Ethics in Accounting: Alan's Case, Ethical Issues, and Solutions

This report delves into the ethical challenges faced by Alan, the Financial Controller of Jupiter Ltd., a construction company navigating difficult economic conditions. The analysis identifies Alan's ethical dilemma concerning a potentially bad debt from a client, Beginner Ltd., and the pressure from his CEO to conceal this information. The report explores the ethical issues Alan confronts, focusing on the importance of integrity and adherence to professional standards. It proposes a course of action for Alan, emphasizing the need to prioritize ethical conduct and inform the auditors about the financial instability of Beginner Ltd. Furthermore, the report examines the application of utilitarian and deontological ethical theories to Alan's situation, concluding that a deontological approach, which prioritizes duty and adherence to ethical codes, is most appropriate. The report also discusses the significance of ethical theories in understanding and addressing complex business scenarios, and provides a brief overview of the history of accounting ethics.

Running Head: ETHICS
Ethics
Name of Student
Name of University
Author Note

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Table of Contents
Introduction......................................................................................................................................2
Discussion........................................................................................................................................2
Response to Question 1...............................................................................................................2
Ethical Issues Faced By Alan..................................................................................................2
Course of Action for Alan.......................................................................................................3
Taking an Utilitarian Approach...............................................................................................4
Deontological ethical perspective............................................................................................4
Appropriate Ethical Theory for Alan.......................................................................................5
Response to question 2................................................................................................................6
Conclusion.......................................................................................................................................7

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Introduction
The title of this paper is “Ethics in Accounting and History of Accounting”. This paper
studies the auditing and accounting ethics and code. This paper deals with the case of Alan who
is a Financial Controller for Jupiter Ltd. Jupiter ltd. is a small construction company that
employs almost 70 people. Recently the company is facing some problems with their trading
conditions. This essay will try to identify the ethical issues that are faced by Alan and the study
will also chart course of action for Alan. The paper also analyses ethical theory that is most
appropriate for the situation that Alan is facing. In this context, the importance of theories and
their significance has been evaluated. Furthermore, the theory which is applicable for the case
study in question has also been analyzed and justified.
Discussion
Response to Question 1
Ethical Issues Faced By Alan
Alan is the financial controller of Jupiter Ltd., facing the following ethical issues according to
the case study:
 Working with Integrity: An accounting professional needs to have a strong integrity as
it is one of the fundamental qualities of the accounting professional. As a person who
deals with the finances of the company daily, Alan needs to be honest and true to his
work. In case of any difference of opinion Alan needs to stay true to the law and not do
anything that is illegal. In this case, Jupiter Ltd was doing business with a company
named Beginner, which according to some sources could be in receivership in the next

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couple of months. According to Alan, it is needed by the company Jupiter to raise a
significant provision against the money that is billed to them by the company Beginner.
Carly who is the CEO of Jupiter rejected this idea given by Alan and said that if this
happens then the auditors would figure out that issues that has been plaguing the
company. The thing that Carly is asking Alan to do is hide a fact from the company
executive and auditors so that the company can keep on doing business with Beginner.
Alan has to face the fact that if he does not listen to his CEO, he might lose his job, if he
does what Carly says then it might be illegal and unethical, this is the dilemma that Alan
is facing. Not listening to his boss is wrong and presenting false information to the
auditors is also false.
Course of Action for Alan
According to the Accounting Professional and Ethical Standards of Australia, the ideal
course of action at this stage would be to follow the ethics of the profession. Alan should keep on
doing his job with integrity and should divulge all the information that is needed for him to
divulge as part of the job. He should not be thinking of any personal gain or loss he should
follow all the rules as per the Professional and Ethical Standards of Australia (Bampton &
Cowton, 2013). Alan should also consider sharing the information about Beginners to the higher
authority. In order for him to understand the course of action that he can take in this scenario, he
should refer to the Professional and Ethical Standards of Australia. In this case, Alan should
inform the auditors about the condition of Beginners to the auditor, because in this case it would
be the ethical thing to do (Duska, R. F., Duska, B. S., & Kury, 2018). Although this would mean
that he is not following the words of Carly but what Carly is asking him to do is unethical and is
unfair the company, to what is right he has go around the words of the Carly and make it a point

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to let everyone know that Beginner is at a crucial stage. Alan could gather more information
about the ethical code and standards of an Accounting professional. He should study a lot about
the ethical standards and then should what is required. Although at this stage, the most ethical
thing to do is inform the auditors about the condition of Beginner so that they do not face any
problem in the near future.
Taking an Utilitarian Approach
Two British philosophers, John Stuart Mill and Jeremy Bentham developed the theory of
Unitarianism. This theory deals with the fact that an action is morally right or morally wrong
solely based on the consequences that the action has. According to this, the right action is the one
which leads to positive consequences and the action that will lead to the greatest utility (Conway,
& Gawronski, 2013). Additionally, it talks about the rule of the ‘greatest happiness of the
greatest number’. Utilitarianism is a theory that believes that the overall happiness or pleasure
rejects any action that causes unhappiness or harm.
In the light of this if Alan takes the utilitarian way, he needs to be transparent with his
organization, he has to let the auditors know the condition of the company Beginners. Although
the end results might not be favorable for the company Jupiter ltd, but this is the ethical thing to
do, this would be good for both the companies in the long run. The problem that Beginner is
facing now can be hidden now but the moment it comes out in the open the loss will be incurred
by both Jupiter and Beginner.
Deontological ethical perspective
The deontological ethical theory is the theory that places more emphasis on the
relationship that is existent between the duty of human actions and morality. In the field of
accounting professionals, deontological is the ethics that has to be followed on duty and the

