You Are An Accountant In The Budgetary Projections And ✓ Solved

You Are An Accountant In The Budgetary Projections And

The assignment involves analyzing the ethical and practical implications of discovering a significant miscalculation in sales and income projections prepared for company executives, particularly the president, Richard Brown, of Fernetti Conductor, Inc. The scenario requires considering the consequences of both disclosing and withholding the error from the president. Additionally, it involves reflecting on the ethical considerations involved in this decision, emphasizing honesty, transparency, reputation management, and professional integrity within the context of corporate finance and accounting responsibilities.

Sample Paper For Above instruction

Introduction

In the field of accounting, integrity and ethical behavior are paramount, especially when facing situations that can significantly impact company reputation and stakeholder trust. The scenario presented involves an accountant who, after preparing sales and income projections, discovers a critical miscalculation that inflates the company's expected performance. The dilemma centers on whether to inform the company president, who is actively using these projections for important investor presentations, about the error or to remain silent. Analyzing the consequences of both choices and the ethical principles involved offers insight into professional responsibilities and the potential repercussions for the accountant and the organization.

Implications of Disclosing the Miscalculation

Disclosing the error to President Brown carries several immediate and long-term consequences. First, transparency fosters trust and demonstrates the accountant's integrity. It aligns with the ethical principles outlined by the American Institute of Certified Public Accountants (AICPA), emphasizing honesty and objectivity (AICPA, 2020). By reporting the mistake, the accountant ensures that the president can make informed decisions, possibly informing investors of the updated figures or adjusting the presentation to mitigate potential damage to the company's reputation (Crumbley et al., 2017).

However, there are potential negative consequences as well. The president might experience embarrassment or frustration, especially if he has already made speeches based on the flawed projections. This could temporarily harm the company's credibility with brokers and investors, and may even lead to internal disciplinary action against the accountant, particularly if the mistake appears to be careless or negligent (Sophie, 2018). Nevertheless, correcting the error aligns with the ethical obligation to prevent misleading stakeholders and uphold the company's integrity.

Implications of Not Disclosing the Error

Choosing not to inform the president about the miscalculation poses significant ethical and practical risks. Ethically, withholding such information constitutes a breach of professional integrity and can be classified as dishonesty, which violates codes of conduct set forth by accounting professional bodies (IFAC, 2018). From a practical standpoint, if the error remains undisclosed and the projections prove false, the company’s reputation could suffer severe damage once the truth emerges, leading to loss of stakeholder trust, legal repercussions, and diminished shareholder value (Guillet & Guillet, 2019).

Furthermore, failure to report might result in the accountant facing disciplinary action or termination if the concealment is discovered, and it can impair the accountant’s professional credibility and career prospects (Rittenberg & Schwieger, 2019). Ethically, silence in this scenario contradicts principles of accountability and honesty that are fundamental to the accounting profession.

Ethical Considerations

The core ethical issue revolves around balancing honesty against potential personal or organizational repercussions. Transparency aligns with principles such as integrity and objectivity, which require accountants to report facts accurately and avoid misleading stakeholders (AICPA, 2020). Additionally, the obligation to prevent harm to investors and the broader market underscores the importance of disclosure (Fox & Ward, 2019).

Conversely, concerns about damaging the company’s reputation or causing undue embarrassment can tempt an accountant to conceal the mistake. Such actions undermine the trust placed in professionals to act ethically and responsibly (Mitchell & Graves, 2021). Therefore, the ethical approach recommends disclosure, accompanied by a professional explanation of the mistake, the steps to correct it, and assurance of corrective measures being undertaken.

Conclusion

In conclusion, the accountant’s decision to inform the president of the miscalculation is ethically sound and aligns with professional standards emphasizing honesty, integrity, and responsibility. Despite potential short-term repercussions, transparency sustains organizational trust and personal credibility. Non-disclosure, while seemingly minimizing immediate fallout, risks far more damaging consequences in the long run, including reputation loss and legal liability. Ultimately, ethical principles and professional integrity advocate for openness, correction, and ongoing diligence to uphold the standards of the accounting profession and safeguard stakeholder interests.

References

• American Institute of Certified Public Accountants (AICPA). (2020). Code of Professional Conduct. AICPA.
• Crumbley, D., Hertlein, B., & Miler, J. (2017). Accounting Ethics. Cengage Learning.
• Fox, T., & Ward, H. (2019). Ethical Issues in Financial Reporting. Journal of Business Ethics, 154(1), 15-24.
• Guillet, B. D., & Guillet, I. D. (2019). Managing the Ethical Dilemma in Financial Decision Making. Business Ethics Quarterly, 29(2), 245-262.
• International Federation of Accountants (IFAC). (2018). Handbook of the Code of Ethics for Professional Accountants.
• Mitchell, S., & Graves, L. (2021). Ethics in Accounting and Finance. Routledge.
• Rittenberg, L. E., & Schwieger, B. J. (2019). Financial Accounting & Reporting: A Decision-Making Approach. Cengage Learning.
• Sophie, L. (2018). The Impact of Ethical Decision-Making in Professional Accounting. Journal of Business Ethics, 152(2), 337-350.