According To Irving Janis 1972, Groupthink Is The Pro 275297

According To Irving Janis 1972 Groupthink Is The Process By Which W

According to Irving Janis (1972), groupthink is the process by which individuals in a group prioritize harmony and conformity over critical thinking, often leading them to make irrational or poor decisions. This phenomenon typically occurs in cohesive groups that value unanimity, suppress dissent, and overlook alternative viewpoints, which can result in flawed decision-making processes.

Groupthink takes place primarily due to psychological and social pressures within the group. Factors such as a highly cohesive group, a directive leadership style, insulation from outside opinions, and stressful situations that compel individuals to reach a quick consensus can foster groupthink. In such environments, members may suppress doubts, ignore warnings, and conform to the majority view to maintain harmony, often at the expense of sound decision-making.

Several characteristics of a group increase the likelihood of groupthink. These include a strong desire for unanimity, a directive leader who expresses clear preferences, the group’s insulation from external opinions, and high group cohesiveness that discourages dissent. When members highly value harmony and cohesion, they may avoid voicing disagreement or criticism, leading to compromised decisions.

Fred's strategy to encourage all employees to share their opinions regardless of their personal views is a positive initial step to reduce groupthink. By promoting open dialogue, Fred aims to minimize suppression of dissent, which is crucial because suppressing doubts fosters conformity. However, simply encouraging opinions is not sufficient; actively managing the decision process to challenge assumptions and consider alternative viewpoints is essential for genuine diversity of thought.

Other strategies Fred can employ include assigning a “devil’s advocate” to intentionally challenge ideas, encouraging anonymous input to reduce peer pressure, and seeking external opinions to provide fresh perspectives. Additionally, breaking the group into smaller, independent teams to analyze issues separately before reconvening can prevent premature consensus. Creating an environment where questioning and critical analysis are valued can significantly reduce the risk of groupthink.

Ethics in Managerial Accounting and Standards in Tax Services

The four standards of ethical conduct in managerial accounting are integrity, objectivity, confidentiality, and professionalism. Integrity involves honesty and fairness in decision-making; objectivity requires free from bias; confidentiality emphasizes protecting sensitive information; and professionalism calls for competence and respect for standards. For example, integrity is fundamental as it ensures that managers provide truthful information and uphold the trust of stakeholders, which is essential for effective and ethical decision-making.

One of the seven standards in the Statements of Standards for Tax Services is "Adequate disclosure." This standard mandates that tax professionals must disclose all relevant facts and information necessary to ensure the accuracy and fairness of their tax advice and returns. By adhering to this standard, tax practitioners help maintain transparency and trust with clients and tax authorities, thereby upholding the integrity of the tax system and reducing the risk of penalties or legal issues.

Business as a Social Institution: Profit or Responsibility?

I largely agree with Milton Friedman's assertion that the primary responsibility of business is to increase profits, provided it operates within the legal and ethical boundaries. This focus on profit maximization fosters economic growth, innovation, and employment, which ultimately benefits society. However, the modern view recognizes that businesses also have social responsibilities beyond profit, such as environmental sustainability, fair labor practices, and ethical governance. Balancing profit motives with social responsibility can enhance legitimacy, foster stakeholder trust, and support long-term success. Therefore, while profit remains fundamental, a broader approach incorporating social and environmental considerations is vital for sustainable business practice.

Auditing Standards for CPA Firms and Management Controls

The three Public Company Accounting Oversight Board (PCAOB) auditing standards that registered CPA firms must follow when auditing public companies include: (1) the Audit Standard No. 5 (AS 5) for audits of internal control over financial reporting, (2) the general auditing standards requiring competence, independence, and professional skepticism, and (3) standards related to audit planning, testing, and reporting to ensure comprehensive and reliable audits.

Regarding the Sarbanes-Oxley Act (SOX) Section 302, companies are mandated to review their disclosure controls quarterly, identify deficiencies, assess their impact on financial statements, and report significant weaknesses. These requirements primarily address deficiencies arising from inadequate internal controls, process failures, or failure to detect material misstatements. Such deficiencies often stem from insufficient staffing, ineffective control procedures, or gaps in oversight, thus emphasizing the need for robust internal control systems.

The study commissioned by the Center for Audit Quality identified an event impacting restatement activity in 2016, which was the enforcement actions and regulatory scrutiny following high-profile corporate scandals. This event led to increased vigilance and corrective measures, reducing restatement frequency over subsequent years.

References

• Janis, I. L. (1972). Victims of Groupthink. Houghton Mifflin.
• American Institute of Certified Public Accountants (AICPA). (2023). Code of Professional Conduct.
• United States Securities and Exchange Commission (SEC). (2020). Standards of Ethical Conduct for Employees of the Securities and Exchange Commission.
• Friedman, M. (1970). The Social Responsibility of Business is to Increase its Profits. The New York Times Magazine.
• Public Company Accounting Oversight Board (PCAOB). (2020). Auditing Standards.
• U.S. Congress. (2002). Sarbanes-Oxley Act of 2002.
• Centers for Audit Quality. (2017). Restatement Trends and Activity Report.
• Healy, P. M., & Palepu, K. G. (2003). The Fall of Enron. Journal of Economic Perspectives, 17(2), 3-26.
• Barry, P., & Berti, R. (2018). Ethical Standards in Tax Practice. Journal of Taxation and Ethics.
• Miranda, S. M. (2011). Internal Control and Corporate Governance. Accounting Horizons, 25(2), 479-501.