Misleading Forecasts in Accounting Estimates

  • The current financial reporting environment, with its increasing use of accounting estimates, including fair value estimates, suggests that unethical accounting estimates may be a growing concern. This paper provides explanations and empirical evidence for why some types of accounting estimates in financial reporting may promote a form of ethical blindness. These types of ethical blindness can have an escalating effect that corrupts not only an individual or organization but also the accounting profession and the public interest it serves. Ethical blindness in the standards of professional accountants may be a factor in the extent of misreporting, and may have taken on new urgency as a result of the proposals to change the conceptual framework for financial reporting using international standards. The social consequences for users of financial statements can be huge. The acquittal of former Nortel executives on fraud charges related to accounting manipulations is viewed by many as legitimizing accounting gamesmanship. This decisionThe current financial reporting environment, with its increasing use of accounting estimates, including fair value estimates, suggests that unethical accounting estimates may be a growing concern. This paper provides explanations and empirical evidence for why some types of accounting estimates in financial reporting may promote a form of ethical blindness. These types of ethical blindness can have an escalating effect that corrupts not only an individual or organization but also the accounting profession and the public interest it serves. Ethical blindness in the standards of professional accountants may be a factor in the extent of misreporting, and may have taken on new urgency as a result of the proposals to change the conceptual framework for financial reporting using international standards. The social consequences for users of financial statements can be huge. The acquittal of former Nortel executives on fraud charges related to accounting manipulations is viewed by many as legitimizing accounting gamesmanship. This decision illustrates that the courts may not be the best place to deal with ethical reporting issues. The courts may be relied on for only the most egregious unethical conduct and, even then, the accounting profession is ill equipped to assist the legal system in prosecuting accounting fraud unless the standards have been clarified. We argue that the problem of unethical reporting should be addressed by the accounting profession itself, preferably as a key part of the conceptual framework that supports accounting and auditing standards, and the codes of ethical conduct that underpin the professionalism of accountants.show moreshow less

Export metadata

Additional Services

Share in Twitter Search Google Scholar Statistics
Metadaten
Author details:Wally SmieliauskasORCiD, Kathryn Bewley, Ulfert GronewoldGND, Ulrich Menzefricke
DOI:https://doi.org/10.1007/s10551-016-3289-1
ISSN:0167-4544
ISSN:1573-0697
Title of parent work (English):Journal of business ethics
Subtitle (English):a Form of Ethical Blindness in Accounting Standards?
Publisher:Springer
Place of publishing:Dordrecht
Publication type:Article
Language:English
Date of first publication:2016/08/04
Completion year:2016
Release date:2021/09/14
Tag:Accounting standards; Auditing standards; Estimation uncertainty; Ethical accounting estimates; IASB accounting conceptual framework
Volume:152
Issue:2
Number of pages:21
First page:437
Last Page:457
Organizational units:Wirtschafts- und Sozialwissenschaftliche Fakultät / Sozialwissenschaften
DDC classification:3 Sozialwissenschaften / 30 Sozialwissenschaften, Soziologie / 300 Sozialwissenschaften
Peer review:Referiert