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Accounting for Merchandising Operation

Case Study ICP II: Societal Concerns

For ICP-IPS Tarbiyah Students

Two accounting students, Joan and Miguel were studying for their final university accounting exam.

“Miguel, what if they ask us whether the accounting profession should speak out about the shortcomings in financial statements?”

“Like what, Joan?” We know they don’t show the value of employees or the impact of inflation, or the economic reality or market value of many transactions-is that what you mean?”

“No, I mean the advocacy of disclosures which will lead to a better world for all of us. For Example, if we could only get companies to start disclosing their impacts on society, and particularly our environment, they would be induced to set targets and perform better the next year. We know that lots of externalities, like pollution costs, are not included in the financial statements, but we could speak out for supplementary disclosures.”

“Joan, you go right ahead if you like, but I’m going to stick to the traditional role of accountants – to the preparation and audit of financial statements. It got us this far, didn’t it?”

“Yes, but do medical doctors refrain from commenting on health concerns, or do lawyers refrain from creating laws that govern our future? Why should we shy away from speaking out of an issue that we know something about that mean a lot to our future?”

Question: Is Joan or Miguel right? Why?

Submit your answer in the “Leave a comment” menu in this page by the end of 7th June 2011.

This case study is taken from:

Brooks, L. J., and Dunn, P. 2010. Business and Professional Ethics for Directors, Executives and Accountants. South-Western Cengage Learning. USA

About yuniartihidayah

Monash University, Australia, PPAK UB Interests: Listening to music, reading, traveling, eating delicious food, and networking

Discussion

15 thoughts on “Case Study ICP II: Societal Concerns

  1. I think, externalities are very important to be learned for us as well as accountants. that is observed around us. Most of the accountants indifferent to the life around, maybe because we are a lot of work. but externalities do not affect the objectivity of our work.

    Posted by Didik Purwanto | June 1, 2011, 3:45 am
  2. Joan is the right one, he has a good character and very care to society and environment. As we know in this era is very difficult to get a people like him. Almost human or employee just think about their self and don’t think about other people and environment.

    If all accounting profesion like him , may be the company more care to society and give the social cost for the environment who get the negative impact from the industry. Not just think about how to increase the industry income.

    Posted by soimatul.m | June 1, 2011, 7:24 am
  3. what is the difference between accounting with economic,
    if accounting only calculate how much revenue costs and expenses, then the economy is in addition to calculate the cost of revenues also calculate the cost of expenditure and the impact on the environment surrounding the company’s so-called externalities.
    externality is the impact of the private sector (companies) to a third party (spill-over) who were not given the social costs / compensation.
    I agree with Joan expressed an accountant should not only audit the company’s finances, but also maintain a corporate environment, because over time they too will feel the impact of negative externalities generated by the company such as pollution ,global warming . and others.
    we know if the company calculates the social costs (negative externalities such as pollution costs) are also influential in corporate spending that salary to be received is also different, but if we do not consider the larger impact that would occur in our environment?

    Posted by GIAN RESTIN (09130003)-ICP IPS | June 1, 2011, 8:29 am
  4. according to me…i prefer to be in john side, because if we only stay on the traditional rule of an accountants we will not develop in our accounting. then externalities also influence the financial of a company, then it also must be reported. that also for another cases of economic. because accounting was being a pat of economic science.

    Posted by hayyun lathifaty yasri (09130109) ICP IPS | June 2, 2011, 12:46 am
  5. In my opinion, both of them are right. Both of them have reason to defend their opinion.

    Miguel has reason that the job of accountan is preparation and audit of financial statements. According to me, this opinion is right because it is the real job and task for accountan. Maybe, he think that the problem like externalities and society can discuss and job from other person/profession. He try focus with his job and maybe if he want to talk about this case he will talk and do out from his job.

