Ethical Considerations in Budgeting

Response to Classmate

Great insights! I concur with you regarding the budgeting process’s essentiality for realizing a company’s long-term and short-term goals (Needles et al., 2013). I also share a similar opinion regarding Joakim’s actions; he is not interested in driving the company towards actualizing its goals; instead, he is after fulfilling his selfish interest in gaining an undeserving bonus. Joakim’s actions are likely to result in adverse effects on the firm in terms of reduced profitability and growth opportunities; I, however, doubt it would lead to bankruptcy. Nonetheless, the accumulation of poor decisions and lack of strategy implementation could eventually lead a company to financial distress.

Upon questioning, Joakim lied to the budgeting committee. “Truthful lips endure forever, but a lying tongue lasts only a moment” (Proverbs 12:19). From this verse, I contemplated that endurance is in relation to the company and Joakim’s career. In case an audit is performed on Joakim’s department budget, discrepancies will be discovered, and he risks losing his job or, worse still, losing his career. Then again, his actions risk the firm’s long-term viability. I also agree with you regarding the identification of opportunities by Joakim to enable the company to gain a niche in the industry. The only way to grow is through proper planning, implementation of strategy, and diligence. It appears Joakim is unaware of the process required to attain the success he desires for himself and the company. With that attitude, he is least likely to contribute positively to the company’s growth.

References

Needles, B. E., Powers, M., & Crosson, S. V. (2013). Financial And Managerial Accounting. Nelson Education.

Version, K. J. (2017). Holy Bible. Arcturus Publishing Limited.

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Ethical Considerations in Budgeting

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Ethical Considerations in Budgeting

Classmate’s Post

Budgeting helps managers achieve both long-term and short-term goals (Needles et.al., 2014). However, Joakim does not utilize the budgeting process for the company’s goals at all. He seems to have no plan for the company’s growth and just put simply 20% increased amount comparing to this year’s budget without any strategic consideration.

What is the real reasons for the increased budget? I would have to say that he just secured room to obtain higher bonuses for him and his members. Another reason could be because he is just lazy. However, he must realize that by his budgeting approach without any strategy, the company will lose some business and growth opportunity. That could cause the company to be bankrupted. In the case, he and his colleagues will lose the jobs as well as salary and bonus eventually.

Was Joakims acting ethically? No, he was not. When the budgeting committee questioned him, I suppose that he told a lie as he expects a significant increase in activity in his department next year. “Truthful lips endure forever, but a lying tongue last only a moment” (Proverbs 12:19). If his statement is true, the numbers were not increased simply by 20% higher than this year’s budget. It is obvious for him not to review this year’s actual amount used though he should. Comparing to this year’s actual amount, 50% higher in supplies, 17% higher in labor, 28% higher in utilities, 67% higher in tools, 83% higher in hand-carried equipment in next year. If he tells any story behind the increases, that is ethical consideration, but he did not do that.

If I were him, I overview the current business status – customers and market trends, competitors’ activities to the customers, and our position. Then, I define a story based strategy for how to win the competitions to grow sustainably. Then, I identify the gaps between the current our status and future vision and what we should invest to fill the gaps so that we can define for what our company should pay next year. Then, the next year budget can be drafted for the further discussion among the team. In the case, we can easily answer to budgeting committee’s questions.