Question

This week we continue to build our understanding of ethical accounting practices by examining the intersection of business and accounting practices by examining the ethical responsibilities of accountants when encountering company procedures affecting the accounting function, and its related responsibilities. Considering differing bases for accounting (cash, accrual) available,

Discuss the legal rights, responsibilities, and liabilities involved when the accounting function is asked to take action(s) that may be inconsistent with the accounting basis that the company has traditionally used.

Does it matter if this is a “one-time” shift, or not?

Would it matter if the shift were not disclosed to the company’s lenders or the SEC? Why or why not?

Answer 1

COMPANY PROCEDURES AND ACCOUNTING ETHICS

Ethical behaviour as well as ethics refer to more general attitudes and values such as integrity, values, morals, honesty etc. The accounting ethics plays an important role in every organization, because they deal with life blood of every business. Their ethical behaviour will lead to the most efficient as well as true and fair view of the financial statements. if they became unethical, it will lead to drastic isuses towards its  stakeholders. the ethical behaviour is the best result that can be given to those who belive the accountant and gave him a position in their firm.

While going through traditional measures and ethics, we have to say "whether an activity done from previous period or back doesnt mean that it is correct way to follow up. if it is as per the legal or accounting bodies then, then it is ok at that time. but current scenario is our issue. if it is against the accounting principles now prevailing, then we have to act accordingly. not as per historical activities. since there is confusion regarding which one to follow, we have to consider the legaly followed activity of recording accounting entries.

Shifting from traditional unethical activities to ethical activities, we have to consider the practises followed till now. the range of changes required should be closely monitered. proper way out should be analysed and implemented.

practically there will some challenges to be faced, so those are also to be planned. those plan should address those challenges effectively without affceting stakeholders. the shifting can be onetime but proper way of planning required to address the most negative possibilities

The shifting should be disclosed to lenders if it there is chance to affect them. The disclosing will be an issue if it is reasonable for them to know. if the aftereffects of shifting will affect the lender's interest in our company. then they have right to know about it and hence those information is to be disclosed else no need.