Management accounting is the process where they produce convenient monetary guidance, which a company will take into consideration when making a judgement. The title is questioning if the process needs to be ethical, suggesting that if the documents provided by the business need to follow what may be seen ethically fair and what may be seen ethically invalid. This essay will cover both advantages and disadvantages of management accounting being ethical.
According to the (https://www.cimaglobal.com/Professionalism/Ethics/), they have the role of guiding what management accounting should follow, they set rules and regulations on the ethics they should oblige. One of their principle states, they must make sure they treat everyone equally, and not show any personal dislikes, this is because they want to give everyone equal chance and not be biased towards anyone. Secondly another principle is the accountant has to make sure they are forthright, and do not lie to anyone they deal with. The information that they use, must be true, if they feel the information may be not 100% true, they must not take it into consideration. This is important because public trust them to be loyal, so if they use false information this can be seen as fraud. Thirdly the principle states they must make sure they oblige the individual’s personal information. And the fourth principle states they do not share their personal details with anyone without their permission because, if they were to disclose anything without the individual’s permission, they may be faced with serious issues which may affect the reputation of the business for example. And the last principle states that they must follow the current laws because by doing this they can assure they are up to date and are following the legal aspects. This shows management accounting have to be ethical as accountant have a set of rules and guidelines, which highlights the importance of being ethical in the workforce, they must follow this as it is mandatory. (https://www.cimaglobal.com/Documents/Ethics/CIMA%20Code%20of%20Ethics%202017.pdf
The importance of being ethical, in management accounting are according to Francis, R. J. during the process of management accounting the individual, must take the responsibility of what their decisions consequence will be ‘… reflect on how accounting is used to effect economic relations between people’, it is important that accountants take care into considerations of the society as it can affect the company’s reputation if they do not take the stewardship of taking care of the economy, by making sure they follow a ethical code when dealing with management accounting.
The advantage of being ethical in management accounting is, ‘…composed of values, policies and activities affecting the qualification of organizational behaviors’, this suggests that companies have a plan which they explain what is right and wrong, by doing this the companies productivity level will improve, and the staff within the business will know what to do and what not to do to avoid any issues. By being ethics the businesses ‘values can increase team work morale, honesty in work place’. In addition to this another advantage is by being ethical businesses can make sure they avoid issues such as impropriety (Meymandi, A. R., et al 2015). Ethics is important in the management accounting because of the past when management accounting did not follow any ethics, they faced a huge amount of scandals, this was published on a number of articles, as a result of the scandals they were faced with bankruptcy.
Another journal that highlights the benefits of management accounting being ethical is, by a business being ethical, so doing what is considered to be right and wrong, this will encourage the society to understand the process that the accountant carries out is morally correct. (Yustina, A. I., & Liswandi,. 2017).
The drawbacks, of management accounting being ethical is nowadays businesses are not open, showing care to others as companies now focus on their surplus rather than wanting to be ethical, businesses just focus on maximizing their earnings through any way. This can mean if business decides to grow and move into other countries because of ethics they would be restricted with options. And by being ethical it can be a drawback as it may mean the business will have to spend more money on gathering information which is ethically right which can also mean the business has to take more time on this (Meymandi, A. R., et al 2015).
In addition to this another disadvantage is management accounting is, when they gather information, they may struggle to get relevant quality information, as ethics may set boundaries on the type of information they produce, which may not be as useful. According to the standards of ethical conduct for management accountants’ article, it has been highlighted that because the organization is ethical, they have limited access ‘… select and provide, to all levels of management’ (Labelle R., et al 2009).
Furthermore, another disadvantage of management accounting not being ethical, is this may slow down the production level of the employees, as they would not be as motivated to do their best to the ability as their freedom will be taken away instead, they would just have a set of rules of what is right and what is wrong that they can follow. This will also affect the staffs as this may suggest they would have to familiarize themselves with a unfamiliar set of guidelines.
In conclusion management accounting needs to be ethical, as firstly according to the CIMA, individuals who are accountants are required to follow the guidelines which outline that ethics is important in the finance sector. Another reason why they have to be ethical because as if they are not ethical, this may both damage their business morals and their reputation, as some individual’s will avoid dealing with business management that are not ethical as it goes against their beliefs and values. They can’t be ethical, as if a company deals with just wanting to grow their business, they would not consider the ethics, as this may be a factor that affects their actions they do as a business.
Reference:
1. Meymandi, A. R., Rajabdoory, H., & Asoodeh, Z. 2015. The Reasons of Considering Ethics in Accounting Job. International Journal of Management, Accounting and Economics, 2 , p.p.136-143, [Online] Available at: <http://content.ebscohost.com/ContentServer.asp?EbscoContent=dGJyMNLr40SeqK44zOX0OLCmr1Cepq9Sr6y4TLSWxWXS&ContentCustomer=dGJyMPGrtky2prZQuePfgeyx9Yvf5ucA&T=P&P=AN&S=R&D=buh&K=102558383 > [Accessed 16 November 2018]
2. Labelle R., Gargouri, R.M., & Francoeur, C., 2009. Ethics, Diversity Management, and Financial Reporting Quality. Journal of buissness ethics. [Online] Available at: <https://page-one.springer.com/pdf/preview/10.1007/BF0038278> [Accessed 19 November 2018]
3. Yustina, A. I., & Liswandi,. 2017. Does Auditors’ Role Influence their Ethical Environment?: Examining The Mediating Roles of Organizational Fit. International Journal of Management, Accounting and Economics, 4, p.p. 30-42. [Online] Available at: <http://content.ebscohost.com/ContentServer.asp?EbscoContent=dGJyMNLr40SeqK44zOX0OLCmr1Cep69SsK%2B4SLOWxWXS&ContentCustomer=dGJyMPGrtky2prZQuePfgeyx9Yvf5ucA&T=P&P=AN&S=R&D=buh&K=121979778> [Accessed at 15 November 2018]
4. Francis, R. J., 1990. After Virtue? Accounting as a Moral and Discursive Practice. Accounting, Auditing & Accountability Journal, Vol. 3 Issue: 3,[Online] Available at: <https://doi.org/10.1108/09513579010142436> [Accessed at 20 November 2018]