1
CHAPTER I
The Problem and Its Background
Introduction
Accounting is the language of business. Thus, business will not exist without the presence of accounting. Every company has its own ethical practices in accounting particularly the top five leading business firms firms in the Philip Philippin pines. es. These These recogn recognize ized d firms firms are are the follow following ing:: nit n ited ed
!abor aborat ator orie ies, s,
"oll "ollib ibee ee
#ood #oods s
$orp $orpor ora ation tion,,
%&
'rou 'roup p
of
$ompanies, %an &iguel $orporation and Ayala $orporation. Every society has a strong interest in the ethical standards of its citizens especially in the business field. A society without ethics would be dangerous and chaotic place to live. #or this reason, governments pass laws (eeping out or re)uiring certain types of behavior. behavior. *rganized *rganized relig religio ions ns atte attemp mptt to defi define ne ethi ethics cs thro throug ugh h serm sermon ons s and and relig religio ious us teac teachi hing ngs. s. Educ Educat ator ors s atte attemp mptt to dist distin ingu guish ish ethi ethics cs usin using g crit criter eria ia acce ac cept ptab able le to the the grea greate terr so socie ciety ty beca becaus use e as we all all (now (now peop people le without ethics would see nothing wrong in cheating and stealing. $oro $orolla llary ry to this, this, it is im impe pera rati tive ve that that a defi defini niti tion on for for both both professional and personal ethics is established and then the )uestion of whether they should differ can be addressed more comprehensive c omprehensively. ly. Personal Ethics or in general ethics, derived from the 'ree( word ethos which means the customary or habitual way of acting or doing
things. +t is the moral principle that an individual uses in governing his or her behavior. behavior. +t is also a code of values which guide our choices and actions and determine the purpose and course of our lives. To sum up, it is the personal criteria by which an individual distinguishes right- from wrong- /usiness Ethics: A &anagement Approach, 01102.
2
*n the other hand, Professional ethics is defined as giving of one3s best to ensure that clients3 interests are properly cared for, but in doing so, the wider public interest is also recognized and respected. %pecifi %pecifical cally ly,, accoun accounta tants nts,, too, too, have have uni)ue uni)ue ethica ethicall respon responsibi sibilit lities ies.. $ertified Public Accountants $PA2 auditing financial statements have an ethical obligation to be independent of the company issuing the statements. An accountant preparing an +ncome Tax Tax 4eturns +T42 has an ethical obligation to prepare the returns honestly, even though the taxpayer paying the accountant3s fee may want the return prepared in a manner that understates taxable income. An accountant employed by a priv priva ate co comp mpan any y has has the the co conf nfli lict ctin ing g ethi ethica call obli obliga gati tion ons s of respecting the confidentiality of information gained on the 5ob, and also ma(ing appropriate disclosures to people outside the organization. 6eve 6evert rthe heles less, s, ca capi pita tall is esse essent ntia iall in star starti ting ng a busin busines ess s and and protec protectin ting g that that ca capit pital al is vital vital especi especial ally ly with with the practic practice e of ma many ny clients today of paying three to six months after service is rendered to them Entrepreneur Philippines, 78812. All recognized professions have developed codes of professional ethics which provides them guidelines for conducting themselves in a manner consistent with the responsibility of the profession. %everal profes professio sional nal associ associati ations ons of accoun accounta tants nts develo developed ped codes codes of ethics ethics relating to the practice of accounting. &ost $PAs are members of the Philippine +nstitutes of $ertified Public Accountants P+$PA2. The membership of this association has voted to adopt a code of professional conduct to provide members with guidelines in fulfilling their professional responsibilities. 9owever, unethical practices by firms are giving accountants a bad name. They are being labeled as unethical criminals, even though their primary ob5ective is to please their boss, so they can protect their
2
*n the other hand, Professional ethics is defined as giving of one3s best to ensure that clients3 interests are properly cared for, but in doing so, the wider public interest is also recognized and respected. %pecifi %pecifical cally ly,, accoun accounta tants nts,, too, too, have have uni)ue uni)ue ethica ethicall respon responsibi sibilit lities ies.. $ertified Public Accountants $PA2 auditing financial statements have an ethical obligation to be independent of the company issuing the statements. An accountant preparing an +ncome Tax Tax 4eturns +T42 has an ethical obligation to prepare the returns honestly, even though the taxpayer paying the accountant3s fee may want the return prepared in a manner that understates taxable income. An accountant employed by a priv priva ate co comp mpan any y has has the the co conf nfli lict ctin ing g ethi ethica call obli obliga gati tion ons s of respecting the confidentiality of information gained on the 5ob, and also ma(ing appropriate disclosures to people outside the organization. 6eve 6evert rthe heles less, s, ca capi pita tall is esse essent ntia iall in star starti ting ng a busin busines ess s and and protec protectin ting g that that ca capit pital al is vital vital especi especial ally ly with with the practic practice e of ma many ny clients today of paying three to six months after service is rendered to them Entrepreneur Philippines, 78812. All recognized professions have developed codes of professional ethics which provides them guidelines for conducting themselves in a manner consistent with the responsibility of the profession. %everal profes professio sional nal associ associati ations ons of accoun accounta tants nts develo developed ped codes codes of ethics ethics relating to the practice of accounting. &ost $PAs are members of the Philippine +nstitutes of $ertified Public Accountants P+$PA2. The membership of this association has voted to adopt a code of professional conduct to provide members with guidelines in fulfilling their professional responsibilities. 9owever, unethical practices by firms are giving accountants a bad name. They are being labeled as unethical criminals, even though their primary ob5ective is to please their boss, so they can protect their
3
