Question

Why does budgeting creates serious ethical issues for mane people and give an example?

Answer 1

Budgets play an important role in evaluating the performance of employees or people but ethical issues spread throughout all aspects of budgeting. Employees may breach the code of ethics if the firm fails to take preventive measures for lowering the performance. The budgets create serious ethical issues due to following reasons;

1. Budgetary slack creates many problems for the people which results in creating unethical issues. For example if the employees will not able to achieve the targets which has been set for them then they take unethical steps for achieving those targets
2. If the company is facing losses then it results in inefficient allocation and coordination of activities which is considered as unethical act on the art of the employees. For example; all the budgets are prepared in accordance with the sales budgets and if the sales budget is wrong then all the other budgets may also be planned incorrectly.
3. Another ethical issue is spending the budget. Managers try to spend the entire amount which has been budgeted for them because they believe if they don’t spend the budgeted amount now it will be reduced for the next year.