Managerial Accounting and Business Ethics Essay

Tags: business law ethics accounting confidentiality conflict decision making managerial accounting risk business ethics operations integrity trust ethical behavior duty compliance disclosure management behavior investors

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Introduction

In the business actuality of the present day, where knowledge management together with intangible assets are fundamental sources of competitive advantage, the individual action and behavior of employees ranging from first-line personnel to management can facilitate the success or downfall of an organization’s reputation. This has a substantial effect on share value, the capability to attract and sustain consumers, investors, personnel, or clients, and the risk of violating compliance (Jamshidinavid and Kamari, 2012). Addressing business ethics and responsibility issues within a business entity begins the compliance of the pertinent legislations and codes of practice. As a provider of business needs with scarce resources, there is the need to have the capability to make a distinction between the appropriate and inappropriate way of taking expense into account when making decisions regarding practices and processes of clients. In the contemporary business setting, the role that is played by accountants is significant. The data and information that they provide is pivotal in helping managers, investors, together with other stakeholders in making important economic decisions. In view of that, ethical indecencies by accountants can have an adverse impact to the society, giving rise to distrust by the general public and interference of efficacious operations in the capital market. Fitting instances of such failures include scandals in corporations such as World Com, Enron, and also individual such as Martha Stewart (Jamshidinavid and Kamari, 2012). The main objective of this paper is to examine the business ethics in managerial accounting from the perspective of product liability.

Business Ethics in Managerial Accounting: Product Liability Perspective

Managers necessitate information from managerial accounting for decision making in a just about incessant and more recurrent manner. Managerial accounting permits for management planning, operation and control of the current and future of the organization for continual progression and achievement (Ghose, 2017). Corporations are completely reliant on managerial accountants for providing the accurate state of operations such as precise market purchasing trends, anticipated expenses for supplies and production labour, and inventory quantity levels. Imperatively, unethical managerial accounting could give rise to distorted numbers giving rise to stock outs, delivery delays, production slowdowns and wastages, financial deficiencies and detrimental strategic decisions. Ethical standards ought to be espoused and sustained by all managerial accountants with classic ethical leadership from the top-ranking management. In addition, devoid of driven ethical behavior by management accountants, all of the codes, policies and standards will eventually turn out to be ineffective (Ghose, 2017).

Product liability signifies one of the issues at the core of ethical and socially responsible behavior for businesses. Product liability encompasses the area in which business manufacturers or producers, distributors, suppliers, as well as retailers are held liable and culpable for the harm that such products cause. One of the key aspects that is linked to product liability is negligence in the sense that a management accountant become in breach of the duty that is owed to him or her and there is a resultant quantifiable damages. There is also the aspect of strict liability where the professional is liable for careless standard of conduct or unethical behavior in the course of conducting his or her duties and thereby providing misleading, inaccurate or false information to other parties.

The Institute of Management Accountants (IMA) is the most significant management accountant professional body in the nation and has developed benchmarks of ethical conduct for compliance with four basic principles including: competence, confidentiality, integrity, and credibility (Garrisson, Noreen, and Brewer, 2018).

Competence

Management accountants have a responsibility to maintain a suitable level of professional specialty by incessantly developing knowledge and skills. Secondly, there is the duty to undertake professional responsibilities in line with pertinent laws, regulations and technical benchmarks.

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Third, management accountant are liable to provide decision support information and recommendations that are precise, clear, succinct and timely. Lastly, every management accountant has a responsibility to acknowledge and communicate professional restraints or other limitations that would hinder responsible judgment or efficacious performance of an activity (Garrisson, Noreen, and Brewer, 2018).

Confidentiality

Managerial accounting necessitates the accountant to ensure that information is kept confidential at all times with the exception of when disclosure is sanctioned or legally necessitated. Secondly, there is the accountability to notify all pertinent parties concerning suitable use of confidential information and monitor the activities being undertaken by subordinates to ensure compliance. What is more, the management accountant is expected to abstain from making use of confidential information for unethical or illegal advantage (Garrisson, Noreen, and Brewer, 2018).

Integrity

In regard to integrity, one of the key responsibilities of the management accountant is to alleviate actual conflicts of interest. This takes into account undertaking regular communication with business affiliates in…

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…misstatements or the lack of suitable risk assessment, and disregarding the key issues that are linked to a particular product (Zowie, 2012).

When ascertaining and assessing the interests and relationships that may generate a conflict of interest and executing safeguards, when essential, to eradicate or diminish any threat to compliance with key principles to a suitable level, a management accountant in public practice is obligated to act ethically by exercising professional judgment and take into consideration whether a sensible and knowledgeable third party, weighting all the distinct facts and situations available to the professional accountant at the time, would probably conclude that the management accountant did not compromise in being compliant with the fundamental ethical principles (CIMA, 2018). In accordance to CIMA (2018), when addressing conflicts of interest, encompassing revealing or sharing information within the company or network and looking for assistance from third parties, it is important for the management accountant to continue being attentive to the key principle of confidentiality. What is more, if the threat generated by a conflict of interest is not at an agreeable level, the management accountant is expected to apply precautions to eradicate the threat or mitigate it to an acceptable level. In the event that such precautions cannot diminish the threat to an agreeable level, the management accountant is obligated to refuse to perform or suspend professional services that would give rise to conflict of interest (CIMA, 2018).

Conclusion

In the contemporary business setting, accountants play a significant role in the day to day operations of a firm. Managers together with other decision makers are largely dependent on the data and information that is rendered by accountants. Bearing in mind that the precision of decisions depends on the reliability of the accounting data and information, the ethical aspect of the profession has attained substantial attention in recent times. Product liability is a significant subject manner in regard to business ethics. Within the realm of managerial accounting, the accountants are expected to adhere to four key business ethics standards including competence, confidentiality, integrity, and credibility. Management accountant are constantly faced with different aspects that might hamper with ethical behavior and result in product liability. These include altering the accounting method for computation, conflict of interest when dealing with clients, failure to reveal information and also providing misleading information. All in all, management accountants are obligated….....

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References

CIMA. (2018). Conflicts of Interest. Retrieved from: https://www.cimaglobal.com/Professionalism/Ethics/CIMA-code-of-ethics-for-professional-accountants/Part-B---Professional-accountants-in-public-practice/220-Conflicts-of-Interest-/

Davis, C. E., & Davis, E. (2011). Managerial accounting. Hoboken: John Wiley & Sons.

Garrison, R. H., Noreen, E. W., Brewer, P. C. (2018). Managerial accounting. New York: McGraw Hill Education.

Ghose, K. S. (2017). Ethics in Managerial Accounting: Today’s Challenges in USA. GSTF Journal of Law and Social Sciences (JLSS), 4(2).

Heisinger, K. (2009). Essentials of managerial accounting. New York: Cengage Learning.

Jamshidinavid, B., & Kamari, F. (2012). Ethics in management accounting: Moving toward ethical motivation. Research Journal of Finance and Accounting, 3(6), 90-96.

Zowie, M. (2012). The Pros and Cons of Professional Skepticism. GAA Accounting.

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