Ethical Issues in Management Accounting: A Case Study

Management accounting

Question 1
Ethical issues can be described as a problem or circumstances which oblige an individual to
have a choice between options that should be evaluated as ethical or unethical either correct
or incorrect (Crane and Matten, 2016). Further, for the success of the company, it is
significant for it to work ethically. As per the assertions of Davies (2016), it can be stated that
all employees of the company must function according to the pre-determined rules and
regulations of the organization.
The main problem faced by Lucia in the present case is a contradiction between personal
profit and responsibility towards the organization. Due to the same Lucia, accountant of
company Vroom Ltd is in the confusion that whether she should choose promotion of her by
deferring revenue or be responsible towards organization by ignoring the promotion. In case
she opts for the responsibility towards organization then she might lose the opportunity of
getting promotion and also the share in profit, which she might get if she agrees with the
instruction provided by Freda that is she has to defer revenues. In contrary to this, if she
selects to defer revenues then, in that case, she is unable of fulfilling her responsibility
towards the organization which will be unethical. It is very important for every employee of
the company to work in an ethical manner.
Question.2
No, Lucia will be no more ethical if she defers revenues as many expenses as possible. Since
for doing the same, she has to manipulate the accounts as well as apply window dressing in
books of accounts. Window dressing refers to activities which are undertaken by the
company prior to issuing a financial statement to enhance the appearance of financial reports.
Weiss (2014), specified manipulation of accounts refers to forge figures in financial
statements with the intention of reporting net income more or less in comparison to actual
figures. Window dressing and manipulation of accounts is done to show inappropriate
financial status in financial statements of the company. As in present case Freda, the manager
of company instructs Lucia to lower the profits of the company and accrue the expenses as
possible as she can so that the company can get the brand grant which is given to them by the
government. Since, if more profit is being shown by the company than in that case, the
government will not pay them the grant. But, it should be considered that the company should