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CHAPTER I
The Problem and Its BackgroundIntroduction
Accounting is the language of business. Thus, business will not
exist without the presence of accounting. Every company has its own
ethical practices in accounting particularly the top five leading
business firms in the Philippines. These recognized firms are the
following: United Laboratories, Jollibee Foods Corporation, SM
Group of Companies, San Miguel Corporation and Ayala
Corporation.
Every society has a strong interest in the ethical standards of
its citizens especially in the business field. A society without
ethics would be dangerous and chaotic place to live. For this
reason, governments pass laws keeping out or requiring certain
types of behavior. Organized religions attempt to define ethics
through sermons and religious teachings. Educators attempt to
distinguish ethics using criteria acceptable to the greater society
because as we all know people without ethics would see nothing
wrong in cheating and stealing.
Corollary to this, it is imperative that a definition for both
professional and personal ethics is established and then the
question of whether they should differ can be addressed more
comprehensively.
Personal Ethics or in general ethics, derived from the Greek
word ethos which means the customary or habitual way of acting or
doing things. It is the moral principle that an individual uses in
governing his or her behavior. It is also a code of values which
guide our choices and actions and determine the purpose and course
of our lives. To sum up, it is the personal criteria by which an
individual distinguishes right from wrong (Business Ethics: A
Management Approach, 1991).On the other hand, Professional ethics
is defined as giving of ones best to ensure that clients interests
are properly cared for, but in doing so, the wider public interest
is also recognized and respected. Specifically, accountants, too,
have unique ethical responsibilities. Certified Public Accountants
(CPA) auditing financial statements have an ethical obligation to
be independent of the company issuing the statements. An accountant
preparing an Income Tax Returns (ITR) has an ethical obligation to
prepare the returns honestly, even though the taxpayer paying the
accountants fee may want the return prepared in a manner that
understates taxable income. An accountant employed by a private
company has the conflicting ethical obligations of respecting the
confidentiality of information gained on the job, and also making
appropriate disclosures to people outside the organization.
Nevertheless, capital is essential in starting a business and
protecting that capital is vital especially with the practice of
many clients today of paying three to six months after service is
rendered to them (Entrepreneur Philippines, 2009).
All recognized professions have developed codes of professional
ethics which provides them guidelines for conducting themselves in
a manner consistent with the responsibility of the profession.
Several professional associations of accountants developed codes of
ethics relating to the practice of accounting.
Most CPAs are members of the Philippine Institutes of Certified
Public Accountants (PICPA). The membership of this association has
voted to adopt a code of professional conduct to provide members
with guidelines in fulfilling their professional
responsibilities.
However, unethical practices by firms are giving accountants a
bad name. They are being labeled as unethical criminals, even
though their primary objective is to please their boss, so they can
protect their job. Most of the filthy stories of corporate scandals
are the involvement of the senior management and high levels of
management that manipulated the books to make their companies
appear more profitable. They pressure their staff to achieve high
earnings to attract investor in buying company stock. If these
goals are not met, drastic measures are taken; some of these are
adjustment of annual report and the other one is the famous Debit +
Credit =Kupit.
In these cases, the word ethics is being questioned. How come
these practices still emerge in spite of the presence of code of
ethics of every business firms? Is there a difference between
professional ethics, specifically in the field of accounting and
personal ethics?
Different companies consider mental accounting because it
describes the inclination to treat money differently according to
its source, allocation or use. It happens when companies slap cost
controls on a vital core business while spending freely on a risky
new initiative. Through this, businesses that consider this lead a
certain area that made them to be on top (Entrepreneur Philippines,
2004).
Among those leading business firms in the Philippines, we, the
researchers are going to conduct some data and information with
regards to the ethical practices of these said companies in the
field of accounting.Statement of the Problem
The purpose of this study is to provide the ethical practices in
accounting among top five leading business firms in the
Philippines. Specifically, this study seeks to answer the following
questions:
1. What are the goals of accounting ethics?
2. What cause accounting scandals?3. What are the ethical
practices in accounting among top five leading business firms in
the Philippines?
4. What are the ethical issues facing the accounting
profession?
5. What is the importance of accounting ethics in business
industry?Significance of the Study
This study is intended to provide information that will benefit
the different areas of society. The study will help the several
people to be informed of the ethical practices in accounting of the
top five business firms in the Philippines.
To the employees, this will help them know if they are receiving
accurate compensation, if there is a possibility of high
remuneration, retirement benefits and unemployment
opportunities.
To the administrator of the firm, this study will let them be
aware on the financial aspect of the company, how the accountants
allocate resources to sustain the companys operation in the long
run.