5ob. &ost of the filthy stories stories of corporate scandals scandals are the involvement involvement of the the seni senior or ma mana nage geme ment nt and and high high leve levels ls of ma mana nage geme ment nt that that mani ma nipu pula late ted d the the boo( boo(s s to ma ma( (e thei theirr co comp mpan anie ies s appe appear ar mo more re profitable. They pressure their staff to achieve high earnings to attract investor in buying company stoc(. +f these goals are not met, drastic measures are ta(en some of these are ad5ustment of annual report and the other one is the famous ;ebit < $redit =->upit-. +n these cases, the word ethics is being )uestioned. 9ow come these practices still emerge in spite of the presence of code of ethics of ever every y busi busine ness ss firm firms? s? +s ther there e a diff differ eren ence ce betw betwee een n prof profes essi sion onal al ethics, specifically in the field of accounting and personal ethics? ;iff ;iffer eren entt co comp mpan anie ies s co cons nsid ider er me ment ntal al ac acco coun unti ting ng beca becaus use e it describes the inclination to treat money differently according to its sour so urce ce,, allo alloca cati tion on or use. use. +t happ happen ens s when when co comp mpan anie ies s slap slap co cost st controls on a vital core business while spending freely on a ris(y new initiative initiative.. Through Through this, businesses businesses that consider this lead a certain certain area that made them to be on top Entrepreneur Philippines, 788@2. Among those leading business firms in the Philippines, we, the resear researche chers rs are going going to conduc conductt som some e data data and and inform informat ation ion with with regards to the ethical practices of these said companies in the field of accounting.
Statement of the Problem
The purpose of this study is to provide the ethical practices in accounting among top five leading business firms in the Philippines. %pecifically, %pecifically, this study see(s to answer the following )uestions:
4
0. hat are the goals of accounting ethics? 7. hat cause accounting scandals? B. hat are the ethical practices in accounting among top five leading business firms in the Philippines? @. hat are the ethical issues facing the accounting profession? C. hat is the importance of accounting ethics in business industry? Significance of the Study
This study is intended to provide information that will benefit the different areas of society. The study will help the several people to be informed of the ethical practices in accounting of the top five business firms in the Philippines. To the employees, this will help them (now if they are receiving accurate compensation, if there is a possibility of high remuneration, retirement benefits and unemployment opportunities. To the administrator of the firm, this study will let them be aware on the financial aspect of the company, how the accountants allocate resources to sustain the company3s operation in the long run. To the 'overnment, this study will help them to be familiar with how a firm comes up with their financial report through disclosure of information in the 6otes to the #inancial Position of #inancial %tatement. This will also help them (now the taxation policies of the firm. To the Private %ectors such as +nvestors, ;ebtors, $reditors and !enders, this will provide them (nowledge if the company has the ability to return their extended financial assistance. *n the part of investors, this will help them (now if the company has the ability in
5
returning their investments. *n the part of debtors, this will let them (now if they will be able to pay their liabilities as they fall due. hile on the part of the creditors and lenders, this will let them (now if the loans they will grant will be paid when due. To the students, this study will help them how to be an ethical professional li(e an accountant through different practices. To the future researchers, this study will serve as a stepping stone and guide to them in conducting another further research study for its development. Scoe and !imitation
This study will focus only on the ethical practices in accounting among the top five leading business firms in the Philippines. +t involves the goals and importance of accounting ethics in the business industry. +t will also cover the practices and accounting issues in the accounting profession. #urthermore, since it focuses more on the accounting part of the firm this will exclude the other operations of the company such as the 9uman 4esource ;epartment, Advertising ;epartment, &ar(eting ;epartment and other nonD accounting related operation of the firms. This study will not aim to compare the accounting policies of the said company but only provide details of their ethical practices in the field of accounting. This
study
is conducted
primarily for
library research
in
fulfillment with the re)uirement for the sub5ect Technical writing in /usiness for the school year 7807D780B at Polytechnic niversity of the Philippines %an Pedro $ampus. Thus, it will be limited only to the information that will be cited and reviewed. The collection of data
6
through direct, indirect, registration, observation and experiment method will be excluded in this study. "efinition of Terms Accounting #raud +t is any act or attempt to falsify an accounting
statement for financial gain. A clear example of accounting fraud is the act of deliberately overpricing a companys assets in order to drive up its share price. Another example is filing ban(ruptcy to avoid debt, rather than because of financial hardship financial dictionary, 78072 American Institute of Certified Public Accountants $AICPA% A
professional organization of $ertified Public Accountants $PAs2 that has long been influential in the development of accounting principles #inancial Accounting, 01FG2. Annual reort A comprehensive report on a companys activities
throughout the preceding year i(ipedia, 78072. Bribery +t is the act of ta(ing or receiving something with the
intention of influencing the recipient in some way favorable to the party providing the bribe /usiness ;ictionary, 780B2. Certified Public Accountant CPA2
A person who holds a valid
$ertificate of 4egistration and a valid Professional +dentification $ard issued by the Professional 4egulation $ommission of the Philippines upon
recommendation
by
the
Professional
4egulatory /oard of Accountancy of the Philippines to those who have satisfactorily complied with all the legal and procedural re)uirements for such issuance, including in appropriate cases, having passed the $PA licensure examination i(ipilinas, 78072.
