Entering the business field of accounting launches an individual accountant as well as the accounting department to take on responsibility of their organizations accounting data and information. They become and are responsible for preparing and providing accurate financial budgets to auditing and decision making departments. This is done while maintaining and controlling their companies financial integrity while adhering to corporate and federal guidelines.
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Accountants convey integrity, ethical and moral standards by understanding and practicing financial authority. By identifying and rectifying incorrect financial reports is one example of showcasing accountant trustworthiness. (Madsen, 2013) researched the pursuit of high quality standards in accounting. Within his research he found that often times management can choose whether or not a policy or choices being made can relate and reflect to personal selection biases. An accountant has the reasonability to ensure that they are choosing to report based upon what is financially correct versus personal or company management benefits. Shareholders not only want financial gain, they can also be looking for utilitarian, emotional and expressive benefits for peer approval (Pilaj, 2015). Therefore, shareholders will rely upon their management and accounting officials to produce positive results for their requests. Conflicts of interest may arise if management comes under pressure by shareholders attempting to avoid market failure. Requests for omission or manipulation of figures may be made by deciding figures and it is the responsibility of the accountant to report if financial documents have been misrepresented. Smieliauskas, Bewley, Gronewold & Menzafricke (2018) found that ethical blindness can happen if decision making is narrowly focused on the short-term gains that may become required by shareholders. Therefore, it is the responsibility of accountants to ensure that financial documents are a true representation of the company’s financial standing.
Accountants face many types of standards when it comes to the accounting professions. Professional and personal reporting are a couple of examples that can reveal lax ethical decision making in both areas. In essence, it is the responsibility of accountants to ensure that reliable decision making happens. Yuen, Thai & Wong, 2016 researched if and why customers are willing to pay for corporate social responsibility (CSR). They found that customers develop a sense of connection, which can result in satisfaction and loyalty to companies that exhibit positive corporate responsibility. How does one accountant set standards to assist with positive corporate values while ethically reporting for financial gain?
Using independence and objectivity allows accountants to emphasize the right and wrongness of individual actions and the production and quality of true, non-fraudulent financial reporting (Vladu, Amat & Cuzdriorean, 2016). Generally Accepted Accounting Principles (GAAP) are common set of standards and procedures accountants must follow while organizing the financial statements within their company. Following GAAP, accountants refine and lend assistance of the clarity of financial information and overall ethical practices within a corporation. Maniora (2014) studied how the internalization and externalization of integrated reporting may adjust ones decisions, processes, strategy and business models and how a companies boundaries affect those reports.
There are many penalties that an unethical accountant can encounter when reporting, hiding or falsifying financial reports. In an attempt to enforce multiple federal and securities laws, the U.S Securities and Exchange Commission (SEC) was formed. The SEC has created and maintained many acts such as the Securities and Exchange Act of 1934, Securities Act of 1933, Investment Advisors Act of 1940 and more recently the Sarbanes-Oxley Act of 2002. The main mission of the SEC is to protect investors, maintain fair, orderly and efficient markets as well as facilitate capital formation.
The most important development from the SEC is the passing of the Sarbanes-Oxley Act of 2002 (SOX). SOX allowed protection for investors from the possibilities of fraudulent accounting performed by corporations. The main responsibilities of SOX is to guarantee that senior management within a corporation certifies complete and accurate financial statements as well as verifying that internal controls and reporting methods are controlled within their entity. (Banerjee & Kaya, 2017) researched that with the passing of SOX Act of 2002 the number of multiple directors that were also active CEO’s of any company had decreased. Only for it to increase around 2006, therefore denying the long term effect of the Sarbanes Oxley Act passage. When you have situations as such presenting themselves as a form of unsuccessful monitoring, it can give off the illusion that it would be okay to make unethical or unsound decisions when it came to financial reporting.
While reading and comprehending the research of Banerjee & Kaya, one may be questioning whether or not some forms of control can backfire? Often times when limitations exist there can be good and bad consequences. (Dearman, Lechner & Shanklin, 2018) assert that failing to have the knowledge that is relevant to certain situations can result in poor decision making due to not having the necessary information for positive decision making. Examples of the poor choices being done internally can present themselves as in monetary motivation forms. Therefore, creating the potential for unethical behavior and decision making not only by individuals but departments as a whole. However, good can come by the use of positive controls for departments. Such as controlling certain situations like the sacrificing of monetary gain to further social goals and engage in philanthropy by reaction to the positive demand of stakeholders (Benabou & Tirole, 2010).
Leading the good and bad decisions falls upon ones personal and social moral standards. Once those standards have gone astray from positive corporate culture, accountants and managers alike can find themselves feeling the repercussions of the fraudulent reporting. Penalties differ based upon the SOX section that has been violated by the person responsible for correct financial reporting. The violations range from penalties and fines in the range of millions of dollars and imprisonment.
Corporate & Social Responsibility Of Accountants. (2021, Mar 24).
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