To the Government, this study will help them to be familiar with
how a firm comes up with their financial report through disclosure
of information in the Notes to the Financial Position of Financial
Statement. This will also help them know the taxation policies of
the firm.
To the Private Sectors such as Investors, Debtors, Creditors and
Lenders, this will provide them knowledge if the company has the
ability to return their extended financial assistance. On the part
of investors, this will help them know if the company has the
ability in returning their investments. On the part of debtors,
this will let them know if they will be able to pay their
liabilities as they fall due. While on the part of the creditors
and lenders, this will let them know if the loans they will grant
will be paid when due.
To the students, this study will help them how to be an ethical
professional like an accountant through different practices.
To the future researchers, this study will serve as a stepping
stone and guide to them in conducting another further research
study for its development.
Scope and Limitation
This study will focus only on the ethical practices in
accounting among the top five leading business firms in the
Philippines. It involves the goals and importance of accounting
ethics in the business industry. It will also cover the practices
and accounting issues in the accounting profession. Furthermore,
since it focuses more on the accounting part of the firm this will
exclude the other operations of the company such as the Human
Resource Department, Advertising Department, Marketing Department
and other non- accounting related operation of the firms. This
study will not aim to compare the accounting policies of the said
company but only provide details of their ethical practices in the
field of accounting.This study is conducted primarily for library
research in fulfillment with the requirement for the subject
Technical writing in Business for the school year 2012-2013 at
Polytechnic University of the Philippines San Pedro Campus. Thus,
it will be limited only to the information that will be cited and
reviewed. The collection of data through direct, indirect,
registration, observation and experiment method will be excluded in
this study.Definition of Terms
Accounting Fraud It is any act or attempt to falsify an
accounting statement for financial gain. A clear example of
accounting fraud is the act of deliberately overpricing a company's
assets in order to drive up its share price. Another example is
filing bankruptcy to avoid debt, rather than because of financial
hardship (financial dictionary, 2012)American Institute of
Certified Public Accountants (AICPA) A professional organization of
Certified Public Accountants (CPAs) that has long been influential
in the development of accounting principles (Financial Accounting,
1976).Annual report A comprehensive report on acompany'sactivities
throughout the preceding year (Wikipedia, 2012).Bribery It is the
act of taking or receiving something with the intention of
influencing the recipient in some way favorable to the party
providing the bribe (Business Dictionary, 2013).Certified Public
Accountant(CPA) A person who holds a valid Certificate of
Registration and a valid Professional Identification Card issued by
theProfessional Regulation Commissionof the Philippinesupon
recommendation by the Professional RegulatoryBoard of Accountancyof
the Philippines to those who have satisfactorily complied with all
the legal and procedural requirements for such issuance, including
in appropriate cases, having passed the CPA licensure examination
(Wikipilinas, 2012).Credit An accounting entry that either
decreases assets or increases liabilities or equity on the
company's balance sheet (Investopedia, 2013).Debit An accounting
entrythat results in either an increase in assets or a decrease in
liabilities on a company's balance sheet or in your bank account
(Investopedia, 2013).Disclosure This is the statutoryorgood
faithrevelation of a material fact(or an item ofinformationthat is
not generally known) on afinancial statementor in the accompanying
notes (Business Dictionary, 2013).Ethics This means a customary or
habitual way of acting or doing things.Financial Statements This
refers to the records that outline thefinancialactivities of a
business, an individual or any other entity. Financial statements
are meant to present the financial information of the entity in
question as clearly and concisely as possible for both the entity
and for readers. Financial statements for businesses usually
include: income statements, balance sheet, statements of retained
earnings and cash flows, as well as other possible statements
(Investopedia, 2013).
Fire Sale It is thesaleof goods at extremelydiscountedprices,
typically when the seller facesbankruptcyor other impending
distress. The term originated in reference to the sale of goods at
a heavy discount due tofire damage. A fire sale may or may not be
acloseout, the final sale of goods to zeroinventory. Fire sales are
thought to occur in the financial markets when bidders who value
assets highly are prevented from bidding on them, depressing the
average selling price below what it otherwise would be (Wikipedia,
2013).Generally Accepted Accounting Principles (GAAP) The ground
rules for the financial reporting. This concept includes
principles, concepts, and methods that have received authoritative
support or which have become generally accepted through widespread
use (Financial Accounting, 1976).Philippine Institute of Certified
Public Accountants(PICPA) The integrated national professional
organization of Certified Public Accountants in the Philippines
accredited by the Professional Regulatory Board of Accountancy and
Professional Regulation Commission of the Philippines (Wikipilinas,
2008).Professional Conduct This refers to the field ofregulationof
members of professional bodies, either acting under a statutory or
contractual power (Wikipedia, 2012).Professional Ethics As used in
this study, this refers to giving of ones best to ensure that
clients interests are properly cared for.CHAPTER II
Presentation, Analysis and Interpretation of Data
The purpose of this study was to determine the Ethical Practices
in Accounting among the Top Five Leading Business Firms in the
Philippines. Specifically, it sought to answer the questions stated
in Chapter I. To accomplish this objective, the researchers used
different sources that can be reliably used in this library
research.
