Introduction
Management accounting needs to be ethical as for the company or business to run to its full potential the workers have to be satisfied and treating them with respect and in an ethical way. There are many more factors of ethics within a business such as Business Owners, Governmental Bodies and Environmental Bodies. In this essay I will be expanding on what management accounting is, what it means to be ethical another sector I will be looking at is how management accounting is ethical, why it should be ethical and looking at situations where businesses have been both ethical and unethical.
What is management accounting?
Management accounting is the main source where information is needed within the company this can be used for making decision “The management accounting is the main supplier of business information required for making decisions within a company”. (ŢAICU, 2017). This is where management accounting is used is within big company’s all this information’s is used my managers to make decisions on a day to day basis this is for internal audiences like managers and chiefs rather than stakeholders. Within the reports some things that can be included are available cash, how much revenue they have made from sales another thing that can be seen on the report are the debts of which businesses owe and how much they are owed from their customers.
What does it mean to be ethical?
How can management accounting be ethical? Why should it be ethical?
Management accounting needs to be ethical as for the company or business to run to its full potential the workers have to be satisfied and treating them with respect and in an ethical way. Due to how important the information could be measures have to be taken to make sure that it is safe making sure that the employees can be trusted. Employees would also have certain ethics to live up to like the protection of the business and the information they share this cannot be exposed to others as then it is seen as unethical. If information was exposed and the employees were complying with others then this can also lead to the business not becoming a good atmosphere to work within. The businesses can be ethical by teaching their employees about what ethical is, how it is achieved and what is expected within the business to make it ethical. “Accounting can transform the world, can influence the lived experience of others in ways which cause that experience to differ from what it would be in the absence of accounting.” (Jere R. Francis, 1990). This is a reason why management accounting should be ethical as it can change the lives of people and is used on a day-to-day basis. It is stating to be used more and more. On the other hand if it were to be unethical it would be a bad thing as like it said it could transform the world. if people are being unethical then the world cannot transform an example of being unethical is not paying taxes less money would be invested into the community stunting their growth. Another reason why it should be ethical is because it would give business a good reputation so they can make more money if they had a bad reputation it would be harder for them to make sales and money because the customer would not trust them and go elsewhere.
Ethical 2 and unethical 1
One example of an unethical situation was Tesco is in “2014 Tesco was involved in an accounting fraud that procured to Tesco the title of the grocery giants earnings collapse. The accounting scandal wiped £1,5 bn of the retailer’s market value and Tesco experience the biggest faller in the FTSE 100 index of blue chip companies.” (Ferri 2017) This is very unethical as they were cheating the people of the money that could have been used for other things, they have also been braking laws and for the business this is very bad as like shown sales had reduced a lot and customers started going to their competitors. They were lucky as it could have determined them in to future but they have brought themselves into a strong position and are still competing with the other big companies.
One example of ethical business and situation that still goes on in the world today is fair trade. They make sure that all parties within the process are being treated fairly managements accountants for a fair trade business have to ensure that organisations such as farmers or the local communities are receiving their fair share of income. Which can make the people happy and as they have a fair amount of money compared to others they can spend more to support themselves. This can have an effect on the whole country as then companies would get more money allowing the government to increase their income as well because of taxes so this is good.