Ethics in the industry
Especially in accounting, ethics in the industry is primarily concerned with making moral decisions about not only the preparation of financial statements but also its presentation and disclosure (Cantrell and Lucas).
Major obligation to the public
It is important to recognize that people in the accounting industry have a major obligation to the public in general. This is due to the fact that they have relevant facts on businesses, allowing the general public to make financial decisions.
An ethical quandary
When working as an intern in the accounting department, I came across an ethical quandary. In this paper, I will elucidate why the decision I made during the fraudulent financial reporting was wrong because it contravened the ethical code of financial reporting.
Manager's unethical instruction
During my internship at ABC Bank, the manager approached me and instructed me to record a financial transaction in a manner that was incorrect. The policy of this bank stipulated that their financial calendar year ends on 31st December and the bank signs consumer contracts for them to offer services. Usually, the contracts are signed on 1st December and last for a whole year. Thusly, the accounting principles require ABC Bank to record the proceeds of the contract only for one month, and in this case, it means it should be recorded in December. Part of the remaining revenue is recognized in the financial statements in the next year. Nevertheless, the manager required me to record the whole amount pertaining to the contract in the month of December with the aim of boosting the earnings for the current financial year.
Evaluating the ethical challenge
By recording the earnings in the current financial year, the management was to receive a bonus following the boosted earnings and the employees were to receive recognition in the upcoming performance review. This scenario presented to me an ethical challenge which I had to examine its implications, considering the laid down policies of the bank as well as the ethical conduct required of me as an accountant.
Decision and its consequences
In response to the manager's instruction of recognizing revenue before they are earned, I decided to record these earnings in the current financial year. In doing this, I had to take into perspective the cons and pros of recognizing the contract revenues before they are earned. First, I considered the consequence of the possible termination of my internship at ABC Bank before its completion date by disagreeing with the unethical demands by the manager. If my internship was to be terminated, it took me considerable time to be attached to another organization and this could definitely interfere with my studies' schedule. Therefore, I had to agree with the managers' instructions. Moreover, by the fact that inclusion of these earnings in the financial year could earn me a recognition during the bank's performance review, I thought this could be advantageous to me as part of the bank's team that led to higher income. However, this was to mislead the investors as it will not reflect a true financial position of ABC Bank.
Reflection and conclusion
From the above ethical dilemma and the way I responded, it is evident that I did not consistently apply my ethical principles as I was swayed by personal interests. By recognizing the contract earnings in the current financial year before they are earned contravened the policy of the ABC Bank. The policy of the bank required that you only record the proceeds from the contract only for one month and the rest in the next financial year. In addition, the generally accepted accounting principles require that revenues should only be recorded in the financial statements once they are earned so as to reflect the true financial position of a company (Wilkens). If I had to do it over again, I will consult the Bible for guidance. In this case, I will have to reject the instructions of the manager to recognize the revenues before they are earned and stand for the truth so as to reflect the true financial position of the bank.
Work Cited
Cantrell, Wesley E, and James R. Lucas. High-performance Ethics: 10 Timeless Principles for Next Generation Leadership. , 2007. Internet resource.
Wilkens, Steve. Beyond Bumper Sticker Ethics: An Introduction to Theories of Right and Wrong. Downers Grove, Illinois: IVP Academic, 2011. Internet resource.
