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management accounting concept - Essay Example
Finance & Accounting
Pages 6 (1506 words)
This paper intends to discuss a particular area of moral hazard which is associated with the management accounting concept.It further intends to elaborate about how this area delivers significant benefits to the managers and the organizations as a whole…
Moreover, the paper will also entail the affiliation between moral hazard and decision making along with relevant information. QUESTION 1 Moral hazard is an interesting area of research in management accounting as it deals with various significant aspects concerning the perception of the managers in making effective decisions, determining disciplinary aspects and mitigating ethical issues. The area of moral hazard forecasts that the activities of the managers are hard to monitor and the compensation along with the financial decisions are linked with the performance of individual managers. It can be affirmed that moral hazards differ from one person to other based on the mental attitudes and the intention of the individuals to perform various operational functions. The moral hazards mainly occur due to the unethical practices that perform by the individuals or the managers belonging to any organization in order to attain personal along with organizational benefits. In this similar context, moral hazard can be explained from various aspects such as a company is running in loss. In order to recover such loss, the manager of the company arranges for fire to destroy the building and claim the money from the insurance sector. This denotes the conduct of unethical practices by the manager, resulting in causing moral hazard. ...
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