Ethics in Cost Accounting





Ethics in Cost Accounting

Violation and Conformation to the Ethics Standards

The suggestions made by Bredahl Logistics’ executive staff are aimed at helping the company improve its short-term operating results. Some of the suggestions try to improve the firm’s financial situation by changing the nature of its operations. Other forms of action try to change the revenue of the current fiscal year by eliminating some of the costs that the firm would have recorded in that year. Lastly, some suggestions try to improve the financial situation by increasing the revenue for the current financial year.

Some of the suggestions made by the executive staff are violations of the “Standards of Ethical Behavior for Practitioners of Management Accounting and Financial Management”. Recording executive bonuses for the current year in the following financial period would be a violation of the standards of ethical accounting particularly those that deal with integrity. The suggestion to recognize sales revenue on orders that the firm has accepted but not shipped would also be a violation of the standards on integrity issues. Lastly, the executive staff’s suggestion to push companies into accepting early deliveries would be a violation of the code of ethics on issues of credibility.

Some suggestions that the executive staff made conformed to the standards of ethical behavior for accounting. It would be acceptable for the firm to stop shipping goods across the Atlantic and cut its prices to increase the annual revenue. It would also be acceptable for Bredahl Logistics to sell some of its distribution equipment before the end of the financial year and replace it with leased supplies. It would also be ethically acceptable for the company to move its headquarters to Ireland where the corporate tax rates are significantly lower thus, allowing it to cut down on expenses. These actions satisfy the code of ethics by being honest in their nature,

Dealing with Violations of the Ethical Standards

Through their suggestions on ways that Bredahl Logistics could improve its revenue, the executive staff demonstrated a lack of understanding of the ethical standards. This is because some of their suggestions violated the standards of ethical accounting on issues such as credibility and integrity. It is important for Bredahl Logistics to deal with these violations as soon as it can to avoid future scandals and debacles that could cost the company and its stakeholders a lot of money. One violation that the company should deal with regards the recording of executive bonuses. By recording the bonuses on the subsequent year, the company would be violating the policies on integrity. A better course of action would be to report the bonuses within the financial records of the same year for which the company is paying the executives. Another violation that the company should deal with is pushing companies to take early deliveries. The better way to deal with this issue would be to hold meetings in which Bredahl would try to convince the companies to accept the early deliveries. The key issue in these meetings would be to have the companies accept the early deliveries on their own volition instead of being pushed by Bredahl. Lastly, Bredahl Logistics should deal with the suggestion that it should record revenue from orders that it has not delivered in the ongoing financial year. The company should avoid doing this, as it would violate codes on integrity. Instead, a better course of action would be to deliver the items as soon as possible, so that their recipients can receive them in time for the company to include the revenue in its financial statements for the ongoing period.

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