Problem 1: What are the goals of accounting ethics
education?
Accounting ethics education includes seven goals. To implement
these goals, accounting ethics should be taught throughout
accounting curriculum or in an individual class modified to the
subject.
Ethics are important to the different profession such as
accounting. It should be taught to accountants who are entering to
this field. Education would help to reinforce students' ethical
values and inspire them to prevent others from making unethical
decisions. Students should know and understand the ethics of the
profession and they must be able to make value-based judgments.
Specifically, seven goals of teaching ethics in the accounting
curriculum have been identified. They include:
1. Relate accounting education to moral issues
Students must understand that everyone lives in a web of moral
relationships where moral choices are inevitable and often
difficult. The initial stages of accounting education place a
premium on learning of key concepts, principles, and procedures. In
this way, students are introduced to the conceptual framework of
the accounting process. Future improvement and elaboration of
accounting skills will build on the knowledge base that is provided
by the discipline of memory work. Accounting knowledge is further
developed as you use the rules and your own judgment to prepare
financial statements.
2. Recognize issues in accounting that have ethical
implications
Students should be challenged to make conscious rational
attempts to identify issues needing judgment. To resolve these
ethical dilemmas you should be sensitive to and aware of the
effects on ones' actions on the individuals involved in the
decision process.
3. Develop a sense of moral obligation or responsibility
It encourages the ethical thinking needed for one to act in a
way that is perceived as right and good.
4. Develop the abilities needed to deal with ethical conflicts
or dilemmas
Skills are needed to understand that moral choices will have
consequences and students need the skills to deal with ethical
dilemmas.
5. Learn to deal with the uncertainties of the accounting
profession
A professional responsibility course should develop
understanding of the ethical problems that face particular
professions so that students can learn to deal with uncertainties
within the discipline.
6. Set the stage for a change in ethical behavior
It is not only important that a course help a student to
recognize an ethical issue, but it should help provide an
understanding of the importance of changing ones behavior after a
moral judgment and analysis has been completed
7. Appreciate and understand the history and composition of all
aspects of accounting ethics and their relationship to the general
field of ethics.
Developing an understanding of the cultural, political, and
social aspects of a profession should be a goal in most types of
ethics courses.
Problem 2: What cause accounting scandals?
Accounting scandals or corporate accounting scandals
arepoliticalandbusiness scandalswhich arise with the discovery of
misdeeds by trustedexecutivesof large public corporations. Such
misdeeds usually involve complex methods for misusing or
misdirecting funds, overstatingrevenues, understating expenses,
overstating the value of corporate assets or underreporting the
existence ofliabilities, sometimes with the cooperation of
officials in other corporations or affiliates.
In public companies, this type of creativity in accounting can
amount to fraud and investigations.
Estafa is the legal term used to describe certain forms of
swindling. Thus, a person can be considered a swindler for
committing a form of estafa. However, a person can also be a
swindler by committing other acts that are necessarily estafa.
There are three kinds of it. First is the estafa through
unfaithfulness or abuse of confidence. Second is the estafa through
false pretenses. Third is the estafa through fraud. Here, someone
is encourage to sign a document through deceitful means; cheating
in a gambling game; removing, concealing court records, office
files, documents (Entrepreneur Philippines, 2010).
Scandals are often only the small evident part of something
people largely hide. They represent the visible catastrophic
failures.
For example, it is fairly easy for a top executive toreducethe
price of his company's stock. The executive can accelerate
accounting of expected expenses, delay accounting of expected
revenue and engage inan asset or debt or financingtransactions to
make the company's profitability appear temporarily poorer, or
simply promote and report severely conservative estimates of future
earnings. Such seemingly unfavorable earnings news will be likely
to reduce share price. There are typically very few legal risks to
being too conservative in one's accounting and earnings
estimates.
A reduced share price makes a company an easiertakeovertarget.
When the company gets bought out (or taken private) at a
dramatically lower price the takeover artist gains a windfall from
the former top executive's actions to surreptitiously reduce share
price. This can represent tens of billions of dollars
(questionably) transferred from previous shareholders to the
takeover artist. The former top executive is then rewarded with
agolden handshakefor presiding over thefiresalethat can sometimes
be in the hundreds of millions of dollars for one or two years of
work. (This is nevertheless an excellent bargain for the takeover
artist, who will tend to benefit from developing areputationof
being very generous to parting top executives) (Wikipedia,
2013).
