Financial Accounting- Ethical Decision Module - Assessment Answer

Financial Accounting Assignment

Assignment Task

1. What is Ethics? What are the types of Ethics? Explain for example Teleological, deontological. Explain all types of ethics.
2. Explain Ethical decision Module.
3. Explain Importance of ethics
4. How unethical actions lets to pass corporate collapses.

Introduction

1 . Ethics is the study of the basics and principlesof decent human behaviour and conduct. It involves decisions on universally acceptable valueslike human rights, abolishment of child labour, basic health facilities for all etc. In the corporate arena, ethics involves decisions on environmental safety, societal good vis-à-vis the profits of the company etc. A corporate is expected to conduct itself in an ethical manner for the benefit of its shareholders. (Businessdictionary.com 2016)

The study is broadly divided into Descriptive ethics dealing with morality of actions based on social contract of a society and may differ over time and society. An example would be the issue of Apartheid inSouth Africa. Normative ethics is a subjective study of moral actions. For example, the practice of voluntary abortion. Metaethics seeks to define a middle ground between good and bad based on morality of decisions and actions. For example, the existence of democracy.(Atheism.about.com 2016)

Normative ethics is categorized into deontological, teleological and virtue ethics. Deontological and teleological branches deal with an individual’s actions of morality. When the morality of actions is judged on the basis of consequences, it is termed as teleological ethics while when actions are judged on the basis of their confirmation to a set of expected values, it is termed as deontological ethics While the first two branches are action oriented, the virtue-based ethics is concerned with the character of the person totally ignoring his actions; his actions and decisions are taken on the basis of what enhances the goodness of his character. (Reference, 2016)

2 All Ethical modules in various fields like Counselling, Human resource management, Accountancy, Law, Medicine are based on the premises that it is practically difficult to devise a uniform code of ethics applicable to all scenarios and ethical dilemmas. However, a module for ethical analysis and decision making based on research by Corey et al. (1998) is a seven step process on which most of the current ethical modules are based. These steps are

-Identification ofthe problem.

-Identification of the potential issues.

-Review and analysis of relevant ethics code.

-Knowledge of relevant applicable laws.

-Consultation.

-Decision on alternativecourses of action.

-Listing the consequences of each alternative.

-Decision on the best course of action.

In a corporate set up, this implies keeping all the stakeholders and supervisors duly informed including reflection and review of the entire process after the decision is taken with the supervisor. (Soe.syr.edu, 2016)

It has also been researched that between a computer based and face-to-face group, no difference in the ethical consequence or decision outcome was noted. However, face to face showed better speed and consensus within the group compared to the computer based modules and also resulted in better satisfaction and motivation levels (Cappel and Windsor, 2000)

The "Character-Based Decision-Making Model" model, developed by the Josephson Institute of Ethicslists three deciding points for the framework:

• Decision taken ought to reflect a concern for the protection of interests of the stakeholders or affected parties.
• Ethical values ought to always precede the non- ethical in all scenarios.
• An ethical principle may be violated to further another ethical principle depending on the scenario confronting the decision maker(Blink.ucsd.edu, 2016)

3. The importance of ethics can be well appreciated from the fact that all desire the corporate and business to be fair and beneficial to the society. This requires establishment of a code of ethics to inculcate fair practices so as to benefit the consumer, the employee as well as the society in general. Other considerations are

1. Ethics is important for the satisfaction of the basic human need of working for and being associated with people and Organizations who indulge in fair, honest, credible and ethical practises.
2. An ethical organization enjoys a better reputation and goodwill. For example, Organizations like Infosys are perceived ethical due to initiative like corporate governance and social responsibility and this perception multiplies manifold globally over time. This implies good news for the business.
3. Employees prefer organizations that are ethic centric and a perceived alignment of interest among employees and management is often noted in these companies.
4. Ethics results in wisdom to take better decisions by individual and Organizations. These value centric decisions are perceived to result in better growth potential for both.
5. Ethical decisions prove to be profitable in the long run as they tend to result in better societal image which in turn results in increased customer loyalty and base.
6. Ethics helps in securing the society and preserving its value compared to the legal system of a society. This is so because the legal system is passive in its approach in enacting laws and is often a mute spectator to decision making scenarios. Ethics pervades societies and companies and inculcates among them a sense of fairness.(Managementstudyguide.com 2016)

4. Unethical actions let to pass corporate collapses due to a number of reasons. Though Corporates in general prefer ethical behaviour in order to maintain their public image and social image; often ethical decisions contradict with the profitable decisions and organizations tend to bend towards the latter in a bid to make profits. These unethical actions lead to collapses when unchecked and tend to be repeated again and again.

Unethical acts as a consequence ultimately lead to corporate collapse. Unethical management leads to conflict of goals, loss of talent and loss of goodwill. Employees of an unethical business tend to take unethical decisions and actions themselves and also fall low on the loyalty index. Unethical actions drive away investors, suppliers, customers and other important stakeholders of the corporate(Horton 2015) The Organization slowly moves towards decline in such a scenario.

Primarily; when unethical actions are performed in collusion in the corporate, fraud is perpetrated at a much faster pace. Another important reason for these collapses is attributed to the fact that in most of the scandals like Enron and Tyco to name a few, the whistle blowers i.e. auditors and accountants were also party to crime. This lack of transparency led to the ultimate collapse of the corporates.

Opportunity available to the executives due to deficient internal controls clubbed with the need for more power and wealth gained momentum due to offences being non-punishable at the corporate level which when tolerated by the peer group kept perpetrating (Kemmerer and Shawver, n.d.)