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obligations. According to this theory, if any action leads to a good outcome, but the intentions
and the means were not correct then the end action will also not be correct and vice versa. They
believe in good deeds and good actions.
Appropriate Ethical Theory for Alan
The Deontological theory of ethics and duty is the best approach that Alan can take at this
point of time. Although all his actions will be right but the consequence might not be the best
suited for the company at this point of tine but in the long run this will affect the company.
Certain theories which can be provided for the solving of this issue are provided below:
Deontological ethics – The theory of deontology states that there is a principle of rationality
which needs to be implemented ion the various codes of ethics. As a result, this theory states
that the various actions of the accountant should be evaluated based on the prevailing conditions
that existed during the time such decisions were taken (Boutilier et al., 2015).
AICPA Code of ethics – This theory consist of two parts, namely Principle and Rules. The rles
are made out of the Principles which in turn lays down the frame work for evaluating the
performance of certain services.
Utilitarian ethics – The ethical code of conduct of utilitarian theory is based on the
characteristic of morality (Kahane, 2015). The consequence of this theory is judged from the end
performance. As a result, an action is considered to be morally good when it provides greatest
amount of happiness to the concerned people.

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Response to question 2
Theories are provided in order to understand how a particular situation or the occurrence
of an event in the international sphere can be judged. In other words, a theory provides a frame
work which aids in the understanding of the events of the world. Thus, it can be said that theories
provide certain inter related definitions of the aspects and objects, the concepts which are related
to such aspects and the propositions which aid in the prediction of the occurrence of an event.
The relations among all the different variables are also explained with the aid of such a theory.
This proves the importance of the existence of the theories within the different fields of human
action.
With regard to the case study in question, the accounting theory which can be said to be
appropriate is that of deontological ethics. The theory of deontological ethics states that the
adherence to the various codes of ethics is significant based on the differing conditions that
exited at that point of time. As a result, the codes of ethics vary from one situation to another.
Thus, under this theory, the ethics of the situation is judged by understanding the importance and
significance of that situation.
The criterion which justifies the use of such a deontological theory of code of ethics is
that of existence of difficult times in the economy during that period of time (Kahane et al.,
2015). Furthermore, the organization in which Alan was involved with employed a considerably
lesser number of employees. Thus, the size of the firm was small which further obstructed their
scale of economies. The profit level suffered even during the normal times; during times of
financial crisis, the profit level plunged even further.

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Thus, it can be said the application of the deontological theory if code of ethics. Alan had
to make the difficult decision of either adhering to the code of ethics or undertaking significant
measures to protect his own employees. This was quite a difficult decision to be made. Thus, it
justified the reluctance of Alan to work in a morally and ethical manner.
The accounting regulations were made in order to ensure that no such discrepancy occurs
within the functioning of any business organization. They accounting history advocated for the
adherence to certain socially constructed perspectives. During its initial phase, more attention
was paid to the idea of carrying out financial transactions in a healthy and transparent manner.
Thus, the aim was to avoid any instances of discrepancy which otherwise would tarnish the
image of the business firm. However, this drastically changed in the contemporary period. More
attention is being paid to the issue of the maintenance of social welfare. This is considered to be
important for the assurance of decent standard of living to the people.
Conclusion
To conclude, it can be observed that the different business organizations in the world face
certain ethical and moral issues during their period of activity. The ethical issues cannot be
judged based on their moral connotations in the case of business functioning. Although they are
required to strictly adhere to the ethics of the society so that they may gain the trust of the
people, the accounting history reveals that there has been a gradual shift more organization
centric to more society centric. The main objective of the firms of today is to ensure the
betterment of the people and to provide them a decent standard of living. This is only possible
when right decisions are taken depending on the situation and the conditions under which they
occur. As a result of this, any business action should not be judged based on its ethical

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connotation but rather, to see how many people it catered to during the course of its ethical
dilemma.
References
1. Bampton, R., & Cowton, C. J. (2013). Taking stock of accounting ethics scholarship: A
review of the journal literature. Journal of business ethics, 114(3), 549-563.
2. Duska, R. F., Duska, B. S., & Kury, K. W. (2018). Accounting ethics. Wiley-Blackwell.
3. Conway, P., & Gawronski, B. (2013). Deontological and utilitarian inclinations in moral
decision making: a process dissociation approach. Journal of personality and social
psychology, 104(2), 216.
4. Boutilier, C., Caragiannis, I., Haber, S., Lu, T., Procaccia, A. D., & Sheffet, O. (2015).
Optimal social choice functions: A utilitarian view. Artificial Intelligence, 227, 190-213.
5. Kahane, G. (2015). Sidetracked by trolleys: Why sacrificial moral dilemmas tell us little
(or nothing) about utilitarian judgment. Social neuroscience, 10(5), 551-560.
6. Kahane, G., Everett, J. A., Earp, B. D., Farias, M., & Savulescu, J. (2015).
‘Utilitarian’judgments in sacrificial moral dilemmas do not reflect impartial concern for
the greater good. Cognition, 134, 193-209.
7.

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