Financial & Managerial Accounting Report

What’s ethics got to do with accounting? Everything! Believe me,
everything. When
the word ethics is mentioned, what readily comes to mind is the question
of deciding
between doing what is right and doing what is wrong. But doing what is
right versus
doing what is wrong within what context? The idealist will say that
decisions of ethics
should not be conditional. But it is not as simple as it sounds, for
what constitutes “right”
to one person, may be “wrong” to another person. What bridges the gap,
guides, and
clearly distinguishes the line between right and wrong in political,
economic and social
systems are traditions, culture, laws and regulations. Even then, what
is unethical may not
necessarily be illegal, even though there exists a close relationship
between the two.
These dynamics apply to almost every legal profession, accounting not
exempted. This
paper examines the issues of ethics in accounting. It also looks at the
differences and
similarities between financial accounting to managerial accounting.

According to Marshall et al, (What the numbers mean, 2003)
accounting involves
“identifying, measuring, and communicating economic information about an
for the purpose of making decisions and informed judgments.” This
definition clearly
shows that there are stakeholders in the information generated by
accountants. These
include managers, shareholders, oversight and law enforcement agencies,
and the general
public. Since these entities rely on the reports generated by
accountants for critical
decision making, it is important that the information be reliable,
objective, and presented
in an easy to understand format. Ignoring or circumventing these values
renders the
information generated unreliable. It can lead to devastating
consequences as evidenced
by events which led to recent legislation such as the Sarbanes-Oxley Act
which seeks to
make top management of organizations accountable for the financial
statement produced
by their organizations through the internal controls they develop and
enhance, and to
oversee auditors who hitherto could have business interests other than
auditing in the
organizations they were responsible for auditing.

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Financial versus Managerial accounting
Managerial accounting refers to the management of company resources
applying management accounting principles in decision making. One
characteristic of management accounting is that, it is internal to the
organization even
though external information such as financial accounting reports will
have some amount
of influence.

Financial accounting refers to the identification, recording,
computation, and reporting
of financial information to users who may have a stake in the
information reported. An
important characteristic of this information is that it is geared
towards users external to
the company.

A financial accountant generates information for external
consumption. These
products include the income statement, the balance sheet, the statement
of cash flow, and
the statement of owner’s equity. These statements are used to help
stakeholders make
critical decisions related to the business. A management accountant on
the other hand,
generates reports such as the schedule of cost of goods sold, and may
use reports
generated by the financial accountant. The schedule of cost of goods
sold is used to
evaluate and record internal costs associated with the production
process using various
methods. This is important for employees to understand how their actions
impact the
overall production costs. The income statement can be instrumental in
helping employees
understand the direction the business is headed in terms of
Ethical values
The public and oversight organizations have expectations as far as
ethics are 0
concerned. This guarantees a reasonable amount of reliability and
dependability of the
information they rely on to make critical decisions. These expectations
professional competence, confidentiality of stakeholder information
where necessary,
objectivity of the information reported, and the integrity of accounting

* Competence
All accounting professional should have the requisite skills
to effectively execute.
In my capacity as a disbursing clerk in the United States Navy, I
attended the Naval
Technical Training Institute in Mississippi, where I was fully trained
in the duties of the
disbursing clerk. Updates to this training are also offered while on the
job in the form of
workshops and messages in addition to the hands on training received
when a member
starts working.

* Confidentiality
Stakeholder information should be protected from illegal use
or disclosure. If
there is an institution which is very conscious about the security of
its information, it is
the military. This extends beyond accounting into other realms of
professional realms of
endeavor. The privacy act also limits us from disclosing any information
about a
member’s account until they have voluntarily disclosed some personal
information for
identification purposes and have authorized the release of their
accounting information
either in person or over the phone.

* Objectivity
Accounting information should be fairly and objectively
communicated to the
public. This function in my workplace is supported by the training we
have received and
the checks an balances comprising supervisors and auditors. Each has an
oversight role
to play, thereby resulting in the accuracy and objectivity of the
information released.

* Integrity
Professional should avoid conflict of interest which will
jeopardize their ability to
perform their duties in accordance with the above listed values
including this one. Honor,
courage, commitment is key to the Navy’s core values which are
emphasized not only
in the accounting and payroll sections but across the military. Training
and indoctrination
enable us uphold these values.

If ethical decision-making is in the interest of all stakeholders,
why would accounting
professionals engage in unethical behavior? According to Shaud et al
(Self interest vs
concern for others, 2005), the answer lies in self interest which is a
natural human
phenomenon. In motivated self interest, which is what causes unethical
behavior there is
a payoff. This payoff which may be personal or organizational in nature
professionals to make unethical decisions. They further identify
personal, organizational
and professional values as the basis for analyzing, designing,
re-enforcing preventive and
corrective behavior with the following specific recommendations for
reinforcing ethical

Internal to the organization
1) Management need to set examples worthy of emulation
2) Ethical values need to be articulated and emphasized to
3) An understanding of employee values is important
4) Reward employees who uphold these values
5) Communication to the public about a commitment to the public’s

External to the organization
1) The importance of leadership by organizations such as the
Institute of
Management Accountants and the American Institute of Certified

2) The reinforcement of ethical values at educational institutions
undergraduate and graduate study
The ethical decisions made by accounting professionals will
continue to be the basis
for the integrity of the financial information generated by accounting
Unethical decision making will remain the biggest challenge faced by the
profession, but it behooves all practitioners to understand that for
each unethical decision
made, the financial market s threatened and trust is broken.

Self Interest vs Concern for others: What’s the impact on management’s
ethic decisions:
Michael K. Shaub, Frank Collins, Oscar Holzmann, and
Suzzanne H. Lowensohn.
March, 2005. Retrieved on 21st May, 2005 from University of
Phoenix online
EBSCO database. Reference
Corporate greed vs. IMA’s Ethics Code: Recent corporate financial
scandals. Elizabeth
M Haywood, CMA, CPA and Donald E Wygal. November 2004.

Retrieved on
May 21st from University of Phoenix online EBSCO database.
Accounting: What the numbers mean.Marshall, Wayne W. McManus, and Daniel
Viele. Retrieved on 21st May, 2005 from