Moreover, similar issues occur when a publicly held asset or
non-profit organization undergoesprivatization. Top executives
often reap tremendous monetary benefits when a government owned or
non-profit entity is sold to private hands. Just as in the example
above, they can facilitate this process by making the entity appear
to be in financial crisis this reduces the sale price (to the
profit of the purchaser), and makes non-profits and governments
more likely to sell. It can also contribute to a public perception
that private entities are more efficiently run reinforcing the
political will to sell off public assets. Again, due toasymmetric
information, policy makers and the general public see a government
owned firm that was a financial 'disaster' miraculously turned
around by the private sector (and typically resold) within a few
years (Wikipedia, 2013).
Fraudsare triggered bythree elements. These are rationalization,
perceived pressure and perceived opportunities. Whether the fraud
benefits the perpetrator directly or indirectly, such as benefiting
the perpetrators company, the three elements are always present
(Steve Albrecht, 2009).
Generally, in rationalization, the people who are responsible of
the fraud find some sort of excuses that make their unethical
behavior seem acceptable. While in perceived pressure, the people
behind the fraud are faced with some kind of pressure, whether it
is a financial pressure or executives pressure.
Furthermore, accounting fraudleads to manyserious problems. It
cannot only cause problem to the person or people responsible to
this, but also everyone around them. Accounting fraud causes
problem in the market place and the economy. As a result in most
cases, investors loose large sum of money due to misinterpretation
of statement of financial position or balance sheet of the company.
Also, because of this, there is a lack of trust in the market,
accounting system, and in the company in which accounting fraud was
committed from the investors. Employees in that company probably
lose their job because of the scandal.
Similarly, there is also bribery, but it is not only an
unethical practice in business. A bribe is a payment made with the
intent of influencing directly or indirectly the conduct of an
individual. For example, bribery may be in the form of an account
given for a particular arrangement that favors an individual
through a facilitation that is not consonance with the established
procedures or policies of the organization. Its effects on the
management of the organization seem contradictory. Because of this
situation, there are conflicting interpretations of the
organizations policies (Baysa-Tolentino, et. al, 2010)
All accounting scandals are not caused by top executives.
Oftentimes managers and employees are pressured or willingly alter
financial statements for the personal benefit of the individuals
over the company.Managerial opportunismplays a large role in these
scandals. For example managers who would be compensated more for
short term results would report inaccurate information since short
term benefits outweigh the long-term ones such as pension.
Problem 3: What are the ethical practices in accounting among
top five leading business firms in the Philippines?
Most businesses have a Mission Statement, but few have
considered ethical standards. A statement of ethical standards is
the first step in implementing an inclusive ethical program
throughout the entire business.
Ethical accounting is relevant. A business that hires an ethical
accounting firm knows that they are scrupulously honest and can be
confident that employees, customers and clients are in good
hands.
Being ethical and moral in the business world should be the
rule, not the exception. Of course, there are no laws broken or
ethical lines crossed by a company being optimistic about its
future. It is, however, the accountants ethical duty to project
honest and accurate information to shareholders and other
interested parties.
Among the most complicated things companies have to deal with
are tax issues. Tax regulations, often very complex and very
technical, usually boggle the mind of non-accountants. Books of
accounts are not for tax filing purposes alone. They also serve as
guides for management decisions and as data sources required by
regulatory agencies, the companys stakeholders, and other parties
in business (Entrepreneur Philippines, 2009).
Inaccurate entries or those without supporting documents could
cause the books not to tally with the companys other financial
statements, and could cause problems later (Entrepreneur
Philippines, 2009).
Each of the top five leading business firms in the Philippines
has also unique ethical practices that put them to their respective
rank. The ethical practices among these firms will be further
discussed in this section.
1. United Laboratories (UNILAB)
Unilab is the biggest pharmaceutical company in the Philippines,
with a market share of some 20 percent which it has consistently
maintained for more than three decades. Its portfolio includes some
of the biggest prescription and consumer healthcare brands in the
country.
Established in 1945, Unilab today is the realization of the
grand vision of its foundersto be a firmly established industry
leader distinguished by its corporate culture that places people at
the center of everything. It is a culture whose work ethic revolves
around family and community, cooperation and sharing.
Furthermore, the ongoing success of Unilab products owes much to
a philosophy of market-driven, customer-focused operations.
