resulting in the accuracy and objectivity of the information released. Integrity Professional should avoid conflict of interest which will jeopardize their ability to perform their duties in accordance with the above listed values including this one. Honor, courage, commitment is key to the Navy's core values which a reemphasized not only in the accounting and payroll sections but across the military.

Training and indoctrination enable us uphold these values. If ethical decision-making is in the interest of all stakeholders, why would accounting professionals engage in unethical behavior? According to Shaun et al (Self interest vs. concern for others, 2005), the answer lies in self interest which is a natural human phenomenon. In motivated self interest, which is what causes unethical behavior there is a payoff.

This payoff which may be personal or organizational in nature drives professionals to make unethical decisions. They further identify personal, organizational and professional values as the basis for analyzing, designing, re-enforcing preventive and corrective behavior with the following specific recommendations for reinforcing ethical values. Internal to the organization 1) Management need to set examples worthy of emulation 2) Ethical values need to be articulated and emphasized to employees 3) An understanding of employee values is important 4) Reward employees who uphold these values 5) Communication to the public about a commitment to the public's interests. External to the organization 1) The importance of leadership by organizations such as the Institute of Management Accountants and the American Institute of Certified Public Accountants. 2) The reinforcement of ethical values at educational institutions during undergraduate and graduate study Conclusion The ethical decisions made by accounting professionals will continue to be the basis for the integrity of the financial information generated by accounting professionals. Unethical decision making will remain the biggest challenge faced by the accounting profession, but it behooves all practitioners to understand that for each unethical decision made, the financial market's threatened and trust is broken.

Bibliography

Self Interest vs. Concern for others: What's the impact on management's ethic decisions: Michael K. Shrub, Frank Collins, Oscar Holz mann, andSuzzanne H. Lowensohn. March, 2005.
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Reference web Corporate greed vs. IMA's Ethics Code: Recent corporate financial scandals. Elizabeth M Haywood, CMA, CPA and Donald E Wy gal. November 2004.
Retrieved on May 21st from University of Phoenix online EBSCO database. Accounting: What the numbers mean. Marshall, Wayne W. McManus, and Daniel. Viele. Retrieved on 21st May, 2005 from web center view 0.