7
Credit An accounting entry that either decreases assets or increases
liabilities
or
e)uity
on
the
companys
balance
sheet
+nvestopedia, 780B2. "ebit An accounting entry that results in either an increase in assets
or a decrease in liabilities on a companys balance sheet or in your ban( account +nvestopedia, 780B2. "isclosure
This is the statutory or good faith revelation of a
material fact or an item of information that is not generally (nown2 on a financial statement or in the accompanying notes /usiness ;ictionary, 780B2. Ethics This means a customary or habitual way of acting or doing
things. #inancial Statements This refers to the records that outline
the financial activities of a business, an individual or any other entity. #inancial statements are meant to present the financial information of the entity in )uestion as clearly and concisely as possible for both the entity and for readers. #inancial statements for businesses usually include: income statements, balance sheet, statements of retained earnings and cash flows, as well as other possible statements +nvestopedia, 780B2. #ire Sale +t is the sale of goods at extremely discounted prices,
typically when the seller faces ban(ruptcy or other impending distress. The term originated in reference to the sale of goods at a heavy discount due to fire damage. A fire sale may or may not be a closeout, the final sale of goods to zero inventory. #ire sales are thought to occur in the financial mar(ets when bidders who value assets highly are prevented from bidding on them, depressing the average selling price below what it otherwise would be i(ipedia, 780B2.
8
The ground
&enerally Acceted Accounting Princiles $&AAP%
rules- for
the
financial reporting. This
principles,
concepts,
and
methods
concept includes
that
authoritative support or which have become
have
received
generally
accepted- through widespread use #inancial Accounting, 01FG2. Philiine Institute of Certified Public Accountants $PICPA%
The integrated national professional organization of $ertified Public
Accountants
in the Philippines
accredited
by the
Professional 4egulatory /oard of Accountancy and Professional 4egulation $ommission of the Philippines i(ipilinas, 788H2. Professional
Conduct
This
refers
to
the
field
of regulation of
members of professional bodies, either acting under a statutory or contractual power i(ipedia, 78072. Professional Ethics As used in this study, this refers to giving of
one3s best to ensure that clients3 interests are properly cared for.
CHAPTER II Presentation' Analysis and Interretation of "ata
The purpose of this study was to determine the Ethical Practices in Accounting among the Top #ive !eading /usiness #irms in the Philippines. %pecifically, it sought to answer the )uestions stated in $hapter +. To accomplish this ob5ective, the researchers used different sources that can be reliably used in this library research. Problem () *hat are the goals of accounting ethics education+
Accounting ethics education includes seven goals. To implement these goals, accounting ethics should be taught throughout accounting curriculum or in an individual class modified to the sub5ect.
9
Ethics are
important to
the
different profession
such as
accounting. +t should be taught to accountants who are entering to this field. Education would help to reinforce students ethical values and inspire them to prevent others from ma(ing unethical decisions. %tudents should (now and understand the ethics of the profession and they must be able to ma(e valueDbased 5udgments. % pec if ical ly,
seven
go als
of
t each in g
ethi cs
in
the
a cc ou nt in g c ur r i c u l u m h a v e b e e n i d e n t i f i e d . T h e y i n c lu de : 0. 4elate accounting education to moral issues %tudents must understand that everyone lives in a web of moral relationships where moral choices are inevitable and often difficult. The initial stages of accounting education place a premium
on
learning
of
(ey
concepts,
principles,
and
procedures. +n this way, students are introduced to the conceptual framewor( of the accounting process. #uture improvement and elaboration of accounting s(ills will build on the (nowledge base that is provided by the discipline of memory wor(. Accounting (nowledge is further developed as you use the rules and your own 5udgment to prepare financial statements. 7. 4ecognize issues in accounting that have ethical implications %tudents should be challenged to ma(e conscious rational attempts to identify issues needing 5udgment. To resolve these ethical dilemmas you should be sensitive to and aware of the effects on ones actions on the individuals involved in the decision process.
