EconPapers    
Economics at your fingertips  
 

Misleading Forecasts in Accounting Estimates: A Form of Ethical Blindness in Accounting Standards?

Wally Smieliauskas (), Kathryn Bewley (), Ulfert Gronewold () and Ulrich Menzefricke ()
Additional contact information
Wally Smieliauskas: University of Toronto
Kathryn Bewley: Ryerson University
Ulfert Gronewold: University of Potsdam
Ulrich Menzefricke: University of Toronto

Journal of Business Ethics, 2018, vol. 152, issue 2, No 7, 437-457

Abstract: Abstract 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 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.

Keywords: Ethical accounting estimates; Estimation uncertainty; IASB accounting conceptual framework; Accounting standards; Auditing standards (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://link.springer.com/10.1007/s10551-016-3289-1 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:jbuset:v:152:y:2018:i:2:d:10.1007_s10551-016-3289-1

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10551/PS2

DOI: 10.1007/s10551-016-3289-1

Access Statistics for this article

Journal of Business Ethics is currently edited by Michelle Greenwood and R. Edward Freeman

More articles in Journal of Business Ethics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

 
Page updated 2025-03-19
Handle: RePEc:kap:jbuset:v:152:y:2018:i:2:d:10.1007_s10551-016-3289-1