In the excerpt below , the authors present an ethical dilemma. Explain the possible actions that the manager can take, depending on the three main theories of ethics (Main Western ethics theories are: Consequentialist, Nonconsequentialist, Virtue).

 

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"Managers often rationalize earnings management as being a necessary evil or the "right thing to do" given the circumstances. There could even be situations where managing earnings appears to be the "ethical" choice. For example, imagine you're the CFO of a company who has toiled tirelessly to meet analysts' earnings forecasts for the last few periods, but to no avail. Furthermore, you have had difficulty motivating your hardworking employees because results have consistently failed to reach the level necessary for employees to receive bonuses. Your company's current period earnings are finally on track to beat expectations and trigger employee bonuses, but an important sale falls through just before the end of the period. As the CFO, you know that yet another failure to meet earnings expectations and pay employees bonuses will further damage shareholder value as well as employee morale. Such a situation provides the perfect environment to argue the ethicality of managing company earnings. After all, isn't it the CFO's job to protect the interests of both shareholders and employees? Perhaps a more aggressive interpretation of GAAP would allow more revenue to be recognized in the current period, or perhaps a sale of obsolete equipment planned for the current period could be delayed to avoid the loss on sale that would result." "Managers often rationalize earnings management as being a necessary evil or the "right thing to do" given the circumstances. There could even be situations where managing earnings appears to be the "ethical" choice. For example, imagine you're the CFO of a company who has toiled tirelessly to meet analysts' earnings forecasts for the last few periods, but to no avail. Furthermore, you have had difficulty motivating your hardworking employees because results have consistently failed to reach the level necessary for employees to receive bonuses. Your company's current period earnings are finally on track to beat expectations and trigger employee bonuses, but an important sale falls through just before the end of the period. As the CFO, you know that yet another failure to meet earnings expectations and pay employees bonuses will further damage shareholder value as well as employee morale. Such a situation provides the perfect environment to argue the ethicality of managing company earnings. After all, isn't it the CFO's job to protect the interests of both shareholders and employees? Perhaps a more aggressive interpretation of GAAP would allow more revenue to be recognized in the current period, or perhaps a sale of obsolete equipment planned for the current period could be delayed to avoid the loss on sale that would result."

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The ethical dilemma presented in the above case is whether or not to practice earnings management EM EM is a technique that is used to manipulate fina... View the full answer