B. ;evelop a sense of moral obligation or responsibility
10
+t encourages the ethical thin(ing needed for one to act in a way that is perceived as right and good. @. ;evelop the abilities needed to deal with ethical conflicts or dilemmas %(ills are needed to understand that moral choices will have conse)uences and students need the s(ills to deal with ethical dilemmas. C. !earn to deal with the uncertainties of the accounting profession A
professional
responsibility course should
develop
understanding of the ethical problems that face particular professions so that students can learn to deal with uncertainties within the discipline. G. %et the stage for a change in ethical behavior +t is not only important that a course help a student to recognize an ethical issue, but it should help provide an understanding of the importance of changing one3s behavior after a moral 5udgment and analysis has been completed F. Appreciate and understand the history and composition of all aspects of accounting ethics and their relationship to the general field of ethics. ;eveloping an understanding of the cultural, political, and social aspects of a profession should be a goal in most types of ethics courses. Problem ,) *hat cause accounting scandals+
Accounting
scandals
or
corporate
accounting
scandals
are political and business scandals which arise with the discovery of
11
misdeeds by trusted executives of large public corporations. %uch misdeeds
usually
misdirecting
involve
funds,
complex
methods
overstating revenues,
for
misusing
understating
or
expenses,
overstating the value of corporate assets or underreporting the existence of liabilities, sometimes with the cooperation of officials in other corporations or affiliates. +n public companies, this type of creativity in accounting can amount to fraud and investigations. Estafa is the legal term used to describe certain forms of swindling. Thus, a person can be considered a swindler for committing a form of estafa. 9owever, a person can also be a swindler by committing other acts that are necessarily estafa. There are three (inds of it. #irst is the estafa through unfaithfulness or abuse of confidence. %econd is the estafa through false pretenses. Third is the estafa through fraud. 9ere, someone is encourage to sign a document through deceitful means cheating in a gambling game removing, concealing
court
records,
office
files,
documents
Entrepreneur
Philippines, 78082. %candals are often only the small evident part of something people largely hide. They represent the visible catastrophic failures. #or example, it is fairly easy for a top executive to reduce the price of his companys stoc(. The executive can accelerate accounting of expected expenses, delay accounting of expected revenue and engage in an asset or debt or financing transactions to ma(e the companys profitability appear temporarily poorer, or simply promote and report severely conservative estimates of future earnings. %uch seemingly unfavorable earnings news will be li(ely to reduce share price. There are typically very few legal ris(s to being too conservative in ones accounting and earnings estimates.
12
A
reduced
share
price
ma(es
a
company
an
easier ta(eover target. hen the company gets bought out or ta(en private2 I at a dramatically lower price I the ta(eover artist gains a windfall from the former top executives actions to surreptitiously reduce share price. This can represent tens of billions of dollars )uestionably2 transferred from previous shareholders to the ta(eover artist. The former top executive is then rewarded with a golden handsha(e for presiding over the firesale that can sometimes be in the hundreds of millions of dollars for one or two years of wor(. This is nevertheless an excellent bargain for the ta(eover artist, who will tend to benefit from developing a reputation of being very generous to parting top executives2 i(ipedia, 780B2. &oreover, similar issues occur when a publicly held asset or nonD profit organization undergoes privatization. Top executives often reap tremendous monetary benefits when a government owned or nonD profit entity is sold to private hands. "ust as in the example above, they can facilitate this process by ma(ing the entity appear to be in financial crisis I this reduces the sale price to the profit of the purchaser2, and ma(es nonDprofits and governments more li(ely to sell. +t can also contribute to a public perception that private entities are more efficiently run reinforcing the political will to sell off public assets. Again, due to asymmetric information, policy ma(ers and the general public see a government owned firm that was a financial disaster I miraculously turned around by the private sector and typically resold2 within a few years i(ipedia, 780B2. #rauds are rationalization ,
triggered perceived
by three
pressure
and
elements. perceived
These
are
opportunities.
hether the fraud benefits the perpetrator directly or indirectly, such as benefiting the perpetrator3s company, the three elements are always present %teve Albrecht, 78812.
13
'enerally, in rationalization, the people who are responsible of the fraud find some sort of excuses that ma(e their unethical behavior seem acceptable. hile in perceived pressure, the people behind the fraud are faced with some (ind of pressure, whether it is a financial pressure or executives3 pressure. #urthermore, accounting fraud leads to many serious problems. +t cannot only cause problem to the person or people responsible to this, but also everyone around them. Accounting fraud causes problem in the mar(et place and the economy. As a result in most cases, investors loose large sum of money due to misinterpretation of statement of financial position or balance sheet of the company. Also, because of this, there is a lac( of trust in the mar(et, accounting system, and in the company in which accounting fraud was committed from the investors. Employees in that company probably lose their 5ob because of the scandal. %imilarly, there is also bribery, but it is not only an unethical practice in business. A bribe is a payment made with the intent of influencing directly or indirectly the conduct of an individual. #or example, bribery may be in the form of an account given for a particular arrangement that favors an individual through a facilitation that is not consonance with the established procedures or policies of the organization. +ts effects on the management of the organization seem contradictory. /ecause of this situation, there are conflicting interpretations of the organizations3 policies /aysaDTolentino, et. al, 78082 All accounting scandals are not caused by top executives. *ftentimes managers and employees are pressured or willingly alter financial statements for the personal benefit of the individuals over the company. &anagerial opportunism plays a large role in these scandals. #or example managers who would be compensated more for short
14
term results would report inaccurate information since short term benefits outweigh the longDterm ones such as pension. Problem -) *hat are the ethical ractices in accounting among to fie leading business firms in the Philiines+
&ost businesses have a &ission %tatement, but few have considered ethical standards. A statement of ethical standards is the first step in implementing an inclusive ethical program throughout the entire business. Ethical accounting is relevant. A business that hires an ethical accounting firm (nows that they are scrupulously honest and can be confident that employees, customers and clients are in good hands. /eing ethical and moral in the business world should be the rule, not the exception. *f course, there are no laws bro(en or ethical lines crossed by a company being optimistic about its future. +t is, however, the
accountant3s
ethical
duty
to
pro5ect
honest
and
accurate
information to shareholders and other interested parties. Among the most complicated things companies have to deal with are tax issues. Tax regulations, often very complex and very technical, usually boggle the mind of nonDaccountants. /oo(s of accounts are not for
tax
filing
purposes
alone.
