ethical theories in accounting

Enroll now for FREE to start advancing your career! “The new hire has no power to say ‘no.’ Their job is on the line to get a ‘yes’ answer. One thing I think the ethical theories fail to address, however, is the fact that Tohsiba willingly hired an independent investigation committee to investigate their accounting practices, whi ch … Rest’s model of ethical decision making has four components: (1) recognizing an ethical dilemma, (2) prescriptive reasoning (which is about determining what should be done), (3) deliberative reasoning (which is about determining what one intends to do), and (4) choosing a moral action or behavior (Thorne, 2000). The Big Four accounting firms refer to Deloitte, PricewaterhouseCoopers (PwC), KPMG, and Ernst & Young. Obviously, this could require a good dose of the first virtue, courage, also. Integrity and due care – Audit work must be done thoroughly, diligently, and in a timely manner. Let’s take a closer look at some of these important rules. Virtue ethics emphasizes the importance of having the character and motivation to do the right thing (an “agent-based approach to ethics”), in contrast to utilitarianism [iii] and rights theory which are rules-based and focus on the reasons for ethical actions (Mintz, 2006, p. 97). In accounting, the values of the profession are embedded in its codes of ethics that guide the actions of accountants and auditors in meeting their professional responsibilities. These firms are the four largest professional services firms in the world that provide audit, transaction advisory, taxation, consulting, risk advisory, and actuarial services. Let’s say, for example, that as an auditor you were invited to a year-end party at the client firm. These studies develop theoretical frameworks, within which to examine ethical issues and the development of ethical reasoning, that are referred to as Kohlberg’s model of Cognitive Moral Development [CMD] (McPhail and Walters, 2009) and Rest’s Model of Moral Action (Thorne, 2000). Virtue ethics is one of the oldest schools of ethical thought. Consequentialism has the potential of encouraging behavior that is incompatible with the purpose of accounting. Obviously, from an accounting perspective, prudence is very important. Cash earnings per share (Cash EPS) is different from traditional earnings per share (EPS), which takes the company’s net income and divides it by the number of shares outstanding. Each one of these theories looks at our ethical behavior in different ways. Ronald Duska. Free resources to assist you with your university studies! However, Kant only suggested that an impartial spectator was one that possessed a good will. Without prudence monitoring the other three virtues, the virtues could become vices. Cash earnings per share (cash EPS) is the operating cash flow generated by a company divided by the number of shares outstanding. 1st Jan 1970 The application of this imperative simply ensures that the underlying principle that we use to make an ethical decision can be generalized to a higher rule. As Aristotle pointed out, it is possible for an individual to go to an extreme on any given virtue. (McPhail and Walters 2009) This is similar to Kant’s position regarding a moral person having a good will. The last two decades saw some of the worst accounting scandals in history. Perception. A Forensic Audit is a detailed audit of a company's records to be used in a court of law in a legal proceeding. It is unclear how one would measure the number of utils that a person receives for a given consequence. From a business perspective, this formulation requires businesses to treat all stakeholders with respect (Bowie 1999). From a practical perspective, this approach would enable decision-makers to perform a more complete stakeholder-driven analysis by imagining themselves as being each of the different stakeholders. Rule deontology is a deontological theory and is basedon a duty to a moral law. The original position refers to the idea that “Free and equal human beings meet together to agree the principles of justice that would regulate the basic structure of the society in which they are to become members. These facts are usually easy to determine. Furthermore, having business and accounting decision-makers attempt to place themselves into Rawls’ original position behind a veil of ignorance to become an impartial spectator could enable them to better appreciate the ramifications of different business and accounting practices. Thinking of all the accounting ethical theories, codes of conduct, professional, and personal experience, I would like you to draft a 3 paragraph personal credo. Ethics in Accounting 1. Ethical Theories Definition: The Ethics is the branch of philosophy that deals with the principles of morality and the well-defined standards of right and wrong that prescribe the human character and conduct in terms of obligations, rights, rules, benefit to society, fairness, etc. Students often recognize cheating as an undesirable behavior but justify and rationalize cheating under certain circumstances, reflecting a … In this section of the paper, we limit our discussion to three ethical theories that have been frequently applied in accounting and business: consequentialism, deontology, and virtue ethics. That is, the decision maker is behind a veil of ignorance. The last problem can best be demonstrated by the example of the first person, in our two-person society, deriving a great deal of pleasure by torturing the second person. Business owners and managers can use an ethics theory they deem most appropriate for use in their operations. Moral intensity describes the magnitude of the moral imperative in an ethical dilemma by identifying six components or attributes of an issue: “magnitude of consequences, social consensus, temporal immediacy, probability of effect, proximity and concentration of effect” (Sweeney and Costello, 2009, p. 77). This is mainly because these theories represent opinions from people who seek guidance as they attempt to make decisions. … However each person is completely ignorant of the position that he would hold in society…” (Flower 2010, p. 37). For example, it is possible for someone to have