Advanced market research capabilities applied to brand management
& an intimate, unmatched knowledge of local markets combine to
form a focused & forceful operating group
In Unilab, "Bayanihan" has taken on a unique corporate
character. The traditional notion of working together and sharing
the fruits of labor has evolved into a value discipline of working
together and giving one's best effort. In this way, there is a
shared commitment and pride in providing quality products and
services and delivering high levels of performance. Bayanihan finds
even greater expression than it did more than a half century ago in
sharpening the vision of promoting better health and well-being now
that Unilab is serving a far greater number of people in Asia.
Similarly, Unilab employees enjoy one of the broadest benefit
programs in the Philippine industry. The company's extensive
welfare policy ensures its employee's economic and physical
well-being. Many of the benefits include the welfare of the
employee's family. These benefits come in many forms: material
compensation, hospitalization and health care, training and
educational benefits, economic benefits and other miscellaneous
assistance. Unilab recognizes that an employee working with a high
morale and a vision is better prepared to meet greater challenges
in his job.
Human asset as the greatest asset is a foundational value. The
company constantly strives to have their human resources strategy
always tightly aligned with overall business strategy. They believe
that this guarantees long-term business performance growth
(http://www.unilab.com/corporate/getting -to -know -our
-company).
2. Jollibee Foods Corporation
According to Howard Stevenson, Jollibee is a success story based
on solid foundations, not a meteor that will burn itself out.
Unlike many corporate leaders who trace their lineage to wealthy
Chinese clans, Tan had comparably very humble beginnings, with his
family exactly mirroring the stark circumstances in which the early
Chinese immigrants found themselves in Manila. His father had been
an immigrant cook in Binondos Seng Guan Buddhist Temple on Narra
Street before he opened a small Chinese restaurant in Davao City,
where Tan and his siblings helped clean tables and get water to
customers (Entrepreneur Philippines, 2004).
Jollibee Foods Corporation owned by the Tan family began in 1975
as a basic ice cream parlor and subsequently expanded its menu
offering in the form of sandwiches and hamburgers as a result of
the increased cost of oil and the President Tony Tan Caktiong (TTC)
anticipated ice cream prices to soar. The company culture was
developed on the Five Fs: Flavor, Fun, Flexibility, Family
atmosphere and Friendliness. The years to follow, Jollibee Foods
began to expand domestically opening five stores and proceeded to
incorporate as Jollibee Foods Corporation.
Jollibee is the largest fast food chain in the Philippines,
operating a nationwide network of over 750 stores. A dominant
market leader in the Philippines, Jollibee enjoys the lions share
of the local market that is more than all the other multinational
brands combined. The company has also embarked on an aggressive
international expansion plan in the USA, Vietnam, Hong Kong, Saudi
Arabia, Qatar and Brunei, firmly establishing itself as a growing
international QSR player.Moreover, Jollibee dedicated its
continuous success to theFilipinos who have been there from the
very start. Jollibee is so well-loved every time a new store opens,
especially overseas; Filipinos always form long lines to the store.
It is more than home for them. It is a strong hold of heritage and
monument of Filipino victory.
Jollibee also has its own and unique values Mission and Vision
that are distinct from other corporation. These include the values
for Customer Focus, Excellence, Respect for the Individual,
Teamwork, Spirit of Family and Fun, Humility to Listen and Learn,
Honesty and Integrity and Frugality. Their mission is to serve
great tasting food and bringing the joy of eating to everyone. Last
but not the least is their vision of to lead in product taste all
the time, provide excellence in every counter, give happiness in
every moment and let the Filipino be admired worldwide.
(http://www.jollibee.com.ph/about-us).
3. SM Group of Companies
SM Group of Companiesis thePhilippineslargest retailer run
byHenry Sy. SM Group is a retail giant with 38,600 employees and
annual revenues of $1.7 billion. SM is thePhilippines' leader in
the retail industry.SM Investments Corporationis the holding
company of the SM Group. For more than 40 years, it has been
committed in providing quality products and services at reasonable
prices.
SM Group of Companies is also one of the leaders in Banking
& Financing Industry and Property & Real Estate Investment
today. The company does not forget their role in the community or
their civic responsibilities, that's why SM also focuses on four
major programs and areas of advocacy, namely, education; religious;
outreach; and health.
The company has a Code of Ethics that serves as a guiding
principle for directors, officers and employees in their business
transactions with investors, creditors, customers, contractors,
suppliers, regulators and the public. The Code provides that the
company must strive to render adequate, reliable and efficient
customer service at reasonable cost. It protects shareholders' and
investors' interests, including their rights to a fair return of
investment and accurate and timely information. It also protects
the employees' individual and collective rights and encourages free
and honest communication within the organization. The Company
further aims to provide its employees with adequate benefits as
well as a safe workplace and environment.
