Exploring Ethical Dilemmas and the Evolution of Accounting Practices

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Professionalism & Ethics in Accounting
and History of Accounting
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Table of Contents
Question 1:.......................................................................................................................................3
a):.................................................................................................................................................3
b):.................................................................................................................................................4
c):.................................................................................................................................................5
d):.................................................................................................................................................6
e):.................................................................................................................................................7
Question 2:.......................................................................................................................................8
a):.................................................................................................................................................8
b):...............................................................................................................................................10
References;....................................................................................................................................11
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Question 1:
a):
John is working as a senior accountant in Venus and facing several ethical issues related to
personal benefit and job role obligations. Due to significant interest in other company, managing
director of the company is asking for the change in recommendations that are provided by John
in respect of new overhaul contract. Here, John is facing the followingethical issues:
Issues related to basic ethics:
A person who is working for an organisation is liable to assure a high level of integrity,
objectivity and trustworthiness in actions. As John is working as a senior accountant and handing
all the financial issues of the new overhauling project, he is liable to maintain honesty and
fairness in cost determination, supplier assortmentand contractorselection (Oster 2019). As
provided in the case study, the managing director stated that contract should be provided to the
Zirconium Ltd in which she has a significant personal interest. Here, John is facing ethical issues
related to fair working and honesty because he has to select among personal benefits and
organisational responsibilities.
Issues related to decision-making:
Inthe given situation, John has to makethe selection of the best contractor for overhaul activities.
As per the principle of decision-making, every employee has the right to make bias-free decision
to complete his job responsibilities so that well-attainment of organisationalgoals can be
ensured(Sherman, 2019). In the provided case, the managing director is trying to influence the
decision of John for the personal benefit which is creating ethical conflict for John.
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b):
From the concept of egoist approach, ethics and morality should be judged on the table of
individual interest. In more elucidated manner,the benefits of one individual are outweighed
against the benefits of others. For example, the decision of one person will be assumed ethical
under egoist approach if it is providing benefits to decision-maker and ignoring the interest of
others (Westacott, 2019). If the decision of one person is providing some advantages to
otherpeople also, it will be assumed side effect.
In the current case, John has to makea decisionregarding the selection of overhaul contractor. He
is facing a conflict situation because the matter is related tothe completion of organisational
responsibilities and personal benefits. If the egoist approach is adopted by John, all the
recommendations provided by the managing director will be accepted and the contract will be
provided to Zirconium Ltd in which managing director has a significant personal interest.
Egoist approach says that decisions should be made for the personal welfare and interest of
others can be ignored for the same. If someone other is receiving benefits in this situation, it is
not against the ethical principles (Westacott, 2019). Here, acceptance of recommendations
provided by the managing director will ensure the protection of the interest of John in Venus.
Similarly, it will be beneficial for Sophie(managing director) but harm organisational interests.
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c):
Yes, following of utilitarianism concept will change the decision that has been taken by John in
the current situation. This concept refers to the welfare of maximum people by accepting harm
for some persons (Brown, 2019). In respect of business entities, a decision that is beneficial for
the whole organisation or major people will be assumed ethical under utilitarianism theory by
ignoring the negative impact of the same decision on fewer people.
In the currentstate, John is facing a conflict situation of personal interest and professional
competence because key managerial persona is forcing him to change the decision. If the concept
of utilitarianism is adopted, suggestions provided by the managing director will be ignored and a
decision will be made by considering the welfare of the whole organisation.
Through the rejection of suggestions that are provided by the managing director, the overhauling
project can be completed by spending fewer resources. Similarly, Thermatic Ltd that is selected
by Johnis offering more work quality which will be beneficial for the wholeorganisation
(Euvolution, 2016). Here, the interest of John andmanaging director are going to be ignored for
the wellness of organisational welfare and the same is accountable with utilitarianism approach.
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d):
The concept of deontological ethics states that ethical decisions should be based on the set of
accepted rules to assure the bias-free decision-making. As per this approach, a decision will be
assumed ethical if it is based on a series of accepted rules by ignoring the positive or negative
impact on people(Brown, 2019).
