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Penny is the chief accountant at kitchenware retailer Hut Ltd. Penny has been in this role for around 5 years. Penny feels secure in her job and has recently purchased a new home, taking out a significant mortgage. Hut Ltd. has a June 30 year end and Penny is finalising the year end accounts.

In finalising the inventory valuation Penny has a discussion with the warehouse clerk. During the conversation, Penny is made aware of the existence of a large amount of slow moving stock. A closer inspection of the stock reveals that it is two years old and would normally have been written down months ago if regular inventory management policies had been followed.

Penny is curious and so decides to follow up the issue of the stock valuation with the managing director Anne Redmond. It is well known within the company that Anne is also a major shareholder of Hut Ltd. Penny is suspicious that Anne may have given a directive to defer any inventory write downs. Anne tells Penny that there is no need to write down the stock in the year end accounts. Penny suspects, however, that Anne wants the balance sheet to carry overpriced stock values because she wants to sell Hut Ltd on terms advantageous to the shareholders. Anne goes on to tell Penny that she is aware of a potential buyer who is looking to inject capital into the business and that if the sale proceeds then all employees will hold onto their jobs and that Penny will receive a substantial pay increase.


1. a) Define the normative ethical perspectives of teleology and deontology. b) From an ethical egoist perspective, what would be an appropriate course of action for Penny? Justify your choice.

c) Would your answer to b) be different if Penny pursued ‘utilitarianism’? Justify your position.

d) Advise Penny of an appropriate course of action from a deontological ethical perspective. Outline why it is based on deontological ethics.

e) Which ethical theory do you think leads to the most appropriate course of action for Penny? Justify your position.

2. a) Outline the key historical events that have shaped the development of accounting from 1900 - 2018.

b) How do these events support the notion accounting is socially constructed? c) What arguments and evidence is there to suggest that accounting can influence society?

d) Which perspective, based on your answer for part b) and c), do you agree with? Justify your position.

Normative Ethical Perspectives of Teleology and Deontology

1.a. Deontology can be regarded as an ethical theory or perspective and it is based on obligation or duty. More specifically, a deontological theory refers to a theory where the moral obligations of duties are considered as self-evident including intrinsic value and there is not any need to provide justification. As per this theory, the evaluation of the moral actions is done based on inherent wrongness or rightness rather than the primary consideration of consequences and goodness (Ismail, 2014).

On the other hand, teleology provides description about an ethical perspective of any situation contending the wrongness or rightness of any actions solely based on the badness or goodness of their consequences. Under the strict teleological interpretation, neutrality in the actions can be seen when they are considered apart from their consequences. Some of the major examples of teleological theories are ethical egoism and utilitarianism (Berker, 2013).

b. One major example of normative theory is the ethical egoism theory. This particular theory favors, recommends and praises specific kinds of actions or motivations; and it also involves in describing another types of motivation. Two major versions of their theory can be seen; they are individual ethical egoism and universal ethical egoism. As per individual ethical egoism, one should look out for his/her own interest. As per universal ethical egoism, people should concern about the others when they have their interest involved with that (Vardaman, Gondo & Allen, 2014).

From the perspective of the above-discussed ethical egoism theory, the appropriate course of action for Penny would be to comply with the instruction of Anne Redmond that is not to write down the stock in the year end account. This decision would be appropriate for Penny as this decision would fulfill her own interest. There will be an increase in the payment of Penny in case Anne can set the deal with the potential buyer. This situation clearly shows the involvement of Penny’s own interest with the case. Thus, this course of action is justified for Penny from ethical egoist perspective (Gantt & Burton, 2013).

c. Utilitarianism is a major ethical theory that involves in the determination of right from the wrong by focusing on the outcome; thus, it can be regarded as a form of consequentialism. According to this theory, most of the ethical choices are one that can do greatest good for the greatest number. Wide use of this theory can be seen in the businesses all over the world due to the presence of the costs and benefits (Mill, 2016).

