Ethics in Accounting
Earnings management can be described as the intentional intervention with the process of external reports with an aim of getting some private benefits. It can also be defined as the acts where the managers or the financial handlers use their judgment within the financial reporting and also in the structuring of the transactions. The aim of these actions is to manipulate the records and mislead the handlers. Ethics recommend the use of qualified strategies in reporting financial matters of the company. Using the virtual ethics framework, the intention and reasons for each action are well accounted for by the financial department. One should not ignore the rights of the stakeholders and shareholders while conducting personal duties with an aim of receiving accurate and fair information (Gong, 3). Ethics in management indicates the true performance of an organization and must be true and honest according to the books. Unethical behavior is very rational and this is a poor strategy for making conclusions on financial matters.
Decisions made should be done according to the evaluation of the benefits of the company and management in order to get improved and quality incomes. The financial statements at all times should never be tampered with or manipulated for the benefit of one person which is a selfish act on the part of the perpetrator. Accountants and other players in an organization who have moral values view the unethical behaviors of the managers as very unethical and undeserving (Ferrentino et al., 170). Individuals who possess little or no knowledge of accounting are in most cases unlikely to detect the actions of the unethical managers and this is a worrying factor in business.
Accounting method of manipulation according to the managers is regarded as unethical compared to the manipulation of the decision with regards to operational details. This is, however, both unethical since accurate and true information should be provided in all levels and operations of the business. Managers take earnings management to mean good for the business. According to them, it is a way of attracting new and retains more during the close of the year and increases the sales in the following and current year (Burns et al., 150). Deferring of the necessary expenditure into the subsequent years is basically the view of the managers with regards to earnings management especially the operational decisions. The accounting manipulations are regarded as the change of accounting and inventory methods and valuations for personal benefits.
Overstating of the profits and revenues in order to have an enhanced earnings report is wrong and this is perceived as financial shenanigans in accounting. Also the understating of the profits and revenues with an aim of smoothening the net income and decrease volatility is also a bad idea which is unethical in a business. Auditors should look out for the one time sources of revenue to realize the fraud levels happening in an organization (Ferrentino et al., 165). Acquisitions of businesses should also be red flags pointed to the auditors to overlook business operations keenly. Account receivables can also be sources of identifying accounting malpractices in a business and this should be sorted by the auditors. Market shares which are very fake and unbelievable can be termed as fraud activities which are unethical. In the event, the management has manipulated the earnings, the information, and qualities of the records also suffer due to the unethical behaviors.
Works cited
Burns, David J., James A. Tackett, and Fran Wolf. "The Effectiveness of Instruction in Accounting Ethics Education: Another Look." Research on Professional Responsibility and Ethics in Accounting. Emerald Group Publishing Limited, 2015. 149-180.
Ferrentino, Alexandra L., et al. "Ranking Accounting Scholars Publishing Ethics Research in Accounting and Business Ethics Journals." Research on Professional Responsibility and Ethics in Accounting. Emerald Group Publishing Limited, 2016. 163-215.
Gong, James Jianxin. "Ethics in Accounting: A Decision-Making Approach." (2017): 1-3.