The Code requires a fair and transparent process for the
evaluation and selection of suppliers of goods and services, as
well as an effective monitoring and control system to prevent fraud
and other malpractices. It prohibits the solicitation or acceptance
of gifts by any director, officer or employee of the company from
any business partner, except only for gifts of nominal value or
those given for the company's charitable projects. It likewise
prohibits conflict of interest, insider trading, corruption and
other illegal acts.
The Code lays down the company's policy to select, develop and
compensate the best people to manage the company. The Code further
expresses the company's advocacy to support health, educational,
livelihood and other charitable projects.
(http://www.sminvestment.com/smic).
4. San Miguel Corporation
SanMiguelCorporation(SanMiguel) was established in 1890 as a
single-product brewery. It is the Philippines largest beverage,
food and packaging company. Today, the company has over 100
facilities in the Philippines, Southeast Asia, and China.
One of the countrys premier business conglomerates, San Miguels
extensive product portfolio includes over 400 products ranging from
beer, hard liquor, juices, basic and processed meats, poultry,
dairy products, condiments, coffee, flour, animal feeds and various
packaging products.
For generations, the Company has generated strong consumer
loyalty through brands that are among the most formidable in the
Philippine food and beverage industry San
Miguel Pale Pilsen, Ginebra, Monterey, Magnolia, and Purefoods.
Flagship product, San Miguel Beer, holds an over 95% share of the
Philippine beer market.
In addition to its leadership in the Philippine food and
beverage industry, San Miguel has established a significant
presence overseas. The Companys operations extend beyond its home
base of the Philippines to China (including Hong Kong), Vietnam,
Indonesia, Malaysia, Thailand and Australia.
Through strategic partnerships it has forged with major
international companies, San Miguel has gained access to
managerial expertise, international practices and advanced
technology, thereby enhancing its performance and establishing
itself as a world-class company.
San Miguels partners are world leaders in their respective
businesses. Kirin Brewery Co., Ltd. is a major shareholder of San
Miguel Brewery. The Company also has successful joint venture
relationships with US-based Hormel Foods Corporation, Nihon
Yamamura Glass and QTel, a telecommunications company in Qatar.
In the Philippines, San Miguels corporate strategy is at aimed
capitalizing on new growth markets through acquisitions and further
enhancing its competitive position by improving synergies across
existing operational lines.
The company has significantly expanded its participation in both
its core businesses of food, beverage and packaging, as well as
heavy industries including power and other utilities, mining,
energy, toll ways and airports.
San Miguel has had a long-standing commitment to good corporate
governance practices and taking a leadership role in instituting
and maintaining practices that represent strong business ethics.
These practices provide an important framework within which the
Board of Directors and management can pursue the strategic
objectives of the Company and ensure its long-term vitality for the
benefit of stockholders
(http://www.sanmiguel.com.ph/corporate/company).
5. Ayala Corporation
Ayala Corporation is the holding company of one of the oldest
and largest business groups in the Philippines. It maintains a
tradition of excellence, and integrity has run continuously through
seven generations, adhering to the principles and ideals that had
brought it to existence 178 years ago.
One pioneering family started a business in 1834. That business
grew and engendered others. As it does today, Ayala harnessed some
of the best talents in the Philippines. Today, Ayala is one of the
biggest, most respected, and most widely diversified conglomerates
in the Philippines, with leadership positions in real estate
development, banking and financial services, telecommunications,
electronics and information technology, water infrastructure
development and management, and new investments in power, renewable
energy, and infrastructure.
Ayala continues to contribute to Philippine economic and social
growth through its diverse business interests, maintaining its
tradition of excellence in every endeavor.
Ayala is gearing up to move further forward, drawing on its
heritage and experience to fulfill its brand promise of "Pioneering
the Future."
Integrity is one of Ayala's core values. Strictly abiding by the
principle of "doing the right thing" has earned for the company its
strong position of trust among its stakeholders.
Ayala believes that integrity starts with the individual; thus,
we strive to maintain an exceptional standard of conduct among our
employees.
This Code of Conduct applies to all Ayala employees, including
senior executives and members of the Executive and Management
Committees. It provides an outline of the general expectations and
sets standards by which employees are expected to conduct
themselves. As it does not cover every conceivable subject, it is
recommended that employees refer to its general principles to guide
them in their activities.
Ayala expects its employees to conduct business in accordance
with Philippine laws and regulations. Employees are encouraged to
consult with Corporate Governance and Legal Affairs whenever there
is any doubt concerning the legality of any matter.
