By Tom Parnelle
Instructor: Dr Earl Godfrey
Course: Managerial Accounting
December 11, 2011
Ethical Standards for Management Accountants
In today’s economy, it is important to make informative business decisions. Profit margins are shrinking, labor and material costs are rising and global pressure on our markets continues to tighten (Sider Group 2009). To be competitive in a global or even local market, managers must understand the financial and operational data of their respective businesses (Enotes, N.D.). This decision process has its foundation with accurate and reliable information from management accounting (IMA, 2011). With increasing pressure to obtain funding resources and meet a variety of other operational quotas, a rise in unethical behavior has emerged. This pattern involves the manipulation of financial and operational numbers to achieve certain goals (Girodano, 2011; Parapundit, 2005; Yee, 2005). These goals can lead to financial rewards for the participants. Management Accounting is the discipline that provides the capabilities and tools for organizational and ethical decision processes (Vitez, 2009).
Management Accounting provides a system of financial accounting records that forms the basis for data and information that can be analyzed to make sound business decisions. Management Accounting is designed to assist decision making, planning, and setting performance benchmarks over specific periods of time as well as controls to ensure safeguarding of assets. This information provides comparative analysis to determine if the business is achieving plans and operating competitively and efficiently (Sider Group 2009).
What would happen if the information provided by management accountants was purposely skewed or manipulated? Would your business survive? (D’Aquila, 2001) Ethical standards are being violated more frequently and business integrity is eroding (Taicu N,.D). Numbers are manipulated not only in business, but also in government, social organizations and in other highly regarded institutional goals (Girodano, 2011; Parapundit, 2005; Yee, 2005). In a country that holds truth as the foundation of a thriving democracy, why is it that honesty among our representatives is considered a rarity? (Brownwell, 2003)
The Pressure to Maintain
The pressure felt to “meet the numbers” while maintaining ethical standards is high (Beresford 2003). Individuals who are transparent and live by a code of integrity can be demonized for being factual and honest. Consider the three individuals who were Time’s Persons of the Year in 2002. Each believed, "the truth is one thing that must not be moved off the books" (Brownwell, 2003). However, when they testified against the organizations for which they worked, they did so at a cost of being isolated and outcast. However, it was their willingness to raise the important issues at the Enron, WorldCom, and the FBI 9/11 investigation, that earned them the cover of Time Magazine (Brownwell, 2003). Three women were named as heroes: Sherron Watkins at Enron, Cynthia Cooper at WorldCom and Coleen Rowley of the FBI who blew the whistle about the FBI not responding to information regarding the 9/11 hijackers (Ripley 2008).
Stakeholder distrust is high, and business leaders are struggling with the challenge of bringing integrity back to their organizations (McGraw-Hill, N.D.). It seems to many that the only answer is to legislate laws to control the behaviors of corrupted organizational leadership (Woelfel, 1986). What is so complex about doing the right thing? (Woelfel, 1986)
This question is examined in a recent experiment conducted by Professor Dan Ariely at Duke University. The purpose of his research was to measure the number of students who were tempted to cheat. Professor Ariely is a teaching faculty member at Duke’s Fuqua School of Business, where 34 MBA…