Friday, July 22, 2016

Ethical Dilemma: The Trials of an Accountant

Character cannot be developed in ease and quiet. Only through experience of trial and suffering can the soul be strengthened, ambition inspired, and success achieved.”
                                                 Helen Keller

Hello! It's IFRS is easy

This is our maiden edition of our newest feature. Enjoy!

If it were you, what would you do?

When faced with the devil and the deep blue sea, would you rather jump into the sea or dance to the devil’s music? 

Questions like this might arise when Accountants find themselves in seemingly difficult situations. The scenario below illustrates such. Your comments are highly welcome.

Imagine that you are the Chief Financial Officer (CFO) of a Small and Medium Enterprise (SME). It is April and the Chief Executive Officer has just returned from a meeting with the company’s bankers. She calls you to her office to discuss the results of the negotiations. As things stand, the company requires a fairly significant injection of capital which would be used to modernize plant and equipment. The company has been promised new orders if it can produce goods to an international standard. Existing machinery is incapable of manufacturing to the required level of quality.

Whilst the bank is sympathetic, current lending policies require borrowers to provide an adequate current and projected cash flow, as well as a level of profitability sufficient to indicate a capacity to make repayments from an early date. Largely because of some industrial problems, the business has not been performing at its optimal level. As such, the figures would not satisfy the bank’s requirements.

However, the Chief Executive Officer (CEO) informs you that she has told the bank that the company is in excellent shape; that she believed that its financial results would satisfy the criteria and; that the Chief Financial Officer could deliver the company’s financial report to the bank at the beginning of the following week. She adds, “It is up to you to decide on the contents of the report”. As you were getting up to leave her office, she mentioned casually that the company would have no choice but to retrench if the company fails to secure the bank loan required to modernize its plant and equipment. Understandably, you find the possibility of being retrenched very scary as you have just purchased a new house, with a significant mortgage.

As the Chief Financial Officer, what decision would you make with regard to the request of the Chief Executive Officer?


  1. This is truly a dilemma. It'll be better to stick to one's ideology and face the consequences. If you won't allow your integrity to be tampered with at the expense of the company's failure, then so be it. If otherwise, it's a personal decision. None is entirely right or wrong.

  2. That's one situation I detest been in. Bt I doubt if my integrity and personality is sound enough to not yield. Medicine after death will be my solution as I'll yield and later along the line do my best to remedy the ill already done

  3. My broda...ts actually against best practice to compromise buy let even forget abt DAT..Accountant shouldn't be too rigid and must give way for flexibility in some issues. The problem of d company is well known, d accountant can even know with some high degree of percentage dat d company will come back good if dey take d loan. Morality depends likewise, some will look @ it as absolutely wrong to compromise while some will set a basis dat d consequence is wot matters. If d accountant can calculate DAT d benefit lucidly outweigh d cost den he should fellow d teleological approach DAT "an action is good if it brings d greatest amount of good to d greatest number of people" DAT means white lies is acceptable. We cannot say d CFO is doing it for his own self interest coz many people will be retrenched not only him

    1. I think it's safe to assume that to become the CFO of a registered company, one most likely belongs to a professional body. If this were the case, it's believed that, more than anything, the ethical conduct of a professional should be guided by professional ethics. This basically means no other source of ethical belief should supercede the ethical guidance of the profession as stated in the professional code of ethics. Applying the teleological philosophy here might not only be inappropriate for a professional, but also impracticable. How does the CFO determine what is 'good' or not? How can he know for sure the number of people that would be affected by his decision?

      If I were in this position, my aim would be to act in a way that's not at the detriment of the parties affected I.e. the bank, my company, and myself.

      As you've pointed out, it looks probable that the performance of the company would improve significantly if the loan were secured, but this is no excuse to act without integrity by misrepresenting events to help facilitate the securement of the loan. Knowing that I'm also, ethically, expected to act with professional competence and due care in affairs affecting my employer, my job would be to provide convincing, fairly presented estimates and narrative, in addition to a set of true and fair historical financial information, to the bank that might persuade the bank to grant my company the loan.

      The conflict of interest that exists might tilt a professional toward acting in an unethical way. However, acting in a way that could potentially tarnish the image of one's profession cannot be said to be in the long term interest of the professional. The professional body might take actions that would restrict the economic progress of the professional in the future if his actions tarnished the reputation of the profession.

  4. As an accountant who intends to act ethically,I would abide the professional code of ethics as given by ICAN and other relevant professional bodies of which intergrity in an underlying principle.Moreso that the accounting is a profession that is supposed to serve the interest of the public and not the company or accountant.It's important to note here that professional ethics cannot be compromised either by business ethics(on the part of the company) or the accountant's personal ethics.

  5. My point of view will be different from others, I will do what he suggest so far they can outsource the project to another company