Any suspected criminal violations will be reported to the
appropriate authorities. Non-criminal violations will be
investigated and addressed as appropriate
(http://www.ayala.com.ph/about_ayala_mission.php.).Problem 4: What
are the Ethical Issues facing the Accounting profession?
The role of accountants is critical to society. Accountants
serve as financial reporters and intermediaries in the capital
markets and owe their primary obligation to the public interest.
The information they provide is crucial in aiding managers,
investors and others in making critical economic decisions.
Accordingly, ethical improprieties by accountants can be
detrimental to society, resulting in distrust by the public and
disruption of efficient capital market operations.
From the 1980s to the present there have been multiple
accounting scandals that were widely reported on by the media and
resulted in fraud charges, bankruptcy protection requests, and the
closure of companies and accounting firms. The scandals were the
result of creative,misleading financial analysis, as well
asbribery.An accountant working in the public or private sector
must remain impartial and loyal to ethical guidelines when
reviewing a company or individual's financial records for reporting
purposes. An accountant frequently encounters ethical issues
regardless of the industry and must remain continually vigilant to
reduce the chances of outside forces manipulating financial
records, which could lead to both ethical and criminal
violations.
Pressure from Management seems to be the common issue that the
causes accounting professional ethics fail. The burden for public
companies to succeed at high levels may place undue stress and
pressure on accountants creating balance sheets and financial
statements. The ethical issue for these accountants becomes
maintaining true reporting of company assets, liabilities and
profits without giving in to the pressure placed on them by
management or corporate officers. Unethical accountants could
easily alter company financial records and maneuver numbers to
paint false pictures of company successes. This may lead to
short-term prosperity, but altered financial records will
ultimately spell the downfall of companies when the Securities and
Exchange Commission discovers the fraud.
Next in line is the accountant as Whistleblower. An accountant
may face the ethical dilemma of reporting discovered accounting
violations to the Financial Accounting Standards Board. While it is
an ethical accountant's duty to report such violations, the dilemma
arises in the ramifications of the reporting. Government review of
company financial records and the bad press caused by an accounting
scandal could cause the company's rapid decline and may lead to the
layoff of thousands of employees. Executives and other corporate
officers could also face criminal prosecution, leading to heavy
fines and prison time.
Effects of greed are also an issue when it comes to accounting
issues. Greed in the business and finance world leads to shaving
ethical boundaries and stepping around safeguards in the name of
making more money. An accountant can never let the desire to earn a
better living and acquire more possessions get in the way of
ensuring that she follows ethical guidelines for financial
reporting. An accountant who keeps her eyes on her own bank account
more than on her company's balance sheet becomes a liability to the
company and may cause real accounting violations, resulting in
sanctions from the SEC.Similarly there is also the omission of
financial records a corporate officer or other executive may ask an
accountant to omit or leave out certain financial figures from a
balance sheet that may paint the business in a bad light to the
public and investors. Omission may not seem like a significant
breach of accounting ethics to an accountant because it does not
involve direct manipulation of numbers or records. This is
precisely why an accountant must remain ethically vigilant to avoid
falling into such a trap
(http://smallbusiness.chron.com/purpose-ethical-practices-business).Problem
5: What is the importance of accounting ethics in business
industry?
The nature of the work carried out by accountants and auditors
requires a high level of ethics. Shareholders, potential
shareholders, and other users of the financial statements rely
heavily on the yearly financial statements of a company as they can
use this information to make an informed decision about
investment.They rely on the opinion of the accountants who prepared
the statements, as well as the auditors that verified it, to
present a true and fair view of the company.Knowledge of ethics can
help accountants and auditors to overcome ethical dilemmas,
allowing for the right choice that, although it may not benefit the
company, will benefit the public who relies on the
accountant/auditor's reporting.
(http://businessworldng.com/web/articles/940/1/Fraudulent-Accounting-Practice/Page1.html)
Most businesses have a mission statement, but few have
considered ethical standards. A statement of ethical standards is
the first step in implementing an inclusive ethical program
throughout the entire business.
Accordingly, ethical accounting is relevant. A business that
hires an ethical accounting firm knows that they are scrupulously
honest and can be confident that employees, customers and clients
are in good hands.
Nevertheless, accountingin business is one of the most important
departments. Ethical and professional accounting forms a clear
financial image of a business, and allows managers to make informed
decisions, keepsinvestorsabreast of developments in the business,
and keeps the business profitable.
It is extremely important for accounting professionals to be
ethical in their practices due to the very nature of their
profession. The nature of accountants work puts them in a special
position of trust in relation to their clients, employers and
general public, who rely on their professional judgment and
guidance in making decisions. These decisions in turn affect the
resource allocation process of an economy.