They
also serve
as
guides
for
management decisions and as data sources re)uired by regulatory agencies, the company3s sta(eholders, and other parties in business Entrepreneur Philippines, 78812. +naccurate entries or those without supporting documents could cause the boo(s not to tally with the company3s other financial statements, and could cause problems later Entrepreneur Philippines, 78812.
15
Each of the top five leading business firms in the Philippines has also uni)ue ethical practices that put them to their respective ran(. The ethical practices among these firms will be further discussed in this section. 0. nited !aboratories 6+!A/2 nilab is the biggest pharmaceutical company in the Philippines, with a mar(et share of some 78 percent which it has consistently maintained for more than three decades.
+ts
portfolio includes some of the biggest prescription and consumer healthcare brands in the country. Established in 01@C, nilab today is the realization of the grand vision of its foundersJto be a firmly established industry leader distinguished by its corporate culture that places people at the center of everything. +t is a culture whose wor( ethic revolves around family and community, cooperation and sharing. #urthermore, the ongoing success of nilab products owes much to a philosophy of mar(etDdriven, customerDfocused operations. Advanced mar(et research capabilities applied to brand management K an intimate, unmatched (nowledge of local mar(ets combine to form a focused K forceful operating group +n nilab, L/ayanihanL has ta(en on a uni)ue corporate character. The traditional notion of wor(ing together and sharing the fruits of labor has evolved into a value discipline of wor(ing together and giving ones best effort. +n this way, there is a shared commitment and pride in providing )uality products and services and delivering high levels of performance. /ayanihan finds even greater expression than it did more than a half century ago in sharpening the vision of promoting better health
16
and wellDbeing now that nilab is serving a far greater number of people in Asia. %imilarly, nilab employees en5oy one of the broadest benefit programs in the Philippine industry. The companys extensive welfare policy ensures its employees economic and physical wellDbeing. &any of the benefits include the welfare of the employees family. These benefits come in many forms: material compensation, hospitalization and health care, training and
educational
benefits,
economic
benefits
and
other
miscellaneous assistance. nilab recognizes that an employee wor(ing with a high morale and a vision is better prepared to meet greater challenges in his 5ob. 9uman asset as the greatest asset is a foundational value. The company constantly strives to have their human resources strategy always tightly aligned with overall business strategy. They
believe
that
this
guarantees
longDterm
business
performance growth http:MMwww.unilab.comMcorporateMgetting D to D(now Dour Dcompany2. 7. "ollibee #oods $orporation According to 9oward %tevenson, "ollibee is a success story based on solid foundations, not a meteor that will burn itself out.- nli(e many corporate leaders who trace their lineage to wealthy $hinese clans, Tan had comparably beginnings,
with
his
family
very
exactly mirroring
humble
the
star(
circumstances in which the early $hinese immigrants found themselves in &anila. 9is father had been an immigrant coo( in /inondo3s %eng 'uan /uddhist Temple on
6arra
%treet
before he opened a small $hinese restaurant in ;avao $ity,
17
where Tan and his siblings helped clean tables and
get water
to customers Entrepreneur Philippines, 788@2. "ollibee #oods $orporation owned by the Tan family began in 01FC as a basic ice cream parlor and subse)uently expanded its menu offering in the form of sandwiches and hamburgers as a result of the increased cost of oil and the President Tony Tan $a(tiong TT$2 anticipated ice cream prices to soar.
The
company culture was developed on the #ive #3s: #lavor, #un, #lexibility, #amily atmosphere and #riendliness.
The years to
follow, "ollibee #oods began to expand domestically opening five stores
and
proceeded
to
incorporate
as
"ollibee
#oods
$orporation. "ollibee is the largest fast food chain in the Philippines, operating a nationwide networ( of over FC8 stores. A dominant mar(et leader in the Philippines, "ollibee en5oys the lion3s share of
the
local
mar(et
multinational brands
that
is
combined.
more The
than
all
company
the has
other also
embar(ed on an aggressive international expansion plan in the %A, Nietnam, 9ong >ong, %audi Arabia, Oatar and /runei, firmly establishing itself as a growing international O%4 player. &oreover, "ollibee dedicated its continuous success to the #ilipinos who have been there from the very start. "ollibee is so wellDloved every time a new store opens, especially overseas #ilipinos always form long lines to the store. +t is more than home for them. +t is a strong hold of heritage and monument of #ilipino victory.
18
"ollibee also has its own and uni)ue values &ission and Nision that are distinct from other corporation. These include the values
for
$ustomer
#ocus,
Excellence,
4espect
for
the
+ndividual, Teamwor(, %pirit of #amily and #un, 9umility to !isten and !earn, 9onesty and +ntegrity and #rugality. Their mission is to serve great tasting food and bringing the 5oy of eating to everyone. !ast but not the least is their vision of to lead in product taste all the time, provide excellence in every counter, give happiness in every moment and let the #ilipino be admired worldwide. http:MMwww.5ollibee.com.phMaboutDus2. B. %& 'roup of $ompanies %& 'roup of $ompanies is the Philippines largest retailer run by 9enry %y. %& 'roup is a retail giant with BH,G88 employees
and
annual
revenues
of
0.F billion.
%&
is
the Philippines leader in the retail industry. %& +nvestments $orporation is the holding
company of the %& 'roup. #or
more than @8 years, it has been committed in providing )uality products and services at reasonable prices. %& 'roup of $ompanies is also one of the leaders in /an(ing K #inancing
+ndustry and Property K 4eal Estate
+nvestment today. The company does not forget the
their role in
community or their civic responsibilities, thats why %&
also focuses on
four ma5or programs and areas of advocacy,
namely, education religious outreach
and health.
