Introduction
The objective of the paper is to explore ethical issues faced by HOHO for having failed to comply with the established accounting and regulatory rules. One of the major issues that emerge from the case study is that HOHO’s expenditure has surpassed the 25 percent set regulation. This means that HOHO has not complied with the fundraising legislation and permit conditions. However, the CFO of HOHO opines that the costs incurred during the TV advertising are short-term cost and will be met in the near future. According to the newly hired accountant by HOHO, there has been a misallocation of administrative costs by the management. The CFO believes that it is the duty of charitable organizations to ensure that companies contribute towards donor funding. From the scenario given, HOHO has violated the 25% expenditure ratio for its charity drive resulting from TV advertising.
Key Ethical Issues
The major stakeholders involved in the case scenario are the charity beneficiaries, the government, the donor corporation, the American Accounting Association, TV advertising company, and HOHO employees. All these entities have a direct or indirect effect on the success of the charity organization.
Based on the case study scenario, the key ethical issues violated by HOHO include breach of fundraising legislation and permit conditions and an infringement of the 25% expenditure ratio. In addition, the CFO is not accountable and transparent with the major donors regarding the costs incurred by the organization (Nash 1981). This can be classified as a poor reporting standard which is not acceptable by the accounting profession. HOHO has violated S120 on objectivity, S110 on integrity and S150 on professional behavior based on APESB (2008). S110 requires members to be honest and straightforward in their business and professional dealings (APESB 2008). However, HOHO’s CFO has failed to come clean about the TV advert costs which have surpassed 25 percent of expenditure. Under section 110 paragraph 2a, a member is not expected to file misleading statements as this violates the integrity clause. Section 120 deals with the issue of objectivity, and it requires members not to compromise their professionalism on the basis of conflict of self interest or due influence from others (APESB 2008). As noted in the case study, there is misallocation of funds by upper management and HOBO is willing to use more costs expenditure to get the funding from the donor. Lastly, section 150 on professional behaviour requires members to comply with the relevant set regulation and laws (APESB 2008). However, HOHO has violated the fundraising legislation and permit conditions knowingly and this is highly punishable by the law.
Alternative Courses of Action
With regard to the case study scenario, the various course of action on the firm could result in different consequences. For example, by doing nothing, a member appears to be unaccountable in ensuring corporate governance and transparency in the organization (Nash 1981). According to St James Ethics Centre (2012) good ethical conduct requires an individual to make ethical decisions. Telling my corporation about the situation shows a sense of responsibility, honesty, accountability, excellence, loyalty and truthfulness as instructed by (Guy 1990).Telling my corporation about the situation, but explaining the consequence will enable my organization make an ethical decision which will benefit different stakeholders involved. For example, it can foster accountability and require integrity and transparency when carrying out financial reporting. Encouraging my corporation to work with HOHO despite the consequences would be a violation of section 120 on objectivity as this will mean that the organization will be pursuing personal interests. In addition, this does not comply with the set regulations and accounting rules and expectations. Furthermore, as a charitable organization, HOHO is not expected to make any profits whatsoever.
Conclusion
HOHO should adopt a transparent reporting mechanism and allocate funds appropriately. This will enable the organization to comply with set accounting regulations. In addition, HOHO should not have its TV advert costs surpass the set standard. In other words, HOBO should keep the expenditure-to-funding ratio under 25%. This will make HOBO comply with the set regulation and qualify for the funding expected.
Reference List
APESB 2008., Compiled APES 110 Code of Ethics for Professional Accountants , Web.
Guy, M E 1990, Ethical decision making in everyday work situations, Quorum Books, New York.
Nash, LL 1981, ‘Ethics without the sermon’, Harvard Business Review, vol. 59, no. 6, pp. 78-90.
St James Ethics Centre 2012., Understanding ethics, Web.