Financial Accounting For Business And Society: Ethics, Governance, And Stakeholders

Discussion

Discuss about the Financial Accounting for Business and Society.

The modern world constitutes of very complex business structure with the changing time and taste and preferences of the consumers. Therefore, every enterprise functioning within this economic structure tries to optimize its production and service unit by taking out the best out of all the factors of production. One of the most important factors of production is labor or the employees working in an industry. The proprietor of the business always tries to keep their employees satisfied by providing lucrative remunerations and rewards from time to time in order to get the best out of them. The idea of corporate governance was introduced within an organization in order to look after the employees and their desires. An industry even has the role of keeping their stakeholders happy and satisfied, as they are the central nervous system of an organization by providing capital and finance to the firm to keep their production process smooth. It is of great importance for any firm to keep a strong governance and ethics structure so that the stakeholders and the employees are satisfied.

In the present study it is seen that Cocoa Ltd is a large departmental store which uses a straight line method from its inception. The company has been making a record profit and it is expected that the profit would continue to last for the next two years of 2016 and 2017. The economists are in a prediction that an economic slowdown might occur in 2018 and 2019 which might lead to a fall in the profit of the firm. The manager of the firm in order to maintain a consistent profit for the next few years has asked the accountant to establish a strategy so that this profit can be maintained and the confidence of the stakeholders can even be kept towards the organization.

The current paper tries to analyze and discuss the ethics, governance and stakeholders along with the change in the depreciation method that can bring about changes in the structure of the firm and keep a consistent profit within the firm.

This part of the paper tries to analyze the case study with respect to the changing depreciation methods along with concentrating on the ethics and governance of the organization. The firm even tries to satisfy the interests of the firm by keeping a consistent profit and creating a reputation in the market. Cocoa Ltd is a consistent profit making departmental store, which has even estimated that it would be making a profit for the next two years as well. The economists on the other hand have predicted that there might be a economic slowdown in the year 2018 and 2019. The economic slowdown will lead to the fall in the profit of the firm which will not only hamper their market reputation but will even discourage the stakeholders to make further investments in the firm.

Importance of Ethics and Governance

The general manager of the firm Max Cocoa therefore, came to the accountant Andrea Andy and asked her to find a way out to reduce the profit of the next two years so that there can be a consistent profit distribution even during the years when there is an economic slowdown. Max Cocoa is asking Andrea to initiate such a process so that the stakeholders are happy with the performance of the organization and they stay with the organization even in the future (Tricker, 2015). 

The accountant of Cocoa Ltd, Andrea Andy was not justified with the reason shown by the general manager but she decided to do the same, as she was afraid that the firm might terminate her contract. The accountant therefore, decided to change the calculation of depreciation method from straight-line method to sum-of-years digits method (McConnell and Qi 2016). By altering the depreciation method, the firm will be able to decrease its profit, which will be essential in distributing the profit for the next two years to come. It is seen that Andrea did not disclose the changes she made in the financial statement as she thought that such a change in the accounting method might not satisfy the stakeholders and will even not give a good impression.

It is seen that corporate governance and ethics play an important role in the functioning of an industry. It is seen that the ideology of ethics and governance of an industry determine the how they function and how much they value their stakeholders (Denis 2016).

Ethics and governance is one the vital components of the skill base and knowledge of professional accountants in the modern world. As they are the important decision makers, it is essential that they must be experts in the regulatory regimes, governance techniques and compliance needs to make sure that effective and lawful operations and corporate behaviors are performed. With respect to Cocoa Ltd, it is seen that a proper understanding of the ethics and corporate governance structure and techniques bridges with the variety of responsibilities and roles shown in the accounting techniques. From the point of view of Andrea, the matter of ethics and governance provides the decision-making and analytical talent and knowledge to resolve and identify ethical and professional issues. Andrea does the same thing by listening to Max even when she felt that his idea was not justified. She felt that it is important for the organization to satisfy their stakeholders, as they are the core of the business (Joseph, Ocasio. and McDonnell 2014). The ethics and governance and is helpful in gaining knowledge as it is vital for the matters that specialize in the functional disciplines of accounts.

Professional Development for Accountants

It is seen that with respect to the other professional accountants, Andrea is also less involved with the traditional accounting methods and is more focused with the leadership and management. Andrea like the present accountants is leaders in their field and assists support to the senior management and therefore are involved in many crucial decisions regarding the business. Therefore, it is important for Andrea to have a proper knowledge about the governance and ethics to the play the role of a person who will support the senior management of the organization (Acharya et al. 2013). This matter not only enhances the chances of awareness corporate governance but even the members in distributing their functions.

