During auditing, there arise conflicts of interest since firms try to trace the financial statements that show how the management manages the tax company. The whole scenario may result to pressurizing the auditors to sign for the cleared audits despite any issue that exist between the parties. Shareholder management conflict
Shareholders are a vital entity to the business since their share contribution is what keeps the business running. They keep on track how the business is performing since this determines the amount of dividend they will get at the end of any trading year. However, conflicts of interest do arise since shareholders possess much influence over the company’s financial statements whereas the managers will produce forged statements to calm down the shareholders (Stanwick & Stanwick, 2014). Shareholders take much interest on the external auditors since they pay their salaries. Self-interest-professional standards conflict of interest
Most organizations are seen to suffer due to the self-interests of the leaders. For interest, the management, and the auditors may violate their professional standards where they see they can benefit in the expense of the shareholders. Such violations of standards lead to the production of inaccurate financial statements in order to cover-up the damage. Again, auditors may violate their professional standards set by the organization for their own gain. How decisions made during the ethical cycle affect corporate culture? Decision-making is a very crucial process to any organization. In an organization, decisions are made in accordance with the values and the ethics as per the corporate culture. Broadly, ethics is a way of guiding people in an organization on what is right or wrong. Ethical cycle determines how people in an organization are making moral decisions. Ethical cycle seeks to structure and improve moral decisions. Improving moral decision-making calls for a decision-maker to come up with a thorough and systematic analysis of the problem and justify the final decisions in an ethical manner. Ultimately, decision-making steers towards finding an action, which is ethically acceptable. The decisions made during the ethical cycle affects the corporate culture in that they become the guiding principles for the employees (Stanwick & Stanwick, 2014). However, the ethical cycle becomes a hard task to agree on since people usually disagree on what to be termed as an ethical solution. Such differences may affect the corporate culture since some people will feel being sabotaged. Such disagreements may also lead people to behave unethically thus, the corporate culture becomes at risk. The formulation of the moral problem as the very first step in the ethical cycle also becomes a problem. Problem formulation is an interactive process that requires more attention since the moral problem should be stated precisely as well as clearly. Leaders have a perception that they understand and are capable of defining the corporate culture. However, there may be a gap between how the management perceives the corporate culture and how the other employees feel (Kotter, 2008). Thus, leaders’ behaviors during ethical decision-making affect the corporate culture since other people tend to emulate them. A sound decision-making process calls for cooperation in all steps of the cycle where the leaders unit to define the problem, diagnose, develop a solution, make an executive decision, implement it and lastly, evaluate the solution. Such a process shows that leaders are ethically upright and their final decision becomes ethical and upon its implementation and evaluation, a strong corporate culture is developed. Decision-making steps in the ethical cycle from a global perspective Gathering facts is the initial step of making an ethical decision. It is important to maintain...
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