If John considers the model of deontology for ethical decision-making, all the impacts on
personal or public interest will be ignored and a decision will be made on the basis of applicable
rules. In this situation, a detailed analysis of contract terms that are offered by both companies
Zirconium Ltd and Thematic Ltd will be performed and the best option will be selected without
considering a threat to personal benefits and managerial relations. As Thermatic Ltd is looking
more suitable, the contract will be provided to this company.
Contract to Thermatic Ltd is a good decision which is accountable with the concept of
deontology approach. This approach ignores the impact of the decision on any party and refers to
the decision-making under established rules(Brown, 2019). As the current decision of John is
made as per established rules and impact on related parties are ignored, the decision is
accountable with deontology approach.
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e):
According to the circumstances of the provided case, adoption of deontology ethics theory will
be most suitable for John. This theory refers that a decision will be assumed ethical if it is made
on the basis of pre-established rules and free from the bias of impact on related parties (Brown,
2019). Under this concept, the overhauling contract will be provided to Thermatic Ltd because it
is offering the best quality services atlow prices.
Following this approach will ensure integrity and honesty in working environment and, protect
the interest of John from threat-full situations. For example, the selection of the wrong company
may create problems for the companyand justification will be demanded to John. Selection of the
right company will save costs and deliver sufficient benefits to the company.
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Question 2:
a):
Accounting:
Accounting is a branch of financial management that is related to the recording, classification
and assessment of financial transactions so that appropriate reporting documents can be
prepared. For modern businesses, it is a necessary practice to comply with legal regulations and
manage the business.
Historical view:
History of accounting is older more than 400 yearsand several changeshaveoccurred in
accounting regulations over the period. In the 18th century, accounting practices were applicable
without regularity obligations so there were several diversified issues associated with
accountingpractices.
History of unstructured accounting practices is not determinable but the base of modern
accounting system was developed in the 18th century through the adoption of double-entry
accounting arrangements. Before the development of the double-entry system, unstructured
accounting which isalso known as the single-entrysystem was applicable.Basic concepts of
double entry accounting system had been developed by the Italian traders and improved by the
Vatican (Paris, 2016). The approach of double entry accounting system refers that each
transaction has an impacton two different accounts so each debit transactions should be recorded
with a credittransaction. The second assumption of the double entry accounting system refers
that total assets held by a business will be equal to the balance of total debts.
With the starting of worldwide globalisation and ending of goods based economy inthe
19thcentury, industrial managers were feeling a lack of diversified but systematic accounting
regulations to ensure integrity. In the earlier years of the 19th century, several developments had
been taken placed in accounting concepts with the establishment of ICAE. During the middle
years of the 19th century, the significant recession had been experienced by the large economies
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so the decline in reporting standards was identified by the accounting professionals. In 1934,
GAAP regulations were issued to increase the compatibility among financial statements (Iasplus,
2019). At the same period, Company regulation Acts were issued by regulatory authorities of
different countries which were starting of a newera in accounting.
From cash to accruals:
Historical accounting practices were based on the cash concepts in which all the transactions
were recorded on receipt and payment basis. With economic developments, the complexity of
business transactions had been started to increase so new concepts of accrual accounting were
developed and adopted by the business managers (Paris, 2016). In accrual accounting,
transactions are recorded on the basis of events instead of cash transactions.
Development of Modern accounting practices:
During the period of 1973 to 2001, international accounting standards were dispensed by the
IASB board. In 2001, all responsibilities of the IASB board were overcome by the committee of
international accounting standards (IASC). With this change, all previously issued accounting
standards were accepted as the IFRS reporting framework after required changes (FASB, 2019).
Due to the pressure of globalisation and accounting based scams, it was identified that
comparability among financial statements of different corporations is necessaryand so
regulations of IFRS has been adopted by different countries with some modifications. In 2001,
IFRS 1 has been issued which provides detailed guidance for the reporting of financial data. it
has been adopted by major countries with some specific alterations.
