Ethical Dilemma in Accounting

This article discusses the three major ethical dilemmas faced by accountants in the field of accounting and their impact on the public and the image of the firm. It explores the violation of accounting principles, the dilemma of being a whistleblower, and the omission of financial records. Solutions and the fundamental principles affected are also discussed.

0Running head: ETHICAL DILEMMA
ETHICAL DILEMMA
Name of the Student
Name of the University
Author Note

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Introduction
Ethicality needs to be considered an essential part of any business and the different
organizations who would like to attain success in the long run, would be required to ensure that
they take up ethicality on a serious note and are successfully able to lead the organization in the
right manner (Bowie 2017). The individuals who are involved in the field of accounting can be
considered to have a general responsibility towards the public on a whole because, it is in the
hands of the accountant to provide the right kind of information to the different investors which
would then allow them to make the correct decisions regarding their investment. Hence, as these
individuals greatly rely on the accountants for the information, there exists a considerable
confidence in the behavior of the accountants. It is for this reason, that it is important for the
accountants to prevent the different fraudulent activities so as to gain public trust. Hence, the
primary objective of the essay is to outline the three major ethical dilemmas which are generally
faced by the accountants and the manner in which this tends to have an impact on the overall
public and the image of the firm in the long run.
Ethical dilemmas
An accountant has a responsibility towards the interest of the public and this emphasizes
integrity, due care as well as objectivity. Hence, in this section, three different cases of ethical
dilemma which an accountant might face shall be described which shall then be analyzed against
the ethical code of conduct as well as integrity aspects.
Ethical Dilemma case 1
The first ethical dilemma which shall be discussed is the common ethical dilemma which
involves the management instructing a particular subordinate to record the transaction in an

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incorrect manner (Ghahramani, Soleymanpor and Fatahi 2016). For instance, in order to avoid
any payment or obligations, the management instructs the accountants to record it either a day
later or earlier. For instance, a company which has the January to December calendar, signs
contracts for the services and they are signed on the first of the month and are for the period of a
year. The principle of accounting requests the company to record the revenue for the contract for
a particular year only and the remaining is required to be recognized on the next year financial
statements. However, as per the instruction of the management, the employee records the entire
payment and revenue in the same year to boost the revenues(Trevino and Nelson 2016). They
engage in this, because they are required to achieve a bonus based on the revenues and the
subordinate receives recognition in the upcoming review.
Why is it an ethical problem
The particular problem can be considered to be associated with the ethical dilemma can
be stated to be associated with the problem of deviation from the accounting principles. The
principles of accounting state that, the recording of the transactions are required to be made in
accordance with the different principles of accounting and that the revenue is required to be
analyzed as per the associated time frame (Loeb 2015). However as the transaction is being
recorded entirely for the month of December. The problem can be considered to be a violation of
the accounting principles.
Affected parties
The different parties which will be affected can be stated to be the parties like the
investors and the general public. This is being stated because, as the accounting principles are
not being followed, the investors will get an incorrect image of the firm and for this reason, the
investment decisions as made by them may not be beneficial for the overall welfare of the firm.

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Manner in which they are affected
The manner in which these investors may be affected can be stated to be the false
information and incorrect investment decisions. As they will get the false information about a
company`s actual standing, they will be under the belief that the company has been performing
well whereas in realty it has not been performing well.
How would this tarnish the scope of accounting
The different investors and stakeholders who are present in the organization tend to see to
it that, the accounting reports serve as a primary source of information for their investments and
as this dilemma is leading to the formation of the incorrect accounting reports, the trust in the
reliability of the accounting reports will not be sustained (Ghahramani, Soleymanpor and Fatahi
2016).
Effect on public interest
The main effect of this dilemma on public interest will be that the different stakeholders
will lose out on the trust in the company and the overall brand name of the firm may also go
down considerably. The particular decision which the different subordinates are being forced to
undertake may be beneficial for the overall firm in general but it will not be good for the overall
interest and the future of the people.
Solution
The ethical dilemmas form a common part of the organization and in order to curb the
desire which the management has to practice aggressive accounting techniques and to ignore the
ethical behavior in the workplace, the accountants should be provided with a special educational
courses in the field of ethics. Moreover, there also exist certain whistleblower hotlines in certain
companies which encourage honesty at the workplace and support the overall integrity.

