ACCT 340 Week 1 Group Discussion Board Forum 1 Example

Group Discussion Board Forum 1: Ethical Reasoning and Its Implications for Accounting

ACCT 340 Accounting Ethics, Group Discussion Board Forum 1

Thread by [Student Name]

The hotel group, the staff accountant's situation and the classmate are composites; the textbook, Scripture and the peer-reviewed sources cited are real.

Imagine a staff accountant eight months into her first job at a regional hotel group. During the year-end close she prepares the impairment analysis for an older airport hotel whose occupancy fell after a new terminal opened across town. Her projections show that the hotel's undiscounted future cash flows no longer cover its $14.6 million carrying amount and that its fair value is about $12.5 million, so an impairment loss of roughly $2.1 million belongs in this year's statements. When she brings the analysis to the controller, he does not dispute the numbers. He asks her to file it and bring it back next quarter, after the bank tests the company's debt covenants, because a $2.1 million loss would push the company past its debt-to-earnings limit and trigger a renegotiation.

Mintz and Morris (2019) introduce several ways of reasoning about such a request. A duty-based or deontological approach asks whether the act itself is right, regardless of its results. Recording the loss when the evidence supports it is a matter of honesty, and delaying it would deliberately present the company as healthier than the accountant knows it to be. The AICPA Code's principle of integrity, which the authors connect to this kind of reasoning, calls for candor and forbids subordinating the truth to personal or employer advantage. On this view the controller's request fails without any need to weigh outcomes: the accountant would be asked to deceive.

Utilitarian reasoning, by contrast, looks to outcomes and favors whichever option yields the most good across everyone it touches. It might seem that delay helps everyone: the company avoids a costly renegotiation, employees keep their jobs and the loss is recorded eventually. But the analysis has to count all the stakeholders. The bank sets its covenants precisely to learn when its borrower's position weakens; hiding the loss denies it that information and shifts risk onto it without consent. Investors and other creditors would make decisions on statements that overstate assets. If the delay is discovered, the company faces a restatement, loss of credibility with the lender and possible legal consequences, costs that would likely exceed the renegotiation it avoided. Once the full set of consequences is counted, delay looks worse, not better.

A virtue approach asks a different question: what would an accountant of good character do? Mintz (1995) argues that virtues such as integrity, truthfulness and courage are what enable accountants to act on what they know is right when others pressure them, and that rules alone cannot supply that strength. The staff accountant does not need a new rule; she needs the courage to tell her controller, respectfully, that she cannot hold back a loss the evidence requires.

The three lenses reach the same answer here, but they rest on different foundations. Duty theories ground honesty in reason, utilitarianism in results and virtue ethics in human flourishing. A Christian worldview grounds it in the character of God, who does not lie, and in the call to God's people to reflect that character. Paul tells believers to put away falsehood and speak truth with their neighbors, because they are members of one another (English Standard Version Bible, 2001/2016, Ephesians 4:25). That reason is different from all three secular theories. It makes honesty a matter of relationship and identity rather than calculation, and it holds even in a case where a lie might seem to produce better results. It also adds something the secular theories lack: grace for the accountant who must deliver unwelcome news, and a source of courage beyond her own.

Seeing the right answer and doing it are separate achievements. Armstrong et al. (2003) argue that accounting ethics education has focused too heavily on ethical reasoning and too little on ethical motivation and behavior, the steps that turn a judgment into an act. Our staff accountant almost certainly knows that delaying the write-down is wrong. The harder question is whether she will say so to the person who writes her performance review. Ethics in accounting is rarely a puzzle about what is right; it is usually a test of whether the accountant will do it when someone with power over her asks otherwise. That is why the course pairs theories with a decision-making model and why character, formed over time, matters as much as analysis.

In practice, the accountant should document her analysis, explain to the controller why the loss must be recorded this year and suggest that management speak to the bank early, since lenders often prefer an honest conversation to a surprise. If the controller insists, she should take the matter to the chief financial officer or the audit committee, following the company's reporting channels. Each step is uncomfortable, and that discomfort is exactly where the virtues the chapter describes are tested.

Reply to Daniel

Daniel, your thread argued that most accounting ethics failures come from small compromises rather than dramatic frauds, and your example of rounding expense reports up a few dollars at a time was a good one. I think a concept from organizational ethics research explains why small compromises are so easy to make. Jones (1991) argued that an issue's moral intensity, which depends on factors such as the magnitude of the consequences, the probability of harm, how soon the harm arrives and the decision maker's social nearness to those harmed, shapes whether people even recognize an issue as ethical. A few dollars on an expense report scores low on almost every dimension, so many people never stop to think about it.

That also helps explain my hotel case. The controller probably sees the delayed write-down as low in intensity: the loss will be recorded eventually, the bank is a distant institution and no one seems to be hurt right away. Part of the staff accountant's job, then, is to raise the intensity by making the consequences concrete, such as explaining that the bank is relying on these exact numbers this quarter. Your point and Jones's model fit together well: small compromises grow because they never feel intense enough to stop, and the remedy is to notice them early, before habit makes them invisible. I would add that a Christian view treats small things as morally significant in themselves, which is a useful corrective to a model that measures importance only by the size of the harm.

References

Armstrong, M. B., Ketz, J. E., & Owsen, D. (2003). Ethics education in accounting: Moving toward ethical motivation and ethical behavior. Journal of Accounting Education, 21(1), 1-16. https://doi.org/10.1016/S0748-5751(02)00017-9

English Standard Version Bible. (2016). Crossway. (Original work published 2001)

Jones, T. M. (1991). Ethical decision making by individuals in organizations: An issue-contingent model. Academy of Management Review, 16(2), 366-395. https://doi.org/10.2307/258867

Mintz, S. M. (1995). Virtue ethics and accounting education. Issues in Accounting Education, 10(2), 247-267. https://doi.org/10.2308/iae-9601071242

Mintz, S. M., & Morris, R. E. (2019). Ethical obligations and decision making in accounting: Text and cases (5th ed.). McGraw-Hill Education.