The company has a $ode of Ethics that serves as a guiding principle for directors, officers and employees in their business transactions with investors, creditors, customers, contractors, suppliers, regulators and the public. The $ode provides that the company must strive to render ade)uate, reliable and efficient
19
customer service at reasonable cost. +t protects shareholders and investors interests, including their rights to a fair return of investment and accurate and timely information. +t also protects the employees individual and collective rights and encourages free and honest communication within the organization. The $ompany further aims to provide its employees with ade)uate benefits as well as a safe wor(place and environment. •
The $ode re)uires a fair and transparent process for the evaluation and selection of suppliers of goods and services, as well as an effective monitoring and control system to prevent fraud and other malpractices.
+t prohibits the
solicitation or acceptance of gifts by any director, officer or employee of the company from any business partner, except only for gifts of nominal value or those given for the companys charitable pro5ects. +t li(ewise prohibits conflict of interest, insider trading, corruption and other illegal •
acts. The $ode lays down the companys policy to select, develop and compensate the best people to manage the company.
The $ode further expresses the companys
advocacy to support health, educational, livelihood and other
charitable
pro5ects.
http:MMwww.sminvestment.comMsmic2. @. %an &iguel $orporation %an &iguel $orporation %an &iguel2 was established in 0H18 as a singleDproduct brewery. +t is the Philippines3 largest beverage, food and pac(aging company. Today, the company has over 088 facilities in the Philippines, %outheast Asia, and $hina.
20
*ne of the country3s premier business conglomerates, %an &iguel3s extensive product portfolio includes over @88 products ranging from beer, hard li)uor, 5uices, basic and processed meats, poultry, dairy products, condiments, coffee, flour, animal feeds and various pac(aging products. #or generations, the $ompany has generated strong consumer loyalty through brands that are among the most formidable in the Philippine food and beverage industry I %an &iguel Pale Pilsen, 'inebra, &onterey, &agnolia, and Purefoods. #lagship product, %an &iguel /eer, holds an over 1CQ share of
the Philippine beer mar(et. +n addition to its leadership in the Philippine food and
beverage industry, %an &iguel has established a significant presence overseas. The $ompany3s operations extend beyond its home base of the Philippines to $hina including 9ong >ong2, Nietnam, +ndonesia, &alaysia, Thailand and Australia. Through strategic partnerships it has forged with ma5or international companies, %an &iguel has gained access to managerial expertise, international practices and advanced technology, thereby enhancing its performance and establishing itself as a worldDclass company. %an &iguel3s partners are world leaders in their respective businesses. >irin /rewery $o., !td. is a ma5or shareholder of %an &iguel /rewery. The $ompany also has successful 5oint venture relationships with %Dbased 9ormel #oods $orporation, 6ihon Ramamura 'lass and OTel, a telecommunications company in Oatar. +n the Philippines, %an &iguel3s corporate strategy is at aimed capitalizing on new growth mar(ets through ac)uisitions
21
and further enhancing its competitive position by improving synergies across existing operational lines. The company has significantly expanded its participation in both its core businesses of food, beverage and pac(aging, as well as heavy industries including power and other utilities, mining, energy, toll ways and airports. %an &iguel has had a longDstanding commitment to good corporate governance practices and ta(ing a leadership role in instituting and maintaining practices that represent strong business ethics. These practices provide an important framewor( within which the /oard of ;irectors and management can pursue the strategic ob5ectives of the $ompany and ensure its longDterm vitality
for
the
benefit
of
stoc(holders
http:MMwww.sanmiguel.com.phMcorporateMcompany2. C. Ayala $orporation Ayala $orporation is the holding company of one of the oldest and largest business groups in the Philippines. +t maintains a tradition of excellence, and integrity has run continuously through seven generations, adhering to the principles and ideals that had brought it to existence 0FH years ago. *ne pioneering family started a business in 0HB@. That business grew and engendered others. As it does today, Ayala harnessed some of the best talents in the Philippines. Today, Ayala is one of the biggest, most respected, and most widely diversified conglomerates in the Philippines, with leadership positions in real estate development, ban(ing and financial services,
telecommunications,
electronics
and
information
22
technology, water infrastructure development and management, and new investments
in power, renewable
energy, and
infrastructure. Ayala continues to contribute to Philippine economic and social growth through its diverse business interests, maintaining its tradition of excellence in every endeavor. Ayala is gearing up to move further forward, drawing on its heritage and experience to fulfill its brand promise of LPioneering the #uture.L +ntegrity is one of Ayalas core values. %trictly abiding by the principle of Ldoing the right thingL has earned for the company its strong position of trust among its sta(eholders. Ayala
believes
that
integrity
starts
with
the
individual thus, we strive to maintain an exceptional standard of conduct among our employees. This $ode of $onduct applies to all Ayala employees, including senior executives and members of the Executive and &anagement $ommittees. +t provides an outline of the general expectations and sets standards by which employees are expected to conduct themselves. As it does not cover every conceivable sub5ect, it is recommended that employees refer to its general principles to guide them in their activities. Ayala expects its employees to conduct business in accordance with Philippine laws and regulations. Employees are encouraged to consult with $orporate 'overnance and !egal Affairs whenever there is any doubt concerning the legality of any matter.