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Fundamental principle affected
The fundamental principle which has been devoured in the case of the Management
forcing the subordinates to undertake decisions and write off the incorrect revenue in the firm
can be stated to be associated to Professional competence and professional behavior. This
reflects that, as the actions being undertaken by the different members of the firm, are against the
overall professional behavior hence, this dilemma can be stated to be deviating the principle of
professional conduct.
Threats to compliance
In the case of the management showing domination over the junior employees, the threats
to compliance for the fundamental principles can be stated to be Intimidation and self-interest.
The senior employees of the firm are intimidating the junior accountants and forcing them to
write the books in such a manner (Ferrell and Fraedrich 2015). In addition to this, the managers
are acting out of their own self-interest which harms the overall accounting ethicality in the firm.
Ethical dilemma case 2
The second ethical dilemma which may be faced by the different businesses can be stated
to be associated with the dilemma relating to the accountant as a whistleblower. This means that
any accountant in an organization may be faced by an ethical dilemma relating to the discovery
of an accounting violation as per the financial accounting standards board. Hence, it lies the
overall duty of the accountant to report any such violation which is taking place but the dilemma
arises during the ramifications of the reporting. This is because, here the accountant stars acting
as an employee of the company and tends to consider the overall long term future of the
company. In line of this, he may also be inclined to ensure that, the Government needs to review
the financial records of the company, and the bad press which may be caused by it may affect the

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overall operations of the firm Moreover, it may also lead to the layoff of the different employees
and the management could be faced by criminal prosecution which may lead to prison fines and
heavy fines.
Why is it an ethical problem
The given problem is being considered to be an ethical dilemma because it is violating
the overall principles that accounting is based on. As an accountant, the employee would be
required to ensure that he is successfully being able to come up with considerate solutions and
identify any issues and related problems which take place (Shaw 2016). However, as the
accountant is acting in the favor of the firm and not undertaking actions which would be rightful
in nature, the given scenario can be stated to be one relating to the overall ethical dilemma.
Affected parties
The affected parties in the particular scenario can be stated to be the investors and the
government. The organizations operating in the business environment would be required to take
considerate decisions which would be in favor of the different employees and the public.
However, as the firm is not doing so it will lead to considerate incorrect move on the side of the
employees and the overall objective of the firm towards the society.
Manner in which they are affected
The manner in which these investors would be strongly affected will be stated to be in the
form of incorrect decision making. The different employees as accountants would be required to
fulfill their overall duty which will enable them to present the statement in the right manner and
inform the different authorities of any fraud activities. However, in line of this, the employees
would not engage in this, and in line of this, the investors are not being able to take the correct
decisions.

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How would this tarnish the scope of accounting
This would tarnish the scope of accounting by not reflecting the true nature of accounts
and by encouraging the firm to undertake the different wrong decisions (Pergola and Walters
2017). Accounting needs to reflect the true nature of the books and in line of this, it becomes
considerably important for the employees and the different accountants as present to inform the
standards regarding the violation which takes place in the work.
Effect on public interest
The public interest shall be affected in the form of the dishonesty which is being
portrayed by the firm in the long run. The public will not be willing to undertake the confidence
in the firm anymore and may be required to change their opinion.
Solution
As a solution to the given issue, the organization would be required to ensure that they
engage in continuous auditing, of the operations of the firm which would then go a long way in
helping the firm to attain overall success.
Fundamental principle affected
In the present scenario, the fundamental principle which is being affected can be stated to
be relating to the principle of integrity and confidentiality. The accountant would be required to
portray integrity in the overall operations as they may be largely required to ensure that all their
actions are undertaken in the favor of the firm (Ferrell and Fraedrich 2015). Moreover, the
confidentially principle is also being affected because, the accountants are informing the firm
about the mistake instead of reporting against them.