It is important for Andrea to understand the matter of governance and ethics as it provides skills and knowledge that is essential for her to function effectively in the dynamic and universal business structure. This process is structured to make sure the development in a variety of professional ethics, attitudes and values among her and even in the accountants working globally (Bushee, Carter and Gerakos 2015).           

The subjects of governance and ethics is essential in providing skills and knowledge to the accountants so that they can work efficiently in the complex economic environment and even understand the needs of the management (Harijono and Tanewsk 2015). These subjects are framed to enhance development for a variety of professional values, ethics and attitudes in the professional accountants so that they can understand the problem of the management and concentrate on making decisions that will satisfy the stakeholders involved with the organization. (Carroll and Buchholtz 2014)

On proper understanding of the matter of governance and ethics Andrea will be able to understand and explain the factors from a global perspective and the style of accounting profession and their function as an accountant. It is crucial to apply for the important duties of the accountant, in this case Andrea from the point of view of a member of the CPA in Australia. These processes even points out the importance of professional judgments and ethics and explains the crucial regulatory and governance frameworks, which is inclusive of the international viewpoint on corporate governance and their effect on the variety of stakeholders involved. These factors are even important for accountants like Andrea as it explains the estimations based on the external and stakeholders coming up from the organizational responsibilities of the governance (Larcker and Tayan2015). It even ascertains different compliance and regimes, which effects the international business environment. Governance and ethics involved in the business is essential in finding out h leadership, strategic and international problems, which has an impact on the accountants, like in this case Andrea and her profession of accounting. It even describes the role, nature and importance CSR (corporate social responsibility) which is inclusive of the sustainable development and the change in the climate (Chun et al.  2014).

Conclusion

The module of ethics tries to discuss about the practical implementation of the ethics based on the notions of public interest and the stakeholders. It shows an overview of the ethical approach that is helpful for Andrea to solve the problems of ethical dilemmas, which in this case is the unjustified explanation of the Cocoa Ltd’s general manager Max. The problem is helpful in providing a detailed evaluation of the Code of Ethics for Professional Accountants and reveals the process to gain the code when addressing the ethical issues (Weber and Wasieleski 2013). The process even explains the factors that are essential to Andrea to influence the ethical decision-making and provides an outline of a proper approach of decision n-making that may be essential to make better decisions like Andrea did by changing the method of depreciation by not disclosing in the financial statement (Simmons, Shafer and Snell, 2013).

The theory of governance can be well explained by examining the corporate governance framework. It includes the consideration of relationship between the stakeholders, managers and the organization.  It is seen that there are vital guidance and codes on governance which Cocoa Ltd have seen in the country like Australia which are thought as a crucial role which affects the differentiation in the cultural approaches with respect to corporate governance (Chen 2013). The process tries to end with the discussion on the governance failure that have been found out it is seen that problems like this unjustified reasons of Max may arise in future and therefore recommendations for improvements can be seen. The process tries to limelight those professional accountants, as Andrea needs to have strong understanding of the concept of governance so that a successful fulfillment of the duty and obligations can be maintained (Javid and Ahmad 2014).

According to the current scenario, it is important for Andrea to understand the ethical behavior with respect to the corporate governance, which requires the analysis in two levels namely the internal concerns of the corporate agency and the growth effects on the welfare of the society or the stakeholders who are connected to the organization (Carroll 2015).

It is seen that the governance is based on the premise that the managers, employees need to behave in their most effective interests to satisfy the stakeholders and the owners. There are two factors that restrict the ideology and they are the interest of the managers while going over with the stakeholders. There are instances when the agents can help themselves in various ways that can hurt the stakeholders. The second part includes the fact that the stakeholders have neither the skill nor the knowledge, which the management possesses. This can establish a dynamism where the accountants like Andrea may be forced to “short termism” which means behaving in ways that look to the stakeholders and that is how Andrea had behaved by not disclosing the change in the depreciation method in the financial statement. However, such process undermines the value creation over time thereby decreasing the profit of a year so that the profit can be distributed over a few years more. Variety of transparency, oversight and remunerative mechanisms has grown and are still growing to enhance and restrict the agency cost.

Conclusion

The evaluation of the current study reveals that the organization Cocoa Ltd even being a profit for the last few years have predicted that due to economic slowdown there can be a decrease in the profit for the firm. The manager of the company asked the accountant Andrea to initiate a process that will reduce the profit for the current year so that there will be a consistent growth in the profit even during the time of economic slowdown. The idea of ethics and governance with respect to the stakeholders hold an important part as it is helpful for Andrea the accountant to understand vitality of the stakeholders. The paper even shows the ethical and governance structure, which has helped her to make financial decisions by changing the depreciation method without mentioning it in the financial statement so as to retain the impression of firm and even understanding that unjustified decision of the general manager to be effective and taking the decision same.

Reference List 

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