Findings:
From the above explanations, it can be said that current accounting practices are the result of
continuous improvement. It is identified that uniformaccounting practices are necessary to
increase the comparability among financial disclosure of different organisations.
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b):
Accounting is a vital part of the economy which helps in efficient management of financial
resources. From the analysis of the history of accounting practices and regulations, it can be said
that accounting is socially constructed. For example, it is identified that coinage was developed
in Rome and Greece cities in 630 BC. At the same time, accounting concepts were focused on
the management of transactions related to trades and temples (Unegbu, 2014). It was the time
when single accounting systems were followed to record the financial transactions. During the
starting years of the 18th century, several types of problems were faced by the traders in
accounting so the concept of double entry system was developed by the Italian traders. All these
findings are enough to conclude that development of accounting concepts is based on the social
needs so accounting concepts are socially constructed (Akinyemi, et. al., 2015). Following facts
are sufficientto conclude that accounting regulations are socially constructed;
 IFRS regulations:
In recent years, several businessscandalswere experienced by society and large amounts were
sacrificed by the stakeholders. Study of such scandals is proved that efficient and
uniformaccountingpractices are necessary to support ethical working in trade entities. After the
identification of these necessities, IFRS regulations have been issued and adopted by the
governing authorities so that the threat of scandals can be eradicated.
 Accrual accounting:
Traditionally, accounting was based on cash assumptions so all transactions were recorded on
receipt and reimbursement basis. With the increment inbusiness complexity, the accrualconcept
of accounting was developed to improve the relevancy of accounting statements (Unegbu, 2014).
These conclusions are enough to understand that changes in accounting concepts are accountable
with social requirements and the same is proving that accounting changes are socially
constructed.
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References;
 Akinyemi, B., Okoye, A. E., &Izedonmi, P. F. (2015). History and development of
accounting in perspective. International Journal of Sustainable Development Research, 1(2),
14-20.
 Brown (2019). A Framework for Making Ethical Decisions | Science and Technology
Studies. [online] Brown.edu. Available at: https://www.brown.edu/academics/science-and-
technology-studies/framework-making-ethical-decisions [Accessed 26 Mar. 2019].
 Euvolution (2016). The Differences Between Utilitarianism & Ethical Egoism | Prometheism
Transhumanism Post Humanism. [online] Euvolution.com. Available at:
http://www.euvolution.com/prometheism-transhumanism-posthumanism/the-differences-
between-utilitarianism-ethical-egoism/ [Accessed 26 Mar. 2019].
 FASB (2019). Accounting Standards Effective on January 1, 2019. [online] Fasb.org.
Available at: https://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1176171442438
[Accessed 26 Mar. 2019].
 Iasplus (2019). Adoption of IFRS by country. [online] Iasplus.com. Available at:
https://www.iasplus.com/en/resources/ifrs-topics/adoption-of-ifrs [Accessed 26 Mar. 2019].
 Oster, K. (2019). List of Ethical Issues in Business. [online] Smallbusiness.chron.com.
Available at: https://smallbusiness.chron.com/list-ethical-issues-business-55223.html
[Accessed 26 Mar. 2019].
 Paris, D. (2016). History of accounting and accountancy profession in Great Britain. Journal
of Accounting and Management, 6(1), 33-44.
 Sherman, F. (2019). List of Ethical Issues in Business [online] Bizfluent.com. Available at:
https://bizfluent.com/list-6850278-list-ethical-issues-business.html [Accessed 26 Mar. 2019].
 Unegbu, A. O. (2014). Theories of accounting: evolution & developments, income-
determination and diversities in use. arXiv preprint arXiv:1411.4633.
 Westacott, E. (2019). What Is Ethical Egoism?. [online] ThoughtCo. Available at:
https://www.thoughtco.com/what-is-ethical-egoism-3573630 [Accessed 26 Mar. 2019].
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