The provided situation can be analyzed in the light of the theory. While applying the concept of this theory, the earlier course of action of Penny would not be justified in this situation as it would involve in the satisfaction of own interest rather than the greatest good of all.  The manipulation in the inventory account may not affect the company in the short-run, but one cannot ignore the possibility that this decision can affect the financial position of the company in long-run in case the auditors disclose it. For this reason, as per utilitarianism theory, the correct course of action would be to write down the inventory that has been in the stock for two years as it will do the greatest good for the whole company (Mulgan, 2014).      

Applying Ethical Egoism to the Scenario

d. Deontology is regarded as another major part of ethics focusing on the wrongness or rightness of the actions; and it is opposite of the rightness or wrongness of the consequences of those actions. For this reason, a deontologist will determine a situation good or bad based on the fact that whether it brings right or wrong. Thus, in this theory, the priority of right can be seen over good (Paquette, Sommerfeldt & Kent, 2015).

The provided situation can be explained with the help of this concept. As per the deontology theory, the right course of action for Penny would be to write down the two year old inventory in the current year as this is the right action. It can be considered as right because this action of writing down the inventory is as per the accounting principles that the companies are required to be complied with. At the same time, not writing down the inventory may be good for the employees and Penny, but it is not right as per the accounting principle as it is against the ethical as well as accounting principles (Sharma & Lijuan, 2014).       

e. The above discussions talks about three ethical theories that can be connected with the correct course of action of Penny. At the time to make any business decisions, the decision-maker is needed to take into consideration the interest of all the stakeholders in the company instead of only himself/herself. The egoism theory takes into account the interest of only Penny and some employees. Utilitarianism focuses on the consequence that can be good or bad. However, the deontology theory takes into account the right decision that is good for all the members of the company and the company itself. Under this perceptive, it is needed for the decision-makers to make decisions as complying with all the required principles and regulations. Moreover, the right decisions are goods for the long-run of the companies as it ensures the sustainability of the organizations. For this reason, the deontological ethical theory leads to the appropriate course of action for Penny in the provided situation (Sharma & Lijuan, 2014).

2.a. The occurrence of many key historical events can be seen in the history of accounting from the year of 1900 to 2018. At the beginning of 1900 that is the end of the industrial revolution, the development in the double entry system of accounting can be seen. At the same time, the development of different kinds of measures and techniques can be seen for the reduction in fraud and scandals in the accounting process. After some years, the development of United States Generally Accepted Accounting Principles (GAAP) took place by the American Institute of Certified Public Accountants (AICPA). The establishment of Financial Accounting Standard Board (FASB) can be seen in the year of 1939 (Zhang & Andrew, 2014).

After this time, FASB and AICPA has been working together with the Securities Exchange Commission (SEC) for the development of different kinds of accounting standards for the businesses so that the accounting works can be carried out in the correct manner. After that, in the year 2001, the development of International Financial Reporting Standards (IFRS) can be seen. The main objective behind the development of IFRS is to introduce one uniform accounting standard for all the countries (Wehrfritz & Haller, 2014). Thus, from the above discussion, it can be seen that there has been some major events from 1900 to 2018 that helps in shaping the accounting profession.        

Utilitarianism and its Potential Impact

b. The above discussion indicates towards the occurrence of some of the major events in the accounting profession. In this context, it needs to be mentioned that the accounting profession is considered as a major part of the society. From the example from the above events, it can be seen that that the emergence of accounting is from the society. The main aim of the development of all these events is to bring improvements in the accounting processes so that the companies can take into consideration all the economic consequences (Walker, 2016). At the time to conduct the business operations, it is needed for business organizations to comply with all the accounting rules and regulations. At the same time, the business organizations have certain responsibilities towards the betterment of the societies as they operate in the society. The introduction of GAAP, FASB and IFRS has major positive effects on the organizations as the companies can continue their accounting and financial operations in the most proper manner. In case the companies run their business operations in the right manner, it ensures the effective profitability of the companies. When a company is profitable enough, they can contribute towards the betterment of the society (Walker, 2016).  Thus, on the basis of the above discussion, it can be seen that the major events in the accounting support the fact that accounting is socially constructed.   