    Joan also has reason to defend his opinion, his opinion is right too. He has thought that beside we focus with our job, we must also thought and have attention with our environmemnt and society like thought about externalities and social cost, althought this case not job for accountan. We life in the world and we must save it. All of activity, field and job have relationship one each other. Open your mind! We must develop our mind and together to think our future.
    ^_^

    Posted by dewi rossiliaa_09130024 | June 2, 2011, 3:30 am
  6. in my opinion, the opinion both necessary, but I agree on joan opinion, that we are working not only refer to one point just that in terms of preparing financial report as possible, but we also should pay attention to the environment, any impact arising from the company where we work, if we can give an argument that could make things better why not?
    and it would be better if an accountant has a social life and high environmental awareness, not just good at calculating the financial statements that will be able to improve the quality and performance, but also have a positive impact on the environment around..
    thank you

    Posted by rista khusniawati_09130002 | June 2, 2011, 11:54 am
  7. In my opinion Joan is right. Because we can not only use the traditional role of Accountants, we also have to develop because the world is also always evolving and progressing. And accounting should not only prepare for the financial statement, but also think about externalities. Because externalities are very important .
    As a company that large and growing we also must not only think about the benefits (profit) to be gained by the company, but we also have to think about positive externalities (to provide free health care to the society and scholarships for students who can not afford) and negative externalities to the surrounding of society (such as pollution and waste from the company), because we are as good humans and as social beings who live in the society also have to think about environmental sustainability as a place to live us all.

    Posted by HASNA RUFAIDA (09130122) ICP IPS | June 3, 2011, 2:01 am
  8. I would choose joan. because as an accountant is useful to consider the environment as well. and I think the company should include the costs of externalities in the financial statements

    Posted by Meytha Sari. A (09130004) ICP-IPS | June 3, 2011, 3:17 am
  9. I think Miguel and Joan is same right, Miguel said about his job as accountant, he just auditing financial statements, he don’t care about externalities because he think that pollution costs are not included in the financial statements. and he think that externalities can be discussed by other profession.
    Joan is right too, because he care to the society and environment not just get big profit. We know that some company that have negative externalities, the company must out social cost and it make expanses for their company and can write in financial statement.*_*

    Posted by Wahyu Furqondari (09130072) ICP IPS | June 3, 2011, 5:37 am
  10. I agree with joan, as the accountants are not only thinking about his job (financial auditing firm), but he also cares and observe the environmental state of the environment.but also greatly affect the rate development of the company.

    Posted by ninda yuni a | June 3, 2011, 9:23 am
  11. in my opinion both of them is true, we know the main job of accountant is preparation and audit of financial statement. but in this era we must understand well the development of industry, especially to full the necessity of human which every year increase. and better we know about the Social Accounting(Social Responsibility Accounting), in there there are some aim like: 1) identify and measure the periodic net social contribution of an enterprise, which includes not only the benefits and social costs in factory internalize, but also arises from the externalities that affect social segments are different, (2) help determine whether the strategies and practices of companies that directly affecting the relativity of resources and the status of individuals, communities and social segments is consistent with social priorities given broadly on the one hand and the aspirations of individuals in other parties, (3) provides an optimal manner, to all social groups, information relevant about the objectives, policies, programs, strategies and contribution of an enterprise of the company’s social goals.

    Posted by mirza nurul laili (09130016) p.ips | June 4, 2011, 10:23 am
  12. In my opinion Joan true if an accountant is not only the company’s financial audit but also consider the impact of externalities resulting from the company, for showing concern for the environment. But we can not blame Miguel opinion, because the task of accountant is a financial audit and maybe Miguel wants to focus on his job as accountant.

    Posted by Jafar Shodiq | June 5, 2011, 1:13 pm
  13. I agree with Joan’s opinnion,but for Miguel is right too.
    In here i prefer the Joan thinks, he more detail for report the financial statement,that mean many kind of utilities influence by externality, because our life is connected with the other people in this society. And all of the job always had a risk and the negative and positive impact for the environment,so i guess Joan better than Miguel.

    Posted by Rukhilla Nur A | June 6, 2011, 1:02 pm
  14. I think if we look, the main task as an accountant, the scope of its work only on the position of financial analysis, but on the other hand an accountant should also analyze the impact on the environment as an appreciation for supporting the company’s performance against the surrounding community, therefore I agree by joan opinion stating an accountant also must think about externalities ……..
    Syukron Katheer …….

    Posted by agus budi utomo | June 7, 2011, 2:23 am
  15. in my opinion, joan is right because his opinion about accounting advocacy of disclosures is better for our future then miguel has own opinion about finsncial statement, he will do traditional role to prepare his financial statements.

    Posted by Ika rozy septya dewi (09130022) | June 7, 2011, 12:24 pm

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