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Threats to compliance
The major threats can be considered to be familiarly. As the accountant is associated with
the different operations of the firm, they believe that they are bound to serve the company in the
right manner and hence, do not comply by the law.
Ethical dilemma 3
The third ethical dilemma which can be faced by the different accountants in the
profession of accounting can be stated to be relating to the issue of the omission of financial
records. In line of this, a corporate officer or any other executive may as the accountant to omit
or leave out certain transactions and financial figures as it may paint the business in a bad light
(Duska, Duska and Kury 2018). The omission, although may not appear to be a breach in the
ethics as it does not bring in any manipulation of the records, however, it is crucial that, the
accountant does not deliberately fall into the given trap.
Why is it an ethical problem
The given problem is often considered to be an ethical dilemma because, in such a
scenario the different accountants are forced not to reflect all the transactions which are being
undertaken by the firm (Shaw 2016). This does not reflect the true nature of accounting position
and the financial standing of the firm.
Affected parties
The affected parties in this scenario can be considered to be the stakeholders, who are
investing in the firm in the long run. These stakeholders need to be infirmed in the right manner
about the different standings and financial performance of the firm.

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Manner in which they are affected
However, as these parties are not involved in the correct knowledge which must be
provided to them, they often end up taking the wrong decisions and this then leads to a loss on
the side of the investors.
How would this tarnish the scope of accounting
This incident will further tarnish the scope of accounting by not leaving any scope for the
investors to take reliable decisions (Crane and Matten 2016). In line of this, it can be considered
crucial for the firm to ensure that, they provide all the formation required for the stakeholders.
Effect on public interest
In line of public interest, the particular ethical dilemma may bring upon a bad name on
the firm and may influence the different employees to undertake actions which may restrict their
overall scope and may enable the audience to lose out on the interest.
Solution
A solution to the problem can be understood to be the regular compliance and auditing. In
line of this, it can be rightfully mentioned that, the firm needs to undergo regular auditing, which
will enable the firm to find out the flaws in the overall accounting standards and ensuring that
they are complied with accordingly.
Fundamental principle affected
The fundamental principle which has been impacted can be understood to be the principle
of Professional care and due diligence (Cameron and O'Leary 2015). The organization is
required to ensured that they are undertaking decisions based on the overall professional

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objectives of the firm and undertake due diligence. However, the firms who are affected by the
ethical dilemmas will violating these principles.
Threats to compliance
The primary threat to compliance in this case can be stated to be relating to Intimidation
as well as Familiarity. As the employees are members of the firm, they are often under
Intimidation of the management and affected by Familiarity which leads to the dilemma.
Conclusion
The primary purpose of any ethical guideline is not to provide an exact solution to the
different problems as present but to assist in the long run decision making procedure. The
guidelines as present aim to guide the different accounting professionals in order to direct them
towards the correct ethical behavior as present. The different individuals as present in the
accounting profession are expected to deal as per these guidelines and undertake the right
decisions as present. The essay outlined the different ethical dilemmas which are generally faced
in accounting and also outlined the process to deal with the same.

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References
Bowie, N.E., 2017. Business ethics: A Kantian perspective. Cambridge University Press.
Cameron, R.A. and O'Leary, C., 2015. Improving ethical attitudes or simply teaching ethical
codes? The reality of accounting ethics education. Accounting Education, 24(4), pp.275-290.
Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and
sustainability in the age of globalization. Oxford University Press.
Duska, R.F., Duska, B.S. and Kury, K.W., 2018. Accounting ethics. Wiley-Blackwell.
Ferrell, O.C. and Fraedrich, J., 2015. Business ethics: Ethical decision making & cases. Nelson
Education.
Ghahramani, B., Soleymanpor, M. and Fatahi, R., 2016. Ethics in accounting and
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Loeb, S.E., 2015. Active learning: An advantageous yet challenging approach to accounting
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Pergola, T.M. and Walters, L.M., 2017. Ethics in the Accounting Curriculum.
Shaw, W.H., 2016. Business ethics: A textbook with cases. Nelson Education.
Trevino, L.K. and Nelson, K.A., 2016. Managing business ethics: Straight talk about how to do
it right. John Wiley & Sons.