Finance & Accounting: AC755 Financial Statement and Business Analysis

This article suggests that a leader wishing to avoid fines or business failure should prevent abusive or improper business conduct not by adoption of codes of conduct and periodic rules-based ethics training, but by establishing and maintaining a values-based organizational culture supportive of ethical behaviour, largely through the principles of ethical leadership.

The article focuses on the importance of teaching ethics to students in business education, and presents information on the ethical decision-making model, COVER, aimed at helping students recognize and analyze ethical dilemmas. It discusses several models used for teaching ethics including the Triple Font Theory (TFT) and the WPH Process of Ethical Decision Making. It states that the COVER model incorporates a combination of teleological and deontological theories.

This paper reviews the extant real earnings management literature. Unlike accruals earnings management, real earnings management involves real business activities, consumes resources, and potentially affects future operating performance. This paper identifies studies that investigate earnings management via the manipulation of operating, investing and financing activities. Real earnings management research is a relatively new area and contains many unanswered questions.

It is found that audit committee members' additional directorships are positively associated with real earnings management measured by abnormal cash flows from operations, abnormal discretionary expenses and abnormal production costs, suggesting that audit committees with high additional directorships are less effective in constraining real earnings management. The findings are consistent with the notion that audit committee members' busyness impairs their monitoring effectiveness.

A review of ethics education articles and a sampling of business textbooks and learning objectives indicate that attention to the role of social influence in ethical decision making is limited in business classrooms. The contribution of this article is to heighten the awareness of this deficiency among business faculty and offer a set of instructional strategies that can be used to expand the current use of case studies across the business curriculum so that our students will recognize and respond ethically to social influence tactics.

Recent research has shown that executive hedging has become more prevalent. In essence, managers are unwinding the acute economic incentive to act in the best interest of the owners. This appears to violate the spirit of the compensation contract and from a normative standpoint, is not how executives should act. In this article, we describe how some executives are acting in regard to this issue (descriptive ethics), how they should act (normative ethics) and how they can be helped to get from what they are doing, to what they should be doing (prescriptive ethics).

This study examines the ethics of this practice using a national sample of 763 accounting practitioners, faculty and students. Possible determinants of the ethics of this practice such as perceived role of ethics and social responsibility, and personal moral philosophies (i.e. idealism and relativism) are explored. Results indicate a positive relationship between social responsibility, focus on long-term gains, idealism, and the ethical perception of earnings management and negative relationship between focus on short-term gains, relativism and the ethical perception of this practice. Implications for the accounting profession as it deals with the issue of earnings management are discussed.

The article discusses the ethical implications of earnings management, specifically focusing on the ethical dilemma over the comparative importance of positive organizational consequences for employees' earnings management. It uses the responses of managers who evaluate scenarios as either favorable or not favorable to the company. It addresses the sacrifice of ethical decision-making when the results were favorable to the company. It addresses the need to avoid manager rationalization of decisions with questionable ethics.