Ethical budgeting (Essay Sample)

Ethical budgeting
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Ethical budgeting
Budgets are designed to adjust various changes for the good of the company with the assistance of the decisions made by the management (Amah, 2019). However, the budget sometimes faces various challenges internally and externally. Some of the challenges include the influence of top management of the company. When compiling a budget report, it is important to understand that ethical issues must be considered. This paper will discuss the budget process and the ethical considerations of ABC Manufacturing.
Making a budget is a process that should be conducted objectively and ethically. The budget should focus on the company’s strategic goals. The management has a mandate to plan and control major elements of the budget such as expenses, financing options, revenues and cash flows. The budget cannot work in favor of an individual but in favor of the progress of the company. Concerning ABC Manufacturing, the budget process to plan for the next year’s expenses is not properly designed. Looking at the budget of ABC Manufacturing, the uniformity of increase in every essential item by 20% is not realistic. Because this budget is a designed using the top-down approach, the budget is made under the influence of top officials but not what the mission and vision of the county entails.
The president of ABC Manufacturing has directed that each year the budget should be cut by about 20% every year as a way of showing proper control and leadership. Despite the fact that the president has powers to direct on the way the management should conduct their business, it is important to note that some directions might affect the company’s goals through the provision of defective strategy translating to defective budget. In good corporate practice, company presidents do not interfere with the work of the management but can provide an opinion (Amah, 2019). The president’s directions are bad and unwelcome because they can negatively affect the company’s operations.
Ethical budgeting can uncover incidences of conflicts of interests that can result in improper situation allocation and dishonest accounting. For example, in ABC Manufacturing, the president is also doing the management work by directing the committee working on the budget to escalate the budget by 20% each year. According to accounting practice, the action of the president is termed as conflict of interest in the budgeting process (Amah, 2019). Again, ethical budgeting encompasses providing decision-making power to the committee making the budget and whose accounting priorities are clear and honest. The President o