Ensuring highest ethical standards is important to a public
accountant, which is the one who renders professional services such
as assurance and taxation service to clients for a fee, as well as
to a business accountant in which on the other hand is employed in
a private or public sector organization for a salary. Both public
accountants and business accountants are in a fiduciary
relationship, former with the client and latter with the employer.
In such a relationship, they have the responsibility to ensure that
their duties are performed in conformity with the ethical values of
honesty, integrity, objectivity, due care, confidentiality, and the
commitment to the public interest before ones own.
Thus, accountants, as professionals, are expected to maintain a
level of ethical conduct that goes beyond societys laws. This has
made the professional accounting bodies to develop a code of
professional conduct, which sets rules or standards that define
right from wrong to ensure that behavior of members complies with
perceived public expectations of ethical standards. These rules
have been developed based on the principles of professional
conduct, which form the basis for professional ethics.
However, the involvement of accountants with large corporate
scandals in recent times reflects that they have not complied with
the expected ethical standards. It is often argued that accountants
focus too much on technical issues and lack ethical sensitivity to
recognize ethical dilemmas involved with their work, which would
ultimately lead to making wrong decisions. Thus, accountants should
be trained to be sensitive to identify the moral dimension of
seemingly technical issues. This emphasizes the need to include
ethics education as a core component of professional accounting
education to prepare the accounting professionals to face various
ethical dilemmas that they face in carrying out their
duties.CHAPTER III
Summary of Findings, Conclusions and Recommendations
The purpose of this study was to determine the ethical practices
in accounting among the top five leading business firms in the
Philippines. To realize this aim, the researchers gathered some
data from different sources that can be used to this study.
Summary of Findings
Based on the analysis and interpretation of data gathered, the
findings are:
Problem 1: What are the goals of accounting ethics
education?
1. Relate accounting education to moral issues
2. Recognize issues in accounting that have ethical
implications
3. Develop a sense of moral obligation or responsibility.
4. Develop the abilities needed to deal with ethical
conflicts
or dilemmas.
5. Learn to deal with the uncertainties of the accounting
profession.
6. Set the stage for a change in ethical behavior.
7. Appreciate and understand the history and composition
of all aspects of accounting ethics and their relationship
to
the general field of ethics
Problem 2: What cause accounting scandals?
Based on the data gathered creative accounting,misleading
financial analysis, bribery and frauds cause accounting scandals.
All accounting scandals are not caused by top executives. Managers
and employees are often pressured or willingly alter financial
statements for the personal benefit of the individuals over the
company.
Problem 3: What are the ethical practices in accounting among
top five leading business firms in the Philippines?
The accountants ethical duty is to project honest and accurate
information to shareholders of the company and other interested
parties. The top five leading business firms in the Philippines
have their own mission statement that considered ethical standards.
A statement of ethical standards is the first step in implementing
an inclusive ethical program throughout the entire business. Having
an ethical accounting practice is relevant. A business that hires
an ethical accounting firm knows that they are thoroughly honest
and can be confident that employees, customers and clients are in
good hands.
Problem 4: What are the Ethical Issues facing the Accounting
profession?
Stress and pressure on accountants in creating balance sheets
and financial statements, reporting discovered accounting
violations to the Financial Accounting Standards Board, shaving
ethical boundaries and stepping around safeguards in the name of
making more money, and Omission of financial records are the
ethical issues facing the accounting profession.
Problem 5: What is the importance of accounting ethics in
business industry?
Ensuring highest ethical standards is important to a public
accountant, which is the one who renders professional services such
as assurance and taxation service to clients for a fee, as well as
to a business accountant in which on the other hand is employed in
a private or public sector organization for a
salary.Conclusions
Based on the findings, the researcher arrived at these
conclusions:
1. The goal of accounting ethics education can help future
accountants to be an ethical professional.
2. All accounting scandals are not caused by top executives.
3. The top five leading business firms in the Philippines have
their own unique mission statement that considered ethical
standards in business and accounting.
4. Pressure from management, reporting discovered accounting
violations, greediness and omission of financial records are the
issues facing the accounting profession.
5. Business will not exist without accounting because it is its
language.
Recommendations
Based on the conclusions, the researchers recommend some matters
related to accounting practices.
1. Ethics education should always be implemented to different
universities so that future professionals like accountants will be
aware of the right practices they should perform in the future.
2. A business firm should consider ethical standards by
implementing an inclusive ethical program throughout the entire
business.
3. The management should not pressure and control their
accountants to avoid some ethical issues that can cause a bad image
to the company.
4. Business firms should have their guidelines and policies
inside the company so that the whole management can perform their
respective jobs ethically.
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