Ethics is a crucial factor not only in managerial accounting but also in other aspects of a business or organization. Management ethics is a system of existing practices and knowledge aimed at the most favorable management and business procedures. It is necessary to comply with moral norms and principles, as it affects not only the final result but also every link in the business. Ethics in management accounting promotes honest, transparent, and fair practices. These qualities are urgent in the current case, namely the attempt to cover up problems with the melting furnace at the plant. The purpose is to analyze the need for ethics in management accounting, evaluate the impact of ethics and provide recommendations for ethical compliance at all levels.
The importance of ethics in managerial accounting is articulated by the basic principles that are promoted. These points form fair and transparent practices related to the chosen case. In other words, it includes performing all duties with integrity and treating the company and others fairly (Baker, 2019). The result of such practices is high-quality work performed, as a result of which the efficiency of the company as a whole increase. An example may be the current case where employees are discussing covering up problems with the melting furnace. Potentially, this can lead to even more damage, which will require more time and resources to fix. Consequently, one will have run-out problems, delays, and a drop in efficiency, which will negatively impact the company’s revenue.
Moreover, the importance of ethical standards in managerial accounting is formulated by the impact on security. Hiding any problems or breakdowns can lead to increased injuries or accidents, which will negatively affect not only the efficiency of work but also the health of employees. Considering the current example, namely the problem with the melting furnace at the plant, one may assume that the employees managed to hide this fact, and the problem was hushed up. However, after a while, depending on the type of breakdown, a fire or even an explosion may occur. It is due to the fact that working with the furnace involves working with high voltage, temperature, or pressure. As a result, the consequences of such an accident can be injury or even death of employees. Thus, one might notice that ethics in managerial accounting is of significant importance as it can have unpredictable consequences.
The influence of ethics, both good and bad, on the organization as a whole, is formed by its effect on individual components. Good ethics in the business implies the effective implementation of ethical norms (Baker, 2019). Accordingly, the impact on the organization will be articulated as a positive effect on workflow, efficiency, and revenue (Lautour, 2019). In addition, it will also positively affect the salary level, which will increase motivation and dedication to the company (Lautour, 2019). As already indicated, an organization’s ethical standards can impact safety, especially in factories. Organizations with a high level of security and transparent working practices have a better image than those with a poor one. Conversely, bad ethics will negatively influence organization’s safety and employees’ motivation, decreasing the overall performance.
Primarily, direct influence of ethics on stakeholders is formulated by several aspects. Employees, management, intermediaries, as well as third parties such as commissions, members of the audit, and so on, fall under this influence. It is connected with security incidents that may occur when one is on the plant’s territory. The result of ethics on such a group of stakeholders, such as clients, is formulated by an indirect effect. In other words, the negative impact of non-compliance with ethical standards can be caused by the delay of services or goods as a result of, for example, equipment failure. Moreover, it may include manufacturing low-quality products, which also constitutes negative impact on customers. A similar principle can be observed in regard to suppliers, namely the delay in procedures or the inability to carry out financial procedures on time.
Recommendations that can be proposed for implementing high ethical responsibility at all levels of the organization include procedures aimed at increasing motivation. High motivation of employees and intermediaries will help to comply with ethical standards since one is encouraged to follow the norms (Pinheiro & Costa, 2020). Therefore, it can be achieved through high salaries, bonuses, a democratic leadership style, and other methods of increasing motivation. The next recommendation is to appropriately inform employees about the consequences of low ethical responsibility. It should include oral speeches, videos showing the negative impact of non-compliance with ethical standards, and information about safety and health hazards.
To conclude, ethics in managerial accounting significantly impacts all parts of the organization. High ethical responsibility contributes to increased work efficiency and income, which in turn has a positive effect on employees and motivation. Moreover, the importance of ethical standards is formulated by the impact on the safety of employees, management, and third parties of such commission and audit members. The result of non-compliance with ethical points and, in this case, the concealment of the fact of a breakdown can lead to an accident, which in turn can contribute to injury or even death. Besides, an organization with high ethical responsibility has a good image, which positively affects investment and market position.
References
Baker, C. R. (2019). Research on professional responsibility and ethics in accounting. Emerald Group Publishing.
Lautour, V. J. (2019). Strategic management accounting. Springer Nature.
Pinheiro, M. M., & Costa, A. J. (2020). Accounting ethics education: Teaching virtues and values. Routledge.
