ACC696 Week 4 Discussion Post 1 | ACC 696 - Situational Ethics in Accounting

The essential components of corporate governance are transparency, accountability, and security. By incorporating these, a company mitigates potential risks, improving company reputation, enhancing success and maintaining ethical standards (Wire, 2022). To create an ethical environment, control mechanisms must be put in place to guide organizational decision making (Mintz & Morris, 2020). The firm I work for frequently revisits ethical standards manuals, including subjects such as independence within an audit. Furthermore, when setting up clients we are required to fill out forms regarding any hindrance on maintaining independence. These various measures put in place ensure ethical standards are followed when completing our typical duties. This is what makes us reputable and brings us frequent new clients and referrals. A positive ethical environment is the result of a positive tone at the top. Management must set the precedent for employee actions and behaviors. Employees are more likely to behave and act ethically if management does the same and sets standards to do so (Mintz & Morris, 2020). Working in a public accounting firm there is a lot of corporate governance in place. However, I have observed that there are some staff that do not follow the procedures put into place. There seems to be exceptions made for certain employees, mostly ones with tenure, to following the rules and procedures set up by management. There also seems to be a “don’t rock the boat” attitude when dealing with issues. I have found that employees that find issues with certain staff members, are hesitant to voice any complaints for fear of being fired or that nothing will be done. For a period of time, I would voice the complaints to management, but was informed to stop creating discontent among the employees. Management stated that I was the only one complaining and that if other employees came to me to not listen and tell them to go to management. I quickly let them know that would not be happening, as employees needed to feel heard. However, due to their response to the situation I would no longer be coming to them. This environment opens more risk for unethical behavior within the company. Corporate governance is an essential part of creating an ethical organizational environment. It establishes control mechanisms in an organization to ensure the ethical values of the company guide the decision-making process and that ethical standards are being followed (Mintz, 2020). This entails developing formal systems of accountability, oversight, and control. Strong governance reduces the opportunity for unethical decisions and research suggests that corporate governance has a positive relationship with social responsibility. There are several theories on the best way to implement corporate governance but two of the most common are stakeholder theory and agency theory. In my current job as a mortgage underwriter one of the most important aspects of my job is attention to detail. There is a somewhat “hard” rule that once I see something I can’t unsee it. There are situations where I am faced with a decision to do what is either right for the borrower, or right for my company, creating somewhat of a stakeholder theory example of corporate governance. For example, if I discover in a borrower’s bank statements a personal loan that was not reporting on their credit report, I am obligated to add that loan to the borrower’s liabilities. This can, and has, made a borrower ineligible for a home loan. In this decision I am faced with the ethical decision of “unseeing” the loan in the bank statement, potentially costing my company hundreds of thousands of dollars, or reporting it as is my duty and costing a family the opportunity to purchase a home. As you can imagine this is a difficult decision. The corporate governance at my company holds strong to making correct ethical decisions, but as we have learned in this course, this is a far more complex topic than many believe, and there are many views on what is considered right and wrong. This example may not mold perfectly to stakeholder theory, but the decision I make has a benefit to some and a cost to others showing how a decision affects a wide variety of people and organizations. In my opinion, the primary components of corporate governance should always be accountability, transparency, and risk management. Through these three components I believe a company can create a wide variety of policies and procedures that prove to be effective in ensuring an ethical and rewarding place to work. Corporate governance observes the division of ownership and controls within an organization. It is a method that guarantees a business has enough supervision and control in order to perform in the best interests of its shareholders. Although I have not directly encountered corporate governance at work, I do believe that certain components are necessary for a business to operate to its best potential. In any corporation, it is essential to have a successful business strategy. This component enables top executives and their team to plan ahead and take into account their existing and upcoming duties. It will also result in the establishment of a mission and vision statement for the company that explains what the company does and what its primary goals are. This component would encourage workers to consider the ethical decisions of their choices. Employees should be motivated to take actions that will advance the business because they have a clear grasp of the direction the business is taking, which will ensure that the concerns of all stakeholders are considered. Another crucial component of a company is oversight. A certain level of supervision guarantees that top executives are operating in the interests of the stakeholders. The board approves corporate strategies that are intended to build sustainable long-term value (Business Roundtable, 2016). It may be more difficult to provide good oversight without a Board of Directors, although top executives can be assigned this responsibility. Employees may feel more at ease when they know that there are management in control who are keeping an eye on business operations and taking the necessary actions in each case. Internal control is another factor that has the power to build or damage a company. Internal controls are put in place to assist in the recognition and advertence of fraud as well as the avoidance of false financial reporting. The controls are made to ensure that rules are abided, laws are upheld, and codes of ethics are taken into consideration. Corporate governance is the system of rules, practices, and processes by which a firm is directed and controlled. My experience with corporate governance is working in a helicopter company with a set chain of command. We have a General Operations Manual (GOM) and company manual which outlines every job position's roles in the company. We have managers, reservation agents, pilots, drivers, ramp ground crew, mechanics, and finance. Each department has very strict rules, practices, and processes. These must be followed to ensure a safe and compliant operation. Integrity and ethics start from the owners and managers. If they do not have this, then employees will not have it. Everyone in the business has a very critical role and responsibility in the business. Chen, J. (2022, August 26). What is corporate governance? Investopedia. Retrieved September 18, 2022, from https://www.investopedia.com/terms/c/corporategovernance.asp Business Roundtable, T. (2016, September 8). Principles of Corporate Governance. The Harvard Law School Forum on Corporate Governance. Retrieved September 13, 2022, from https://corpgov.law.harvard.edu/2016/09/08/principles-of-corporate-governance/ Mintz, S. M., & Miller, W. F. (2023). Ethical Obligations and Decision Making in Accounting Text and Cases (5th Ed.). McGraw Hill LLC Mintz, S. M. (2020). Ethical obligations and decision making in accounting: Text and cases. McGraw-Hill Education. Mintz, S., & Morris, R. (2020). Ethical Obligations and Decision Making in Accounting (5th ed.). McGraw Hill. Wire, A. (2022, March 21). The 3 Pillars of Corporate Governance. Onboard Board Management Software | Board Portal | Board Intelligence. Retrieved September 12, 2022, from https://www.onboardmeetings.com/blog/the-3-pillars-of-corporate-governance/