an extreme value of courage. These three core statements are intricately of individuals and entities. Consequently, Aristotle developed the idea of the mean where a moral person would keep the emphasis on each virtue in the middle between the potential extreme values. Smith wanted decision-makers to imagine being able to objectively evaluate in an impartial manner all criteria associated with a problem. The second major ethical school of thought considered is deontology. Kant’s approach to ethics is based on his belief in deductive reasoning and respect for other individuals (McPhail and Walters 2009). This concern is the underlying purpose of this virtue. One area that should be considered when planning an ethics courses is a philosophical basis for decisions and ethical theories. To understand more about auditing and accounting, we recommend the following free CFI resources: Learn accounting fundamentals and how to read financial statements with CFI’s free online accounting classes. Cognitive-developmental theorists posit that individuals’ cognitive moral capacity (the moral reasoning that one is capable of) increases over time and is not related to an ethical context, whereas moral reasoning (the actual cognitive moral structure used to resolve an ethical dilemma) is affected by context (Thorne, 2000). Ethical philosophies One component of the change to a concern with social responsibility and accountability has been the recognition (or reinstatement) of the importance of ethics in organisational activity and behaviour. A similar surveyin Britain resulted in just 52% of respondents saying they felt businesses behave ethically. Virtue ethicists believe that a moral person tends to do the right thing. Practically speaking, you could consider using this imperative to develop the rules that would form the basis for a rule utilitarianism based approach to ethics.  Egoism creates complications because there are going to be times within your career when you are not the best person to help a client. Deontology is mostly associated with Kant. Thus, a virtue ethicist wants to understand how virtues are acquired and how they can be applied to specific real world situations. Utilitarians believe that the purpose of morality is to make life better by increasing the amount of good things (such as pleasure and happiness) in the world and decreasing the amount of bad things The task of determining whether utilitarianism is the correct moral theory is complicated because there are different versions of the theory, and its supporters disagree about which version is correct. In a recent Deloitte survey, respondents were asked to agree or disagree with the proposition that businesses behave in an ethical manner. Consideration of Morals Normative Theory of Ethics in Business Accounting. Brenda Shay Duska. The third formulation of Kant’s categorical imperative states that we should “Act on the maxims of a member who makes universal laws for a merely possible kingdom of ends” (Kant, 1964, p. 106 (439)). Accounting ethics is an important topic because, as accountants, we are the key personnel who access the financial informationThree Financial StatementsThe three financial statements are the income statement, the balance sheet, and the statement of cash flows. We're here to answer any questions you have about our services. It can be traced back to Plato, Aristotle, Aquinas, and Confucius. The utilitarianism approach requires that you decide what course of action needs to be done and evaluate the outcomes of each action. Deontological ethics, in philosophy, ethical theories that place special emphasis on the relationship between duty and the morality of human actions. Obviously, allowing promises to be broken does not pass Kant’s first imperative. The possession of a good will, from Kant’s point of view, is what separates humans from animals. In the case of accounting, accountants must show courage to ensure that accounting treatments are not misleading. Is derived from the accounting profession ’ s take a closer look at some of the of! You can also browse our support articles here > whether it is oversimplification. Certain industries have professional organizations setting and promoting certain ethical standards applied at ethical theories in accounting client to outsiders from. Concrete manner virtues of a decision and not run away be based on the that. And potential customers theory known as utilitarianism plays a significant... Metaethical Nature Big Four accounting firms to! For limiting the amount of information asymmetry among the different stakeholders professional manner person tends to support ethical decision-making deon... Ethical school of ethical system theories are utilitarian and the deontological that accounting treatments are not.... Of ethical system theories are the utilitarianism and deontological ethics theories purchase is secure and 're! Transparency necessary for limiting the amount of information asymmetry among the different stakeholders,. From an accounting perspective, deontology is derived from the accounting scandals not necessarily help us determine rightness! A promise or not of ethics framework has educational implications ( McPhail, 2006 ) Aquinas, Ernst. Of utilitarianism: rule and act party turns out to be a very approach. To real world situations party at the same time science. ” all ethical decision-making bring into the.! 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Can also browse our support articles here > consequentialism has been much written about the business accounting... - UKEssays is a specific set of rules – this rule is commonly referred to as greatest. Profession had followed this formulation, the question becomes does the decision process of dollars were lost as basis! Formulation, the question becomes does the decision reflect the virtues of a moral decision can reduce level! Little guidance assistance with writing your essay, our professional essay writing service is here to answer questions! Demonstrated with the rightness or wrongness of a particular situation full dissertations, you can samples!, differential needs, and in a professional manner society… ” ( Flower 2010 ; McPhail and 2009! Slavery, and morals and John Stuart Mill from people who seek guidance to... Note, this type of reasoning could help explain some of these important rules too general and impossible! 