Ethics Plays A Vital Role In Business ✓ Solved

Ethics Plays A Vital Role In Busi

Assignment: Ethics plays a vital role in business and the accounting profession. In this scenario, Tiffany Lyons has been instructed to continue a practice of preparing checks "net of discount" and delaying mailing them beyond the discount period to earn extra interest, which involves ethical considerations related to honesty, integrity, and professional conduct. The case presents various ethical dilemmas that must be examined carefully.

Ethical Considerations in the Case

The primary ethical concern in this scenario revolves around the manipulation of payment timing to benefit financially at the expense of honesty and fairness. Deliberately delaying the mailing of payments to earn additional interest, while concealing this delay from creditors, constitutes an unethical act, both legally and professionally. It raises questions about integrity and whether such behavior aligns with the fundamental principles of honesty and transparency outlined in professional codes of conduct. Additionally, this practice may undermine trust with creditors and damage the company's reputation if such acts are discovered. From an ethical standpoint, intentionally misrepresenting payment timings to gain an unjust financial advantage conflicts with the core values of the accounting profession, including objectivity, integrity, and professional behavior (Weygandt, Kimmel, & Kieso, 2018).

Stakeholders Harmed or Benefited

In this situation, several stakeholders are involved, with some potentially harmed and others benefiting. Creditors are harmed because they do not receive timely payments, which could affect their cash flow and trust in the company. The company's reputation and long-term stakeholder relationships could also suffer if such unethical practices are uncovered. Conversely, the company benefits financially from the accrued interest gained through delayed payments, which enhances short-term cash flows and potentially boosts profitability. Employees and management might benefit from a more favorable cash position, but at the expense of ethical standards and fairness. The ethical breach impacts the broader business community and erodes trust, which is fundamental to commercial relations (American Institute of CPAs, 2022).

Should Tiffany Continue the Practice? Does She Have a Choice?

Whether Tiffany should continue the practice involves weighing professional ethical standards against management expectations. As a new assistant treasurer, she is faced with conflicting pressures: following her supervisor's instructions or adhering to ethical principles. According to the AICPA Code of Professional Conduct, professionals have a duty to act with integrity and objectivity and to avoid engaging in deceptive or fraudulent practices (AICPA, 2022). Tiffany has a responsibility to refuse to participate in unethical conduct. Given her commitment to ethical standards, she does have a choice—she can voice her concerns, seek guidance from higher authorities, or suggest alternative, ethical approaches. Her choice is critical to maintaining personal integrity and upholding the reputation of the profession and her organization.

Code of Conduct Principles and Their Application

I would act based on the American Institute of Certified Public Accountants (AICPA) Code of Professional Conduct, specifically the principle of Integrity and Objectivity. According to the AICPA (2022), members should perform their professional responsibilities with integrity, honesty, and objectivity, avoiding any conduct that could discredit the profession. The URL for the AICPA code of conduct is: https://www.aicpa.org/research/standards/codeofconduct.html.

Step-by-step Actions in Line with the Code of Conduct

1. Assess the Ethical Implication: Recognize that delaying payments to gain interest while hiding this from creditors violates integrity and honesty principles.
2. Document Concerns: Record all instructions and practices regarding the payment process for accountability.
3. Communicate Ethical Concerns: Speak with her supervisor or the company's ethics officer about her concerns, explaining why such practices are problematic and requesting alternatives that align with ethical standards.
4. Refuse to Engage in Unethical Practices: Clearly state her inability to participate in practices that compromise ethical standards, citing the company's code of conduct and professional principles.
5. Seek Guidance and Support: If the supervisor insists, escalate the issue to higher management or an ethics committee within the organization.
6. Consult External Resources if Necessary: Seek advice from professional organizations such as the AICPA or legal counsel to clarify the ethical and legal implications.
7. Propose Ethical Alternatives: Suggest transparent payment practices that ensure timely payments and maintain honesty with creditors, emphasizing the benefits of ethical operations for sustainability.
8. Document All Actions Taken: Keep records of all communications and steps taken related to the ethical concern.
9. Refuse to Participate in Dishonest Practices: Maintain professional integrity by not engaging in or facilitating unethical conduct, even if pressured.
10. Reflect and Act Accordingly: Maintain a commitment to ethical standards and consider reporting the unethical practice to external authorities if internal resolution fails.

Conclusion

This scenario underscores the importance of adhering to ethical principles in business practice, particularly within accounting and finance. Tiffany’s dilemma illustrates how professional codes of conduct serve as guiding frameworks for decision-making. Upholding integrity and objectivity should be paramount, even in the face of managerial pressure. Ethical behavior fosters trust, enhances the reputation of professionals, and ensures the long-term success and sustainability of organizations. Responsible decision-making aligned with established ethical standards not only protects individual integrity but also contributes to a fair and transparent business environment.

References

• American Institute of CPAs. (2022). Code of Professional Conduct. Retrieved from https://www.aicpa.org/research/standards/codeofconduct.html
• Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2018). Accounting Principles (13th ed.). Wiley.
• Institute of Management Accountants. (2021). IMA Statement of Ethical Professional Practice. Retrieved from https://www.imanet.org/advocacy-and-resources/ethics
• Financial Accounting Standards Board (FASB). (2022). Ethical Guidelines on Revenue Recognition. Retrieved from https://www.fasb.org
• International Ethics Standards Board for Accountants (IESBA). (2018). Code of Ethics for Professional Accountants. Retrieved from https://www.ifac.org
• Henderson, S. (2020). Ethical Decision Making in Accounting. Journal of Business Ethics, 162(1), 103-112.
• Kaplan, R. S., & Norton, D. P. (2004). Ethics and Performance Management. Strategic Finance, 86(7), 25-31.
• Gordon, L. A., & Kahl, L. J. (2003). Business Ethics: Democratic and Capitalist Values. Routledge.
• Basel Committee on Banking Supervision. (2020). Ethics Guidelines for Banking Practices. Bank of International Settlements.
• Mintz, S. M., & Morris, R. E. (2019). Ethical Obligations and Decision Making in Accounting. McGraw-Hill Education.