Business Ethics Discussion

For your amusement:



Discussion Topic

Jean Lim is the accountant for HTech Pte Ltd. Her boss wanted a financial report by 2 pm to present to the Board of Directors. It is 11am and Jean has problem balancing her trial balance as there is a shortage of $5,000 in the debit balance. She believes she would be able to discover the missing $5,000 and make the necessary adjustment if only she has more time. In desperation, she debit additional $5,000 to Plant and Equipment as this account is large and $5,000 would hardly be noticeable. She comforts herself that nobody would be hurt by this anyway and she will investigate the missing $5,000 after the meeting is over.

Comment on Jean’s action and the ethical issues involved.



Excerpts from my classmates’ posts are shown below. So far we have:


“As ethics is about doing the right thing with moral duty and obligation. Thus, what she did was ethically wrong.”

“I would like to comment that Jean's action is worng. “

“Lastly, she believe that the upper management will not discover this due the size of the account. But instead the upper management might pay more attention to this account as a large expense to the company and they will look into further details for the reasons of the expense”

“What Jane did in my perspective is ethically wrong even thought the amount of $5,000 is not of any significance to the account. By adding that amount would only solve the problem temporary or in another word, buying time for a time bomb. “

“ …wouldn't she have to make out an additional $5000 expense to balance the account? Based on this, she has failed to follow the reliability principle which requires a document/evidence to support the transaction.”


My response:

Business ethics is an oxymoron. If companies can employ creative ways to 'polish' their financial statements, why can't Jean be 'creative' to get herself and her department out of trouble? I believe that the conundrum Jean faces is not uncommon in the business world.

Jean is just an ordinary accountant. She has no intention of doctoring the books so that she can embezzle funds. Her intentions are pragmatic rather than criminal. One may argue that the road to hell is paved with good intentions but the consequences of upholding her professional integrity can be just as dire. She would look bad if she were to inform her boss of the problem. Her failure may militate against her when it comes to being selected for promotion. Assuming her boss is as ethical as she is and appeals to the Board of Directors for a delay, this can result in a loss of confidence in her department. Furthermore, the delay in releasing the Financial Statements may also affect investor and shareholder confidence.

As the $5,000 is so small as to be almost negligible when factored into the Plant and Equipment Account, Jean can justify her action on the premise it will not make any significant dent in the final Financial Statement. Take it as the Materiality Concept being applied, albeit with a slight variation and on a much smaller scale.

Jean will investigate the missing amount after the meeting. It is highly likely she will resolve the issue. At the end of the day, as long as she is not apprehended and nobody is hurt in the process, I don't see why her actions cannot be justified. Ethicists will argue that if Jean evades discovery this time, there is no telling if she will do it again. This is fallacious reasoning. If a person is truly deceptive by nature, she will commit crimes whether she has done so in the past.

To reiterate my point, to judge Jean on her action alone is an act of moral prejudice. Intention also plays a part and we have to consider mitigating factors and other reasons so that we can make an informed and objective judgment.