c. Accounting can be considered as the process to collect, analyze and communicate the economic information of the companies. However, for the development of the broader understanding about the processes of accounting as well as its central role in the society, it is needed to consider the social perspective. People in the society exist with the establishment of relationship with each other. At the same time, another way to view the society is to segment them in different areas; like social, economic, political and organizational areas. For the purpose of effective functioning, there is a need to establish communication among these different areas; it is the accounting information that assists in establishing this communication. Accounting information serves in different purposes like to help the users in decision-making, allocation of scare resources and others (Schaltegger & Burritt, 2017).

For this reason, it can be seen that there is a major influence of the accounting information on the society and this aspect affects everybody. In this case, the case of National Cole Board can be presented as example. In this organization, the company used the measurement of accounting profit for the justification of closure of coal pits, impact in the electivity prices, taxes, jobs and others. Thus, from the above discussion, it can be observed that the accounting process and accenting information has many positive contributions towards the development of the societies and it can be found from the example also. Hence, based on the above whole discussion, it can be said that accounting can influence society (Miller & Power, 2013).     

d. The above discussion analyze the facts that the accounting has influence on the society and they are socially constructed. It can be seen that all the developments in the accounting system brought while considering their impact on the society. At the same time, it can also be seen that that the accounting information helps in the establishment of effective communication among all the segments of the societies. Apart from this, the accounting information also helps in accounting decision-making as well as the effective allocation of the resources of the companies. Hence, it can be observed from both the perspectives that the accounting information as well as accounting process has large contribution towards the society. All these aspects provide justification for supporting both the aspects (Alewine & Stone, 2013).


Alewine, H. C., & Stone, D. N. (2013). How does environmental accounting information influence attention and investment?. International Journal of Accounting & Information Management, 21(1), 22-52.

Berker, S. (2013). Epistemic teleology and the separateness of propositions. Philosophical Review, 122(3), 337-393.

Gantt, E. E., & Burton, J. (2013). Egoism, altruism, and the ethical foundations of personhood. Journal of Humanistic Psychology, 53(4), 438-460.

Ismail, S. (2014). Effect of ethical ideologies on ethical judgment of future accountants: Malaysian evidence. Asian Review of Accounting, 22(2), 145-158.

Mill, J. S. (2016). Utilitarianism. In Seven Masterpieces of Philosophy (pp. 337-383). Routledge.

Miller, P., & Power, M. (2013). Accounting, organizing, and economizing: Connecting accounting research and organization theory. The Academy of Management Annals, 7(1), 557-605.

Mulgan, T. (2014). Understanding utilitarianism. Routledge.

Paquette, M., Sommerfeldt, E. J., & Kent, M. L. (2015). Do the ends justify the means? Dialogue, development communication, and deontological ethics. Public Relations Review, 41(1), 30-39.

Schaltegger, S., & Burritt, R. (2017). Contemporary environmental accounting: issues, concepts and practice. Routledge.

Sharma, G., & Lijuan, W. (2014). Ethical perspectives on e-commerce: an empirical investigation. Internet Research, 24(4), 414-435.

Vardaman, J. M., Gondo, M. B., & Allen, D. G. (2014). Ethical climate and pro-social rule breaking in the workplace. Human Resource Management Review, 24(1), 108-118.

Walker, S. P. (2016). Revisiting the roles of accounting in society. Accounting, Organizations and Society, 49, 41-50.

Wehrfritz, M., & Haller, A. (2014). National influence on the application of IFRS: Interpretations and accounting estimates by German and British accountants. Advances in accounting, 30(1), 196-208.

Zhang, Y., & Andrew, J. (2014). Financialisation and the conceptual framework. Critical perspectives on accounting, 25(1), 17-26.

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