Ethical issues in Accounting and Finance


Ethics (maintaining true and fair statements) is a key part of financial reporting. For shareholders to trust a company with money, they must feel confident in the company’s financial reporting. Financial reporting presents all data relating to the entity’s current, historical and projected health meaning investors and shareholders rely upon the available financial data for making informed and educated decisions. To help entities comply with business regulations and maintain financial reporting, shareholders can trust the existing organizations designed to watchdog different aspects of the accounting world. Primary among the organizations are the Securities and Exchange Committee (SEC), Financial Accounting Standards Board (FASB) and Public Company Accounting Oversight Board (PCAOB). These three bodies together ensure financial reporting is fair, reliable, and available to all investors.

The specific importance of ethics in business and in financial reporting is to inspire and ensure public and investor confidence in companies. Without a strong code of ethics, and adherence to that code, individuals may not be certain their investments are secure. Accounting professionals must have a strong ethical and moral reasoning as their decisions regarding financial reporting can have major consequences for individuals as well as corporations and entire nations. Ethics in the business environment are more than just issues that relate to accounting; because ethical practices can and will cross boundaries from business practice in to what a company may ask its accounting professionals to do in financial record-keeping and recording. The many recent scandals involving accounting fraud generally began at the CEO and made their way down into the financial records.

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Introduction to Business Ethics

There is a big difference between what you have a right to do and what is right to do. – Justice Potter Stewart

Man is a social animal. Though rules of nature control humans as they control other living beings, man himself has derived certain principles to govern his own individual and group behavior. These rules, in the form of behavioral standards may differ across cultures and times, but their basic objectives are always mutual existence and peace within the particular community or the social group. By ensuring security and protection of the group these standards helps in the survival of the particular community or a social group and thus its members. These standards of behavior are called “ethics.”

Ethics is two things:

First, ethics refers to well-based standards of right and wrong that prescribe what humans ought to do, usually in terms of rights, obligations, benefits to society, fairness, or specific virtues. Ethics, for example, refers to those standards that impose the reasonable obligations to refrain from rape, stealing, murder, assault, slander, and fraud. Ethical standards also include those that enjoin virtues of honesty, compassion, and loyalty. And, ethical standards include standards relating to rights, such as the right to life, the right to freedom from injury, and the right to privacy. Such standards are adequate standards of ethics because they are supported by consistent and well-founded reasons.

Secondly, ethics refers to the study and development of one’s ethical standards. As mentioned above, feelings, laws, and social norms can deviate from what is ethical.… Read the rest

Warehouse Management System

Warehouse management systems (WMS) is described as the advanced technology and operating processes which optimize all warehousing functionalities. These functions begin from receipts from suppliers and ending with shipments to the customers, also including all inventory movements as well as information flows in between. Warehouse management systems are mainly associated with large and complex distribution operations. However even smaller and middle size companies are identifying the importance of WMS in today’s scenario of integrated logistics, just-in-time delivery and e- commerce fulfillment.

In practical situation, Warehouse Management System is used mainly in integrating computer hardware, software and peripheral equipment along with good operating practices so as to manage inventory, space, labour, and capital equipment in ware houses and distribution centres. Implementing of WMS serves the company by increasing its competitive advantage in matters of labour cost, improval of customer service, increasing inventory accuracy, and improving of flexibility and responsiveness. A WMS also helps the company in management of inventory in real time along with information regarding the latest order, shipment along with any movement in between.

Benefits of Warehouse Management System
  • Faster inventory turns. A WMS reduces lead times by limiting inventory movement and increasing inventory records thus implementing JIT environment. Thus the need of safety stock gets reduced thereby increasing inventory turnover along with working capital utilization.
  • More efficient use of available warehouse space. A WMs along with recuing safety stock requirements also increases available warehouse spacing by efficiently locating items with relation to receiving, assembly, packing and shipping points.
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Group Influence on Consumer Behavior

Each consumer in society is a member of different groups depending on their culture, various subcultures or even social class can influence their consumer purchase. A group can be formed when two or more individuals share a set of norms and beliefs. A group becomes a reference group when an individual recognizes with the group and takes on many of the values, attitudes or personal standards of group members and use it as the base of his/her day to day behavior. Reference group is defined as having significant relevance upon an ‘individual’s evaluations, aspirations or behavior influencing the consumer. The nature of reference group influence can take three forms, this is because some groups and individuals are able to influence greater than others and affect a range of consumption.

  1. Informational influence: This is when the reference group is used as a knowledgeable source in the different parts of the buyer’s decision process. This type of influence emerges when an individual or the member uses the behaviors and beliefs of the reference group as dependable sources. This influence is based either on the similarity of the buyer’s desires with the ones of the group members. For example in the biker subculture the members all share similar desires for purchasing Harley Davidson products therefore influencing the individual decision process in selecting certain products. The members in baby boomer subculture are also likely to purchase similar latest fashion products.
  2. Normative influence known as (utilitarian influence): The reference group creates a level of values and norms of an individual, in the process of purchasing brands or products.
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Porter’s Five Forces Analysis of Dell Computers

In 1984, Michael Dell had a vision for personal computing, a vision that customers could buy customized computers direct from their home. That vision would soon be emulated, but never at the same level as Dell. The industry is more than just personal computers; it includes servers, data storage devices, networking switches, printers and printer cartridges, and services as well. Dell has been able to remain innovative in their approach to building computers. They proved throughout their years of existence that providing differentiated, customizable computers with exceptional customer service at reasonable prices is possible. During the early years, Dell was able to undercut the competition by substantial margins. When they developed their strategic plans to sell computers internationally, they were quickly able to capture some of the market share once held by super-giant IBM. As a result, in 2007 International sales accounted for over 41% of Dell’s sales. To expand upon their business model, they diversified their product offerings to include Dell branded speakers, printers, and ink cartridges. Though not all diversification efforts were successful, Dell proved they could be innovative in their approaches to reaching customers. Michael Dell knew exactly what he wanted to do with his business when he first started his venture, and sticking to that vision has created one of the most successful computer ventures ever.

Most important thing about Dell is its direct business model where it has eliminated the middlemen and let the customers have what they wanted and desired. It is an innovative company that is innovating continuously to grow its customer base and to keep customers happy.… Read the rest

Major Schools of Management Thought

Business in today’s world has become an extremely competitive force changing continuously at a rapid rate. Working in the 21st century requires dealing with a dynamic environment with people that have diverse needs. Every business organisation needs to be managed, and hence there is a need for managers. Even years back there was a diverse need for management of organisations. There have been people who have tried to study management so as to make the most efficient and effective use of their resources. There have been scientific methods, and similarly there have been methods based on people’s behavior. Organisations nowadays use these methods in their business management.

Harold Koontz and Heinz Weihrich refer to management as the process of designing and maintaining an environment in which individuals, working together in groups, efficiently accomplish selected aims. Management has been referred to as an art and a science, some people even call it a profession. With the different levels within the organisation, management becomes a difficult process. Top management, middle management and operational management have to work together in order for the organisation to be efficient and effective. Hence co-ordination can be considered as the essence of management. Planning, organizing, staffing, directing and controlling are the key functions of management that work together to fulfill the organisational, social and personal objectives.

Management has been divided into two schools, Scientific School of Management and Behaviorist School of Management. The main objective of Scientific Management is to increase the economic efficiency. The core of Scientific Management was developed by Frederick Winslow Taylor.… Read the rest