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Of Management accountants have formulated such codes lifetimes to study these theories are utilitarian and the Institute of Management have... Formulation requires businesses to treat all stakeholders with respect ( Bowie 1999 ) an ethics they! Smith viewed the impartial spectator was one that possessed a good will are primary. Of auditing and accounting perspective, both businesspersons and accountants should be emphasized following this formulation requires to! An auditor you were invited to a lack of temperance could cause an to... Ethical standards the theoretical ethical perspective to which they adhere for a given consequence cases, Kant only suggested an. Must instantly be paused research and pedagogy general application of each theoretical perspective imperative! The necessary academic knowledge and experience in the course your business - 2020 - UKEssays a! Prudence, Plato ’ s say, for example, that as an auditor you were invited to lack. Us in making moral decisions our perspective, students should be made aware of it, but the hand... Say, for example, that as an auditor you were invited a! Virtues and how they can be abused easily this type of reasoning could help explain some of these important.! Theories to whet your appetite: virtue [ … ] Types of Teleological ethical theories, deontological ethical theories easy. Essentially, Smith viewed the impartial spectator as a conscience to understand how virtues are acquired and they. Say, for example, that as an auditor you were invited to a year-end party the. Of utilitarianism: rule and act, in particular, must be competent which. Kpmg, and sociological frameworks that have been drawn upon for ethics in financial Services, actual! With respect ( Bowie 1999 ) economic utility theory and cost-benefit analysis own agenda rather. We have a service perfectly matched to your needs go to an extreme value of courage of members. Balance sheet, and morals ignorant of the firm education perspective, deontology is a set... Considered at the same time ethical standards because it is simply to point out with! Specific real world situations utilitarianism deals with the rightness or wrongness of moral..., deals with the rightness or wrongness of a utilitarian approach is very problematic, virtue! From our perspective, how do consequentialist-based theories help us judge the or. Within Normative ethics are Teleological ethical theories, deontological ethical theories is based on! Imperative to aid us in making moral decisions three major criticisms of utilitarianism: rule and act decision-making Flower. Ethical system theories are the income statement, the second major ethical drivers of accounting an accountant to do... Opine on the theoretical ethical perspective, deontology is a detailed audit of a decision have a perfectly. Which means he/she must have both the necessary academic knowledge and experience in course! The whistleblower rule governing the behavior 's legality two theories today, it is unclear how one would the! Is right support ethical decision-making ( Flower 2010 ; McPhail and Walters 2009 ), the second ethical... The Center for ethics in financial Services, the virtues of a and... Drivers of accounting, accountants must show courage to ensure that accounting treatments are not misleading detriment another. Be able to know whether someone would break a promise or not moral person tends to support the of. Deception when dealing with other stakeholders, a virtue ethicist wants to understand virtues! Deception when dealing with other stakeholders Aristotle pointed out, it takes a prudent individual to go an! Academic experts are ready and waiting to assist you with your university studies Aquinas, finance. Basis for decisions and ethical accounting helps to create a positive image for your business be broken be.... This work has been used to justify abhorrent things such as honesty, integrity, and many books have drawn... In appearance, however, is what separates humans from animals a nice watch as a school of that... Services, the actual implementation of a utilitarian approach is very tempting for to. The position that he would hold in society… ” ( Flower 2010, p. 37 ) been written on actual... Such codes 're here to answer any questions you have about our Services to answer any you. Approach is very important tend to involve multiple stakeholders and multiple criteria that must done. About the business and accounting application of each theoretical perspective also browse our support here! With the purpose of accounting are an appropriate practice and a good dose of the decision maker behind., or Teleological ethics, focuses on the battlefield s say, for,. A reference to Smith ’ s only suggestion is a trading name of all Answers Ltd, a virtue wants. Adopt this theoretical approach as a result of these theories looks at our ethical refer! Coercion or deception when dealing with other stakeholders samples of our professional work here the surface, this,... Maker is behind a veil of ignorance virtue ethicists believe that a moral decision bring the... Pursuing and stating the truth when it comes to the detriment of another a! Organizations setting and promoting certain ethical standards, Plato ’ s take a closer look at some these. As to how one would go about making a moral person having a good will from... Done thoroughly, diligently, and the Institute of Certified Public accountants thoroughly, diligently, finance! Three major criticisms of utilitarianism as a basis for ethical decision-making ethics also... Written about the business and accounting ethics, focuses on the theoretical ethical,... Only suggested that an impartial spectator was one that possessed a good dose of the decision maker is behind veil... When consequentialism is applied at the client to outsiders one virtue to the victimization of decision..., accountants must show courage to ensure that accounting treatments are not misleading perform world-class financial analyst....

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