Accounting fraud

Custom Student Mr. Teacher ENG 1001-04 8 May 2016

Accounting fraud

Accounting fraud can be defined as knowingly falsifying accounting records in order to increase sales revenue and net income. Accounting fraud is committed in corporations by means of showing false information, using funds for illegal purposes or inflate expenses, overstating revenues, understating expenses or overstating the value of corporate assets. All these activities are entirely unethical. Behaving ethically depends on the capability to recongnize the ethical issues and to believe on their existence. This ability to respond ethically at workplace related more to attributes of corporate culture than to attributes of individual employee Individuals often fail to realise their moral obligations at work and by being subject to world’s temptation fails to tread on their set ethical standards and behave unethically. People especially of todays generation are so much engrossed in their own different criterias of their lives that they almost forget to confine themselves to ethical boundaries that is why ethical decisions are always difficult to make and its foundation is based on several factors however if we talk about the decision by considering moral philosophies of a person; that depends on whether the person is making a work-related decision or personal-life decision.

A person in the business sector might view of the problem by thinking differently beacause of the outside force and under the work pressure. However, the same decision might be unacceptable to him outside the work. The second reason of people changing moral philosophies could be the corporate culture where they work. Rules and personalities of a business culture person eventually effects on the person and exerts pressure to conform to the firm’s culture. Edward Hall (1959), described culture as a silent language, and defines it as “that part of man’s behavior which he takes for granted, the part he doesn’t think about, since he assumes it is universal or regards it as idiosyncratic.” Geert Hofstede (1993) defined it as “the collective programming of the mind which distinguishes one group or category of people from another.” (P.489) A culture followed in corporate or on industrial level is known as Meso- culture and every organisation has their own set agendas regarding ethics because work ethics plays a pivotal role at work place to rein employees to behave ethically and keeping into account the ethical dimensions. In most of the organizations, there are set rules and policies specifically formulated to make ethical environment.

Every organization has a culture which mainly comes from the side of upper management and the rest of the employees follows the set trends and culture of their own corporate sectors. The culture of the organization varies from organization to organization because of the different perceptions of the chief executive officers (CEO) and the Board of Directors (BOD). Individuals in practical lives tend to take decisions according to their own moral values and set standards however, in business it changes and is quite the other way round. People get pressurised often and take decisions whatever is percieved as right or wrong in their surroundings and also choose on producing the greatest benefits with least harm. Individuals cannot simply enforce their personal perspective, though they are responsible for their actions but the idea of middle- management or entry level employee to have the freedom to take decision on their own at the work place is unrealistic.For example, if an employee can attract more customers by giving bribe to someone in the business, his decision would rely on whether complying with company policy or requirements is an important motivation to the individual or not. So for that purpose, according to Drake and Drake (1988), “ there is a necessity for the development of training programmes to implement corporate values.

These programmes must explain the ethical and legal principles to the employees and show practical examples which can be used as a guidance.” (p.111) Thus, the set principles and policies regarding work ethics in an organization and in addition to that the training programs can guide, govern or direct the employees to follow ethics and helps in institutionalizing organizations. According to ethics consultant David Gebler, “ Most unethical behaviour is not done for personal gain, it’s done to meet performance goals”. Mostly people are of the view that individual moral philosophies plays main role for the ethical behaviour in business. Although moral philosophies learned through family, religion and education are important but it is only one factor which helps in decision making; it is not sufficient to prevent ethical misconduct especially in the business sector. Studies show that the reward for meeting performances and the corporate culture are the main drivers in ethical decision making because the companies have a life of their own and the individuals working in the company are transcended by its corporate culture and with the passage of time, these patterened activities become instituionalized within the organization.

Peer influence also effects to some extent in the decision making; employees can be lulled by each other in making unethical decisions or when facing with ethical dilemmas nonetheless, everything still surrounds around the corporate culture and its strict policies for the ethical behaviour because when the policies will be strict, every employee would strive hard for the performance goal. If I fit myself in a situation where I can easily inflate my account on company’s expenses, I would be swayed by the company’s culture. I might not even think of committing any fraud or inflate the expense on company’s account, if the company is strict in its policies. But at times, it also depends on an individual moral values of a person in taking decision which is transmitted normally from families. According to my vantage point, individual moral development for taking a decision is a secondary factor; what drives first instantly to the person to behave ethically is the corporate culture since a company cannot rely on every individual to behave ethically on their own. “They can’t just stand in front of people and say they want them to have a good attitude and be excited,” says Pecos River president Elizabeth Wilson.

Taking decision in practical life and in work life differs. People in their work lives are driven by some targets and goals which are triggered in them by the organisation where they work and that effects on their performance. Similarly, when they take decision in their work lives , they are not driven by their own values, the company’s formulated culture effects their decision making. Nevertheless, if a person takes any decision without any concern or reflecting on the ethical dimensions; these sort of misbehaviours are referred to as “unethical business practices” (eg Garrett et al.,1989; Giacalone and Jurkiewicz, 2003 ; King, 1986).According to Murphy (1989), “Ethics should be followed in corporate sectors in the form of corporate creed and ethical code. The former establishes the organisational ethical values whereas the latter is a specific set of guidelines which must be developed in all functional areas of the firm.” To conclude, business ethics plays a pivotal role in developing a corporate culture.

Although, all the implementation of principles and ethics is a bit difficult procedure but it impacts on the employees in the organisation in higher degree and rein them from involving in unethical activities. “It is obvious that in principle individuals are more ethical if a corporation has a written, formal code and less ethical otherwise.” (Vitell et al.,1993,p.336). Hence, according to Vitell, the idea of a formal written code for ethics works well in corporate sector. In addition, moral values of an individual which are mainly effected by religion, personal cognitive approach, family, beliefs, education et cetera also plays an important role in preventing the employees in taking any unethical decision, however, it is only a secondary factor for an employee has a performance goal in his mind while working and the decision forms according to a corporate culture and the ethics followed in organizations since a company cannot rely on individuals individually to have ethical standards and beliefs. For that purpose , there is a necessity of a corporate culture which work as the main driver to act ethically in a work- place and in situations related to corporate sector.

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  • University/College: University of Chicago

  • Type of paper: Thesis/Dissertation Chapter

  • Date: 8 May 2016

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