23
Any suspected criminal violations will be reported to the appropriate
authorities.
investigated
and
6onDcriminal addressed
violations as
will
be
appropriate
http:MMwww.ayala.com.phMaboutSayalaSmission.php.2. Problem /) *hat are the Ethical Issues facing the Accounting rofession+
The role of accountants is critical to society. Accountants serve as financial reporters and intermediaries in the capital mar(ets and owe their primary obligation to the public interest. The information they provide is crucial in aiding managers, investors and others in ma(ing critical economic decisions. Accordingly, ethical improprieties by accountants can be detrimental to society, resulting in distrust by the public and disruption of efficient capital mar(et operations. #rom the 01H8s to the present there have been multiple accounting scandals that were widely reported on by the media and resulted in fraud charges, ban(ruptcy protection re)uests, and the closure of companies and accounting firms. The scandals were the result of creative, misleading financial analysis, as well as bribery. An accountant wor(ing in the public or private sector must remain impartial and loyal to ethical guidelines when reviewing a company or individuals financial records for reporting purposes. An accountant fre)uently encounters ethical issues regardless of the industry and must remain continually vigilant to reduce the chances of outside forces manipulating financial records, which could lead to both ethical and criminal violations. Pressure from &anagement seems to be the common issue that the causes accounting professional ethics fail. The burden for public companies to succeed at high levels may place undue stress and
24
pressure on accountants
creating balance
sheets
statements.
issue
accountants
The
ethical
for
these
and
financial becomes
maintaining true reporting of company assets, liabilities and profits without giving in to the pressure placed on them by management or corporate officers. nethical accountants could easily alter company financial records and maneuver numbers to paint false pictures of company successes. This may lead to shortDterm prosperity, but altered financial records will ultimately spell the downfall of companies when the %ecurities and Exchange $ommission discovers the fraud.
6ext in line is the accountant as histleblower. An accountant may face the ethical dilemma of reporting discovered accounting violations to the #inancial Accounting %tandards /oard. hile it is an ethical accountants duty to report such violations, the dilemma arises in the ramifications of the reporting. 'overnment review of company financial records and the bad press caused by an accounting scandal could cause the companys rapid decline and may lead to the layoff of thousands of employees. Executives and other corporate officers could also face criminal prosecution, leading to heavy fines and prison time.
Effects of greed are also an issue when it comes to accounting issues. 'reed in the business and finance world leads to shaving ethical boundaries and stepping around safeguards in the name of ma(ing more money. An accountant can never let the desire to earn a better living and ac)uire more possessions get in the way of ensuring that
she
follows
ethical
guidelines
for
financial
reporting.
An
accountant who (eeps her eyes on her own ban( account more than on her companys balance sheet becomes a liability to the company and may cause real accounting violations, resulting in sanctions from the %E$.
25
%imilarly there is also the omission of financial records a corporate officer or other executive may as( an accountant to omit or leave out certain financial figures from a balance sheet that may paint the business in a bad light to the public and investors. *mission may not seem li(e a significant breach of accounting ethics to an accountant because it does not involve direct manipulation of numbers or records. This is precisely why an accountant must remain ethically vigilant
to
avoid
falling
into
such
a
trap
htt)00smallbusiness.chron.com0urose1ethical1ractices1 business%.
Problem 2) *hat is the imortance of accounting ethics in business industry+
The nature of the wor( carried out by accountants and auditors re)uires a high level of ethics. %hareholders, potential shareholders, and other users of the financial statements rely heavily on the yearly financial statements of a company as they can use this information to ma(e an informed decision about investment. They rely on the opinion of the accountants who prepared the statements, as well as the auditors that verified it, to present a true and fair view of the company. >nowledge of ethics can help accountants and auditors to overcome ethical dilemmas, allowing for the right choice that, although it may not benefit the company, will benefit the public who relies on the
accountantMauditors
reporting.
http:MMbusinessworldng.comMwebMarticlesM1@8M0M#raudulentD AccountingDPracticeMPage0.html2 &ost businesses have a mission statement, but few have considered ethical standards. A statement of ethical standards is the
26
first step in implementing an inclusive ethical program throughout the entire business. Accordingly, ethical accounting is relevant. A business that hires an ethical accounting firm (nows that they are scrupulously honest and can be confident that employees, customers and clients are in good hands. 6evertheless,
accounting in
business
is
one
of
the
most
important departments. Ethical and professional accounting forms a clear financial image of a business, and allows managers to ma(e informed decisions, (eeps investors abreast of developments in the business, and (eeps the business profitable. +t is extremely important for accounting professionals to be ethical in their practices due to the very nature of their profession. The nature of accountants3 wor( puts them in a special position of trust in relation to their clients, employers and general public, who rely on their professional 5udgment and guidance in ma(ing decisions. These decisions in turn affect the resource allocation process of an economy.
Ensuring highest ethical standards is important to a public accountant, which is the one who renders professional services such as assurance and taxation service to clients for a fee, as well as to a business accountant in which on the other hand is employed in a private or public sector organization for a salary. /oth public accountants and business accountants are in a fiduciary relationship, former with the client and latter with the employer. +n such a relationship, they have the responsibility to ensure that their duties are performed in conformity with the ethical values of honesty, integrity, ob5ectivity, due care, confidentiality, and the commitment to the public interest before one3s own.
