The Normative Ethical System - Essay Example

Name: Course: Lecturer: Institution: Date: The Normative Ethical System The normative ethical system refers to a study of ethical frameworks. It involves an attempt to develop guidelines that can detect whether and action is by a given moral system. Teleology is a moral perspective that describes wrongness or rightness of an action based on the consequences of that particular action. It is also known as a consequential moral system. In this theory, actions are morally neutral based on their results. Examples of this perspective include utilitarianism and egoism (Bose, 2012). On the other hand, Deontology refers to an ethical theory that is based on an obligation or duty. Specific moral duties are seen as having an intrinsic value and are self-evident thus no need for further justification. Actions are evaluated based on inherent wrongness or rightness. Deontological moral systems primarily focus on adherence to independent duties or moral obligations. For an individual to make the right moral choice one has to understand his or her functions and the existing rules (Seay & Ford, 2010). It emphasizes on the right motive in a person's actions. Duties and obligations should be considered objectively and entirely. This theory has a critical aspect; this point implies that moral principles are completely separated from their consequences. This implies that whether an individual's action may harm someone else, it is morally right if the rules of his or her duties were fulfilled. The critical questions in deontology are: what is my moral obligation? What is my moral obligation? How do I way one moral obligation against another? Ethical egoism refers to a moral doctrine based on an individual acting to promote exclusively personal interests. It is based on selfishness and disregard of other people's interests for oneself. Coherently, it can be equated to an attempt by an individual to prevent harm from others. As an accountant, Jimmy should go ahead and write down the stock in accordance with the accounting procedures. Based on egoism theory Jimmy will be acting in his interest to secure his professionalism (Woiceshyn, 2011). Acting based on what Peter the shareholder is advising would lead to a compromise in Jimmy's profession. This is because Peter assures him of a better pay if the stock is not written down and sold. This in accounting accumulates to making a decision based on bribery. This involves a breach of contract as stipulated in accounting standards and procedures. It may lead to one losing his practicing license if found guilty. Therefore, Jimmy's action to write down the stock will help him maintain professionalism in his work. This is a core principle ethic in accounting. It will also help Jimmy to prevent Peter from compromising his standards as an accountant (Woiceshyn, 2011). Based on the decision made using egoism, the same advice to Jimmy will apply for the utilitarianism theory. Utilitarianism refers to an ethical system that is based on how an individual's action can positively contribute to the well-being of the society or people. However; self-utilitarian considers the action of a person for his interests. It states that valuable things or actions tend to produce well-being. Examples of acts that are associated with this theory are honesty, integrity, healthy and trustworthy. It opposes moral codes that consist of commands, traditions, customs, rules or orders given by a supernatural being or a leader. It also differs with other ethical theories that depend on the motive of an individual to justify what is right or wrong. It explains that a right thing can be done with an improper motive and vice-versa. The theory tries to answer the question, what does a man ought to do (Duska et al., 2011). As opposed to egoism where Jimmy should take action for his interest, utilitarianism requires Jimmy to take actions with the interest of the company. Making a decision to write down the stock, Jimmy will give an accurate financial report. This report will help in the sound decision making of the entire company. According to utilitarian, Jimmy should do what is morally accepted by the accounting standards and is useful for the organization. He should not follow the orders from Peter even if Peter is a principal shareholder that is so influential to the company. Based on the self-utilitarian, Jimmy ought to do the right thing to protect his career and profession. Failing to write down the stock will compromise his profession. This is because he would not adhere to ethics involved in accounting (Duska et al., 2011). In accordance with the deontological perspective of ethics, Jimmy ought to write down the slow moving stock at the end of the year. The deontological theory is based on moral duties and obligations. It specifies that intrinsic values are self-evident and doesn't require any additional justification. It provides that an individual ought to understand his or her duties and obligations to perform what is morally right. For Jimmy, it is important that he understands his duties as an accountant and act in accordance with them. He has to understand his obligations to his profession. In this case, he has to write down the slow moving stock. This is because; this is what is considered right in accordance with the obligations of an accountant. Acting otherwise will indicate that Jimmy has not done his obligation correctly as an accountant (Seay & Ford, 2010). Deontology theory does not provide any room for one to justify his duties otherwise. In this case, Jimmy cannot use the orders from Peter to justify his actions not to write down the stock. As much as Peter is a core shareholder in the company, Jimmy's actions will only be justified based on his obligation as an accountant. The theory's most significant aspect is doing what is morally accepted by one's obligation despite its consequences to other people. Therefore, Jimmy need not to take into consideration of consequences of his action to Peter. He is to concentrate on his duties as an accountant. This then implies that he should write down the slow moving stock. It is in accordance with the usual procedures of accounting. These are the regulations that govern his duties as an accountant (Seay & Ford, 2010). Importance of Evaluating Accounting Theories Accounting theories attempt to explain the logic underlying a particular practice based on reason. They are logical and confirmed hypothesis accepted in accounting. They are based on Generally Accepted Accounting Principles (GAAP). They can be defined as logical reasoning in a set of principles providing a general framework for accounting practices. They are frequently evaluated and are core in guiding development of new practices and procedures. The accounting theories are closely related to accounting practices and cannot be handled separately. Daily accounting practices are performed by successful applying the established and the accepted theories and principals. It is, therefore, important to evaluate these theories as critical in