An Introduction to Accounting Theory : Assignment

Added on - 21 Apr 2021

  • 8


  • 2323


  • 9


  • 0


Trusted by +2 million users,
1000+ happy students everyday
Showing pages 1 to 3 of 8 pages
Accounting TheoryQuestion 1a)Based on the given situation, Joey (the accountant) faces the following ethical dilemmas.Upholding public interest or the interest of the organisationIn the given case, it is apparent that if Joey does not misrepresent the financial statementsof the organisation (i.e. Tube), then the banks would not extend financial assistance to thecompany and thus the company can potentially face bankruptcy. As a result, there wouldbe loss of jobs of many people and potentially his own also. However, if Joey does complywith Mary’s request, then his report would be misleading the bank into lending to acompany which is not financially sound. This could potentially lead to loss incurred by thebank if it is not able to recover the money.Integrity towards profession or Personal interestFailure to comply with Mary’s request could lead to loss of job. In that situation, Joeycould default on the outstanding mortgage obligations which could result in liquidation ofhis house. On the other hand, incorrect representation of financial position andperformance of the company could bring disrepute to the profession. Infact it couldadversely impact the relevance of profession considering the role of trust and integrity.This could hurt the future prospects of the accounting and audit professionals.b)Ethical egoism refers to a normative position in ethics whereby it is advocated that moralagents must act in their own interest or should serve self-interest. This concept is in sharpcontrast with ethical altruism whereby moral agents tend to have an obligation towardshelping others (Collins, 2012).For the given situation, if ethical egoism is to act as the decision making principle, thenJoey should act in a manner which tends to serve his own interest irrespective of whetherthe interest of other stakeholders is met or not. It is apparent that Joey’s self-interest isserved by complying with Mary’s request and thereby presenting a false report to the bankofficials. This would ensure that the company would get the bank loan and hence therewould not be retrenchments nor liquidation. As a result, Joey would continue to be paid
Accounting Theoryand not fired from his job. This will allow her to meet his mortgage obligations andmaintain the status-quo.c)It is imperative to first define the ethical decision in accordance with utilitarianism. As perthis ethical principle, it is expected that the moral agent should act in a manner whichtends to produce the “greatest good for the greatest number of people” (Ghillyer andGhillyer, 2012). For the given situation, it is apparent that there are two decisions namelyto falsify the financial performance of the company or the present the true picture of thecompany. The appropriate decision under utilitarianism would be one where the costbenefit analysis would be favourable.In case the report is falsified, the company would get the financial assistance and hencewould result in jobs being saved. Additionally, this would extend the benefit to therespective families of the employees who are offering their services to the companyincluding Joey. The cost under this option could be the potential loss than the bank wouldincur if the company is not able to repay the financial assistance for modernization.However, it might be possible for the bank to recover some of the money from liquidatingthe machines. Further, despite the default, the bank might not file bankrupt assuming thatthe exposure would be limited. Hence, the costs seem to be contained especially in theshort run.On the other hand, in case Joey decides the other alternative, in the short term, there wouldessentially be no benefit as there would be significant retrenchments along with potentialliquidation that the firm might enter into. Thus, significant number of jobs would be lostincluding his and this impact would extend to their families and also the economic system.For instance, in case of Joey, loss of job could result in loan default and hence liquidationof house.Considering the above analysis, it is apparent that the correct advice based onutilitarianism would be to falsify the report to the bank so that the much needed financialassistance for modernisation is provided to the company.d)In this case, the advice has to be tendered based on deontological ethics. The core belief ofthis ethical theory is that people should not be used as means but rather an end in itself.
You’re reading a preview
Preview Documents

To View Complete Document

Click the button to download
Subscribe to our plans

Download This Document