This essay will explore the various controversial topics in Management Accounting, and propose an understanding of how these issues should be examined from a biblical perspective. The three topics that will be discussed are accounting fraud, whistle blowing, and the issue of benevolence. These three issues are all very controversial in the business realm, and can all be read about in the American Institute of Certified Public Accountant’s Code of Professional Conduct. Additionally, even though some of these issues are “hot topics” in today’s society, the Bible still has relevant things to say related to all three topics.
Ethical Concerns in Management Accounting
Ethical Concerns are one of the most intriguing topics in the realm of Management Accounting. As controversies and debates rage, it is important to grasp the different issues that often arise, and how these issues should be examined from a Biblical Worldview.
Accounting Fraud
President Theodore Roosevelt once said “To educate a person in mind and not in morals is to educate a menace to society.” (Low, Howard, & Hooper, 2008) Roosevelt had it right. It does not matter how much we educate someone if we do not teach them morals we have failed not only them but society as well. This is evident by the onslaught of accounting scandals we experienced at the beginning of the twenty-first century. Companies like Enron, WorldCom, Adelphia, Tyco International, AIG, Bernie Madoff, Lehman Brothers and Waste Management just to name a few. To specifically use a company as an example, Tyco’s top executives were charged with civil fraud and theft. Former CEO L. Dennis Kozlowski and CFO Mark H. Swartz along with former General Counsel Mark Belnick were accused of taking low interest or interest free loans from the company. Tyco had a “Key Employee Loan” program designed to pay for employee’s moving expenses. (Kumaran, 2014) “They were accused of issuing unapproved bonuses to themselves and other key employees. It is alleged that these bonuses acted as de facto loan forgiveness for employees who had borrowed company money or were used to buy the silence of those who suspected the former CEO and CFO of fraud,” (Einstein Law Inc., 2006)
The falsification of financial data and documents is unethical because it is lying to manipulate public perception. The criminal activity in this case was carefully coordinated and intentional. The group of accountants and executives who were orchestrating the fraudulent activity would meet to discuss which false entries and accounts could be created to avoid detection by the auditors. Much of the activity took place in various asset accounts and the contractual revenue account, which provided an estimated offset to cover the difference between what patients paid for services and what their insurance companies would cover for various services.
There is nothing about fraudulent behavior that aligns itself with a Christian worldview. The participants of theft scandals act with knowledge of the illegality and immorality of what they are orchestrating. Deception of the public, taking advantage of those in lower positions of power, lying to the federal government, effectively stealing from investors – these are all actions forbidden in scripture. The Lord condemns immoral behavior and rewards those who abide by His law. The Bible tells us in 1 Timothy 6:9 “But those who desire to be rich fall into temptation, into a snare, into many senseless and harmful desires that plunge people into ruin and destruction.” Additionally, Proverbs 28:18 (ESV) reads “Whoever walks in integrity will be delivered, but he who is crooked in his ways will suddenly fall.” In the case of many scandals, there are few who take the moral walk of integrity and most fell in some manner because of it.
Whistleblowing
Whistle blowing, a controversial topic, is extremely relevant to ethical behavior in management accounting. It is important to understand what whistle blowing does and does not entail. According to George Susmanschi, “A whistle-blower is a person who tells the public or someone in authority about alleged dishonest or illegal activities (misconduct) occurring in a government department, a public or private organization, or a company.” (Susmanschi, 2012) Thus, whistle blowing is one person taking a stand against wrongdoing within an organization. Susmancschi’s definition includes dishonest or illegal activities as criteria for situations that require whistle blowing. This is important to note because whistle blowing is not meant to be a way for one person to profit based of a “perceived” wrong.