day-to-day operations of accounting (Godfrey, 2010). Accounting practices change from time to time. This is due to the evitable change that occurs in economy and society at large. To accommodate these changes, accounting theories are regularly evaluated. This enables amendments to be done to these theories to make them relevant. It makes the theories be in line with the change in accounting patterns. Relevance is critical in financial reporting. The financial reports are essential in decision-making thus theories used in preparing them ought to be abreast with the current changes in economy and society (Godfrey, 2010). Accounting principles emerge from a constant analysis, observation, and examinations of analytical procedures and problems. The theoretical problems and procedures are not constant. They keep changing in accordance with accounting practices. This makes it necessary to evaluate frequently accounting theories (Santos, 2012). Evaluation of accounting theories is necessary to eliminate unnecessary diversities in accounting treatment of similar items. This helps in amending the existing practices. The reasons for the difference are explained clearly in the process of carrying out an evaluation. This is because the variations can be identified. This contributes to the enhancement of understanding current accounting practices. It also helps in facilitation in regulating the accounting profession by policy makers (Santos, 2012). Accounting theories play a significant role in developing future practices in accounting. These practices form the basis of accounting standards. The changing business practices and environment cause new accounting challenges to arise from time to time. These changes require development and new techniques and procedures. This makes it necessary for the accounting theories to be evaluated. It is because they form logical principles of the general frame of reference and developing new accounting practices (Godfrey, 2010). Criteria for Considering a Sound Accounting Theory Consistency with accounting standards is a core character of a good accounting theory. Accounting theories closely relate to accounting principles. Therefore, for an accounting theory to be considered sound, it must be inconsistency with the accounting standards. This will help accountants when generating reports to maintain uniformity in a financial statement. A good accounting theory should be able to reflect a better understanding of the future direction of financial accounting. Reason being, accounting practices change from time to time based on economic and social changes. It is, therefore, critical that an accounting theory should be able to enable an accountant to project the future of the accounting practices. Simpler resolution of accounting disputes over how events should be reported is also a critical aspect that one should consider in accounting theories. The theory should not be too complicated for easy application by accountants. This will be of greater importance to users of financial statements who may not have the knowledge of accounting. Another factor to consider is the greater certainty about the types of events in accounting and the ways that these events should be reported in financial statements (Santos, 2012). Provision of sound predictions is also critical. This makes a theory useful although it does not provide accurate predictions in all cases. It should result from logical analysis, continuous observation, careful examination and exact explanation of the underlying principle of a particular event of the phenomenon. Other characteristics of a sound theory include wider acceptance, quality of authenticity, authoritative principle and explain current events. Others are it should be verified and confirmed; ability to analyze past events; potential to solve problems created by happening events; be able to forecast the future; have a descriptive approach (Santos, 2012). Positive Theory of Accounting A positive theory aims to explain and predict accounting practices. It is usually based on the assumption of self-interest and efficient capital markets theories. It involves assumptions of logical deduction which enables some predictions to be made about the way things will be. Accurate prediction of an event after being tested against observation is an indication of explanation for that particular event. For instance, in economics, a positive theory of prices may yield a prediction that, if certain conditions are met, then rapidly rising prices will be observed. Similarly, in a positive theory of accounting a yield's prediction‘s if certain circumstances are met, then a particular accounting practice will be observed (Kabir, 2010). A positive theory is initially developed through a form of deductive reasoning. Its success in explaining or predicting particular phenomena is typically assessed based on observation. Observing how the theory's predictions corresponded with the observed facts. In addition, it provides a clear explanation for a particular phenomenon apart from providing the basis for predicting the future. The theory faces some critics which include; it is an entire philosophical movement, it is imperiously dictatorial, lack of accomplishment, it has oversights, paradoxes, and inconsistencies, empty and conventional, logical incoherence (Kabir, 2010). Despite all these critics, the theory still meets some characteristics that make it an ideal theory. These characters are logical analysis, continuous observation, careful examination and exact explanation of the underlying principle of a particular event of a phenomenon. It has a wider acceptance in the accounting field. It also possesses a quality of authenticity as well. Moreover, it correctly evaluates and explains current events and has an authoritative perspective. Besides, it has been verified and confirmed, and it can analyze past events. All these characteristics are in agreement with the accounting principles. Also, they have the potential to solve problems created by happening events; it can forecast the future; it has a descriptive approach (Godfrey, 2010). Reference Bose, U. (2012), An ethical framework in information systems decision making using normative theories of business ethics.Ethics and information technology, 14(1), 17-26. Duska, R, Duska, B, S & Ragatz, J, A, (2011), Accounting ethics. John Wiley & Sons. Godfrey, J, Hodgson, A, Tarca, A., Hamilton, J., & Holmes, S. (2010), Accounting theory.-. Wiley. Kabir, H. (2010), Positive accounting theory and science. Journal of Centrum Cathedra, 3(2), 136-149. Santos, F. M. (2012), A positive theory of social entrepreneurship.Journal of business ethics, 111(3), 335-351. Seay, S, S, & Ford, W. H. (2010), Fair Presentation-An Ethical Perspective on Fair Value Accounting under the Sec Study on Mark-to-Market Accounting.Journal of Legal, Ethical and Regulatory Issues, 13(1), 53. Woiceshyn, J. (2011). A model for ethical decision making in business: Reasoning, intuition, and rational moral principles.Journal of business ethics, 104(3), 311-323. Read More