27
Thus, accountants, as professionals, are expected to maintain a level of ethical conduct that goes beyond society3s laws. This has made the professional accounting bodies to develop a code of professional conduct, which sets rules or standards that define right from wrong to ensure that behavior of members complies with perceived public expectations of ethical standards. These rules have been developed based on the principles of professional conduct, which form the basis for professional ethics. 9owever, the involvement of accountants with large corporate scandals in recent times reflects that they have not complied with the expected ethical standards. +t is often argued that accountants focus too much on technical issues and lac( ethical sensitivity to recognize ethical dilemmas involved with their wor(, which would ultimately lead to ma(ing wrong decisions. Thus, accountants should be trained to be sensitive to identify the moral dimension of seemingly technical issues. This emphasizes the need to include ethics education as a core component of professional accounting education to prepare the accounting professionals to face various ethical dilemmas that they face in carrying out their duties.
CHAPTER III Summary of #indings' Conclusions and Recommendations
The purpose of this study was to determine the ethical practices in accounting among the top five leading business firms in the Philippines. To realize this aim, the researchers gathered some data from different sources that can be used to this study. Summary of #indings
28
/ased on the analysis and interpretation of data gathered, the findings are: Problem () *hat are the goals of accounting ethics education+
0. 4elate accounting education to moral issues 7. 4ecognize issues in accounting that have ethical implications B. ;evelop a sense of moral obligation or responsibility. @. ;evelop the abilities needed to deal with ethical conflicts or dilemmas. C. !earn to deal with the uncertainties of the accounting profession. G. %et the stage for a change in ethical behavior. F. Appreciate and understand the history and composition of all aspects of accounting ethics and their relationship to
the general field of ethics
Problem ,) *hat cause accounting scandals+
/ased
on
the
data
gathered
creative
accounting, misleading financial analysis, bribery and frauds cause accounting scandals. All accounting scandals are not caused by top executives. &anagers and employees are often pressured or willingly alter financial statements for the personal benefit of the individuals over the company.
29
Problem -) *hat are the ethical ractices in accounting among to fie leading business firms in the Philiines+
The accountant3s ethical duty is to pro5ect honest and accurate information to shareholders of the company and other interested parties. The top five leading business firms in the Philippines have their own mission statement that considered ethical standards. A statement of ethical standards is the first step in implementing an inclusive ethical program throughout the entire business. 9aving an ethical accounting practice is relevant. A business that hires an ethical accounting firm (nows that they are thoroughly honest and can be confident that employees, customers and clients are in good hands. Problem /) *hat are the Ethical Issues facing the Accounting rofession+
%tress and pressure on accountants in creating balance sheets and financial statements, reporting discovered accounting violations to the #inancial Accounting %tandards /oard, shaving ethical boundaries and stepping around safeguards in the name of ma(ing more money, and *mission of financial records are the ethical issues facing the accounting profession. Problem 2) *hat is the imortance of accounting ethics in business industry+
Ensuring highest ethical standards is important to a public accountant, which is the one who renders professional services such as assurance and taxation service to clients for a fee, as well as to a business accountant in which on the other hand is employed in a private or public sector organization for a salary. Conclusions
30
/ased
on
the
findings,
the
researcher
arrived
at
these
conclusions: 0. The goal of accounting ethics education can help future accountants to be an ethical professional. 7. All accounting scandals are not
caused by top executives.
B. The top five leading business firms in the Philippines have their own uni)ue mission statement that considered ethical standards in business and accounting. @. Pressure from management, reporting discovered accounting violations, greediness and omission of financial records are the issues facing the accounting profession. C. /usiness will not exist without accounting because it is its language.
Recommendations
/ased on the conclusions, the researchers recommend some matters related to accounting practices. 0.
Ethics
education
should
always
be
implemented
to
different universities so that future professionals li(e accountants will be aware of
the right practices they should perform in the
future. 7. A business firm should consider ethical standards by implementing an inclusive ethical program throughout the entire business. B. The management should not pressure and control their accountants to avoid some ethical issues that can cause a bad image to the company.
31
@. /usiness firms should have their guidelines and policies inside the company so that the whole management can perform their respective 5obs ethically.
BIB!I3&RAPH4 Books
/aysaDTolentino, #uaD'eronimo E.$., %alvador, %.&.$orporate %ocial 4esponsibility and 'ood 'overnance. Allen Adrian /oo(s +nc.7808. 'hyllyer,A. Ph.;./usiness ethics 7e:4eal orld Approach. The &c'raw 9ill $ompanies, +nc.0770 Avenue of the Americas, 6ew Ror(, 6R, 08878.7808. !everiza,".P. /usiness Ethics: A &anagement approach.&' 4eprographics.FD0 Nillamor %t., %an "uan, &etro &anila. 0110. &axiamiano, ".&./usiness Ethics and %ocial $orporate 4esponsibility. Anvil Publishing inc.H88FD/ Pioneer %t., /rgy. >apitolyo, Pasig $ity 0G8B, Philippines.788F. &eigs,4.#.,&eigs,./. #inancial Accounting. $apitol Publishing 9ouse
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C,
http:MMwww.ayala.com.phMaboutSayalaSmission.php.
7807.
33
+ntegrity pledge: A commitment to Ethical business practice, 'ood 'overnance-.
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