Q 1. Is the practice of “window dressing” in accounting legal? What are your ethical arguments relative to this practice? Is everything legal simultaneously moral?
Based on legal terms, window dressing can be legal as long as it is done to indicate the business or firm's actual disposition of affairs. However, it can be unlawful once accompanied by intentional deception, or manipulative practices that aim to show a more positive image of the company in the perspective of the financial statement users and to deceive people, especially the investors. In other words, it means that it depends on the situations and facts being held on a case to case basis.
Though window dressing has many benefits, such as showing that the company has stable profit, helping to seek funds from investors, or securing any loan, it is still unethical because it does not adhere to moral standards.
It is also worthy to note that it does not mean that it is simultaneously or always moral when something is legal. There are some instances where it also became immoral. Just like in this situation where window dressing is done without a will, or in a case wherein the accountant of a particular company faced an ethical dilemma wherein the management is forcing him to apply window dressing, or else he will lose his current job.
Another example shows that legal matters became immoral when the company employs window dressing to file bankruptcy to evade or shirk the creditors. Moreover, moral standards are used to serve the law and not what the law is based on.
There is the law to secure people to have safety and peace, and to condemn evil. So basically, just because one thing is considered legal does not mean it will already become moral.
Q 2. Many laws have loopholes. As accountant, you would not be breaching any rules if you do things at will within the parameters of these defects or deficiencies. Is it ethical to take advantage of them, for instance by moving around number either to under-report income or exaggerate loss, or to meet certain revenue criteria? Answer with ethical principles. Recommend a prevention and/or solution, if there be any.
In the point of view of an accountant, it is unethical to take advantage of the loopholes of the law. The reason is that a professional accountant has the responsibility to have integrity, which suggests fair dealing and truthfulness. It's also vital to be objective, which further states that one should act with conformity as an accountant, which doesn't allow any bias or undue influence on professional decisions. It follows that it's unethical to move around numbers either to under-report income or exaggerate loss or to meet specific revenue criteria, for instance, because taking advantage of it would already breach these two fundamental principles.
Thus, even if the law has defects and that taking advantage of it would benefit the company, it's not morally and ethically right to do such act since it is contrary to the professional accountants' ethical standards.
To avoid such ethical and moral consequences, it's proper to always live with these virtues as an accountant. Because for me, who also aspires to become a future certified public accountant, one should not let his hands get dirty by doing such things. There are always alternative if one genuinely like to find a good way for it. For instance, as an accountant to a company suffering from loss, suggesting to the management to cut down expenses is morally and legally acceptable.
It is a case to case basis, so one should do what their conscience can afford to take. Just because one can get away with something, even if it's inside the scope of the deficiency or loophole, it doesn't make it right. After all, everyone is accountable for the development of their moral character.
Note that this is not a professional answer. It is just based on my personal point of view.
Thanks for reading.
