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Ethics and Judgement Research Paper

Essay by   •  June 10, 2016  •  Research Paper  •  1,309 Words (6 Pages)  •  454 Views

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Introduction

Unethical accounting have always made it to the eyes of stock market watchers as well as have taken many reputed firms to making the headlines many a days, since late 1980s. This has been due to both fame and glory due to the much appreciated financial success or position achieved by the organization or the downfall of the organisation when they blew their cover for Fraudulent accounting statements. The importance of ethics and judgement can be clearly highlighted from the root cause analysis of the stock market downturn of 2002, also called the  Internet bubble bursting, which resulted in a three year stock market collapse.(Block, S., Hirt, G. and Danielson, B., 2011)

 The 20th century was flourished with “dot-com” companies which soared the attitude towards future of online commerce. The initiatives by many companies then, has indeed paved the way to how immeasurably internet has touched and influenced our lives today. But the 2000 stock market crash which resulted in a loss of almost $8 trillion of wealth and shook the very foundations of many multinational companies was hugely credited to the corporate corruption.  Lots of multinational companies had been drawing profits by engaging in illegal means and frauds. The accounts that they maintained had serious loopholes and the debts were not shown. (DeGrace, 2011). Hence following ethics and making the right judgement call, drives the finance and future of any organisation.

Ethics and Judgement: The Traits of an Individual Perspective

Ethics and judgement is not a matter of factual knowledge like the sciences and other various fields of study are. Rather it has more to do with taking the natural tendency one has to care about people and then place it to a professional or rational situation, and then make a judgement about the decision or action to be taken in the same, with the personal perspective of right and wrong.

Judgements are in-turn based on the ethics that you follow. The call of action or the decision you make is questioned by the ethics as, whatever is the decision made, what is the intention of the decision and does the decision benefit you or your any personal intentions. As humans we have the unique ability to reason our decisions and make arguments. However reasoning has a very little role in terms of ethics. Ethics are created mostly through intuition, and therefore don’t need to be thought out before making ethical judgements. However reasoning does indeed define each person’s ‘right’ and ‘wrong’ which forms the perspectives of different individuals. The personal ethics that a person has developed over years of professional practise and personal experience induces a balance of right and wrong. However when faced with a judgement to be made between personal benefits and what is ethically right, it depends on the individuals perspective and the ethics that the person has developed over the years.

Professional Accounting and Ethical Values

        Professional accountants play one of the most significant role in an organisations operating structure. An accountant gathers, analyses and prepares financial information that is crucial in assisting the decisions of the stake holders. Such financial reports are the reflections of the financial position of each firm. Certain major components of financial reports prepared by accountants are balance sheet, cash flow statement and income statement. It is based on these reports that drives the decision making and planning for the management, helps investors and creditors decide their next step with the organisation and so on. Financial reports are also mainly shared with the business community via various social media to put on air the success marked by the company.

“In the market-based world, financial reports are the primary source by which those who have been entrusted with private resources must periodically report both to those who own the private resources and to the general public. Proper preparation and content of financial reports are vital to the effective functioning and success of market-based economies. True, fair, complete, comparable, and transparent financial reporting is the goal to provide necessary information to investors for the best economic decisions and results.” (Garner, McKee & McKee 2007, p. 3).

The users of financial information range from employees and suppliers to banks, suppliers, investors and government bodies. Hence the reports which are of such crucial importance to all types of orgnaisation have to be done by applying all professional competancies as well as without compromising professional ethics. A professional accountant should not be biased or clouded with conflict of interest or by influence of others to override his/her duty to making the business judgement, else this would inturn affect the financial reports and hence the business decisions of the organisation as well, might end up in losing the loyalty and reliability the stakeholder or investor expects from the organisation, thereby impacting the company’s current and future business growth negatively.

Such an incident worth mentioning would be the internet bubble burst of 2000.The Dotcom market crash of 2000-2002, as it is also called, left a huge impact on the public standpoint to corporate accountability. Companies such as WorldCom reported over 9$ billion of incorrect or fraud financial entries on their income statements. Enron also declared bankruptcy after it became known that their accountants kept many of the financial information off the books. The company had more debt than most of their investors and lenders knew about.  In case of WorldCom, Global Crossing, and Adelphia also exhibited fraudulent financial statements. (Block, S., Hirt, G. and Danielson, B., 2011)

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