Ethics in Accounting: Issue of Moving Revenue From One Period to Another

Ethics in Accounting
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Ethics in Accounting
This report seeks to address our recent conversation regarding the possibility of moving revenue from one period to another to reach our profit target for the year. While the need to achieve the 30 percent profit target and earn the bonus is understandable, there is an overriding need to maintain ethical standards in accounting practices.
Ethics in accounting is indispensable to the health of ACC KarParts owing to its significance in ensuring that the company’s financial information is transparent and reliable. Researchers have observed that accounting in ethics is essential as it avoids financial crises, thereby creating a win-win situation for all stakeholders. Ethical accountants are considered the most effective approach to fraud prevention in that they uphold the internal controls that have been set up to avoid fraudulent financial practices (Enobong, 2017). With high levels of ethical adherence, organization and other stakeholders have increased confidence in accountants and can focus their efforts on achieving the best from the business.
Your suggestion that we should claim some of next year's revenues as part of the current year's financial statements raises ethical concerns. While it may seem like a simple reallocation of revenue, it contradicts the principle of accrual accounting, which requires revenue recognition to be tied to the period in which it is earned, regardless of cash receipt (Chen & Gong, 2019). Recognizing revenue in a period before it is earned misrepresents the true financial performance of the company and distorts the picture presented to stakeholders. It creates a false impression of profitability and can lead to misguided investment decisions, ultimately harming the interests of investors and creditors. Further, the action would be unprofessional as it would violate the principle of comparability. Failure to adhere to accrual accounting would make it difficult to compare the financial performance of ACC KarParts with other companies in the industry (Chen & Gong, 2019). Stakeholders rely on consistent accounting practices to assess and evaluate the company's financial health and prospects. Manipulating revenue recognition would undermine the comparability of financial statements, leading to a loss of trust and credibility.
While it would be unethical to claim some of next year's revenues as part of the current year's financial statements, there are three acceptable and legal alternatives to meet our company goals in accordance with generally accepted accounting principles. One effective and ethical alternative to meet our company goals is to focus on increasing operational efficiency and reducing costs. We should focus on streamlining our production processes, identifying and eliminating bottlenecks, and optimizing resource allocation (Zeidan & Shapir, 2017). In addition, we can...