Though whistle blowing is clearly beneficial in many scenarios, the question remains of whether it is an ethical practice. Susmanschi points out that some view whistle blowing as a violation of loyalty and commitment. When considering this argument is important to consider the object of an accountant’s loyalty and commitment. Not only does the accounting professional have a duty towards their employer but also to the general public. If fraud or illegal activities are being committed how can the professional allow it to happen and not do anything with a clear conscience? “As long as the person who blows the whistle has a vindication and he is sure that this/these motivation(s) are sound and he is confident in the system he should relay such information without fear and with the certainty that he took the right decision with the intention of helping to create and/or maintain not only a safer working environment, but a better place to live” (Susmanschi, 2012). Therefore, it is safe to assert that whistle blowing is an ethical behavior if and when an employee does so because of the rightful motive of creating a better environment and to eliminate as much as possible within his or her power the presence of unethical behavior.
When evaluating whistleblowing from a Christian Worldview, The Bible speaks repeatedly of serving one’s employers to the best of his or her ability. Ephesians 6:5-8 (ESV) says, “obey your earthly masters with fear and trembling, with a sincere heart, as you would Christ, not by the way of eye-service, as people-pleasers, but as bondservants of Christ, doing the will of God from the heart, rendering service with a good will as to the Lord and not to man, knowing that whatever good anyone does, this he will receive back from the Lord.” If one goes through the proper process for evaluating a decision to blow the whistle or not, he or she can feel confident that he or she is doing so in the best interest of their employer, fellow employees, and other stakeholders, while glorifying God in the process.
Benevolence
In its simplest form, benevolence means we should do the right thing all the time no matter what the cost. In management accounting, we will find that benevolence and goodwill are especially important when dealing with the financial situations of clients. Additionally, benevolence requires the absence of an egocentric or profit seeking motive. It requires that goodwill be done out of the kindness of your heart, not because you are seeking further gain or self-fulfillment. Benevolence is an important issue to examine because the majority of clients will assume we as CPAs practice benevolence in our every action.
In the business realm, benevolence can often be perceived as weakness and vulnerability. Business tycoons are known to prey on those who do not show a great amount of strength and power in the work environment. I would pose the idea that benevolence can be displayed while also being a bound and determined business person. It takes a secure, self-confident person to exhibit the qualities of kindness and generosity without wavering in the insecurities of how others may perceive them. A benevolent CPA will demonstrate these characteristics without considering the repercussions related to what others will think or say.
The AICPA has a great deal to say about the issue of benevolence, even though the word benevolence is never explicitly mentioned in the code of conduct. The code states that “CPAs are to act with a mission of serving public interest, demonstrating commitment and honoring public trust. An accounting professional therefore should do well to the public with a no personal profit-making motive. Professionalism should be basic in their work. They should act to serve the public interest instead of their personal interest.” (American Institution of Certified Public Accountants, 2014) This means that it is our personal job as accountants to serve our clients and the public in the most honorable and noble way possible. It is the personal belief of clients that CPA’s are always abiding by the code of professional conduct, which means it is our responsibility to live up to our duty of serving the clients in the best way possible. Additionally, Section 56 of the code indicates that “A member should observe the profession’s technical and ethical standards, strive continually to improve competence and the quality of services, and discharge professional responsibility to the best of the member’s ability.” (American Institution of Certified Public Accountants, 2014) This portion of the code indicates that it is the responsibility of a CPA to not only uphold the ethical standards outlined, but also strive to better develop the quality of service to customers and the general public. These types of actions are those of excellence, and should be performed on a daily basis by a CPA.
Perhaps the greatest form of benevolence exists solely in God-breathed scripture. God sent his only son to save a fallen and depraved world, a task that could only be taken on by a perfect savior. Because Jesus Christ died to save all of us, it is our responsibility to live as a constant reflection of Him. Our actions of benevolence as Christians should be a clear demonstration of the perfect and holy nature of Jesus Christ.
Conclusion
This paper has presented three different ethical issues that will arise in the career of management accounting. It has also used examples of biblical teaching on God’s involvement in the realm of business, and how various doctrines and scriptures will affect my career as an accountant. As Christians, it is imperative that we recognize how God’s word is still relevant, and how it should affect our everyday lives.