Drawing upon deontological ethics

Drawing upon deontological ethics, discuss how Adelphia Communications’ executives violated the trust of the company’s shareholders and the trust of that of the larger public.
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Deontological ethics is very important in the decision making in the business. It entails decision making based on rules and moral duties to others. The categorical imperative aspect of deontological ethics seeks to validate certain actions of maxims on the universal level and indicates that maxims that cannot be adopted as universal laws are unethical. This study outlines the application of deontological ethics on the Adelphia a company that committed financial fraud and was unmasked in 2002. It describes the nature of the scandal, outlines two ethical problems of the scandal and shows how deontological and categorical imperative address the ethical problems.
Adelphia’s accounting malpractice surfaced in 2002 when its statements failed to give a true report of the company’s financial situation. External auditors acted unethically by failing to uncover the fact that Adelphia had excluded information about its debt from its financial statement (Barlaup, Doren, & Stuart, 2009). This gives a wrong impression to the stakeholders about the company’s financial standing and it frauds them because they make investment decisions based on false reports.
One of the key unethical problems in the case is the fact that Adelphia’s accountants developed fraudulent statements that excluded its debt burden. The Rigases who are the company’s founding family has misappropriated company assets in various activities such as flights for vacation using the company’s jet for personal vacations and living in company apartments without due approval which is tantamount to swindling shareholders. The company’s founders also conspired with employees to falsify financial statement on discovering that it fell below its public forecast (Markon & Frank, 2002).
False reporting of financial performance dissuades stakeholders of the capital markets into making misguided investment decisions. The financial market attracts a high level of trust and confidence from investors and fraudulent reporting imposes grave consequences on this sector (Barlaup, Doren, & Stuart, 2009). Potential and existing investors in the capital market expect and trust companies that trade in the market to prepare truthful statement to inform unbiased investor decision. Companies require entrenching moral behavior in organizational culture as it retains its credibility and attractiveness to prospective investors.
The other key unethical problem of the case is that the auditors failed to unmask the hidden fraud. The company had incurred huge debts amounting to billions and its accountants that intentionally omitted in its financial statement. The auditing company failed to adhere to the deontological rule of minding about the interests of shareholders and the larger public. The company limited its scope to safeguarding its interest for continued contracting by Adelphia for external auditing instead of abiding to the universal rule of being truthful at all times.
The auditors had little to lose by portraying the true state of the company. The company stood the chance to lose its reputation as a reputable organization and face fines for breaching accounting standards. However, the auditing company only risked losing its contract with the company upon uncovering its fraudulent activities.
The auditors required to take note of the fact that upon revealing the fraudulent activities, it would earn a good reputation and attract other contracts from other companies owing to its professionalism. On the contrary, the auditing company lost it all. It lost its contract with Adelphia, lost its reputation and the capacity to be enlisted on a contract by potential customers.
It is important that auditing companies adhere to ethics codes that are professional accounting bodies develop. These codes of ethics guide the auditing companies in their practice towards promoting integrity, objectivity, professional competence and due care, confidentiality and professional behavior (Barlaup, Doren, & Stuart, 2009).
Deontological ethics is premised upon laid down rules that describe one’s duties towards a subject. The obligation for moral decisions emanate from the knowledge that duties and rules form the basis for engaging in certain activities or making certain decisions. The deontological perspective stresses the fact that people’s motivation for certain actions ought to be the desire to abide by an ethical duty. People require t engage in an objective reflection to determine their motivation towards fulfilling particular duties. Deontological principles are void of consideration of the consequences of particular actions. It pays no attention to the implications that certain actions have on others. For example, ...