Ethical Dilemmas in Managerial Accounting: Bias and Bonuses
This paper examines two interrelated ethical dilemmas in managerial accounting. The first involves Les Pulaski, who faces a decision about whether to accept a bonus exceeding $1,000 that was generated through the erroneous labeling of returned products as an overhead expense. The paper outlines recommended courses of action, including rejecting the bonus and notifying the accountant. The second dilemma addresses cognitive biases — specifically motivated reasoning and surrogation — and how they distort performance measurement, encourage unethical accounting, and undermine the usefulness of balanced scorecards. The paper concludes by suggesting reliance on accepted accounting standards and stakeholder involvement as remedies.
- Introduction: The Bonus Dilemma: Erroneous overhead labeling creates unethical bonus situation
- Recommended Actions for Pulaski: Rejecting bonus and notifying accountant as remedies
- Cognitive Biases in Business Performance Measurement: Motivated reasoning and surrogation drive unethical accounting
- Impact of Biases on the Balanced Scorecard and Ethical Remedies: Biases distort balanced scorecards; standards and stakeholders help
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What makes this paper effective
- Clearly identifies distinct ethical issues within each scenario rather than treating ethics as a single undifferentiated concern, which sharpens the analysis.
- Connects practical workplace situations (a misclassified return, restaurant manager bribes) to broader accounting concepts like the balanced scorecard, demonstrating applied understanding.
- Recommends concrete, sequenced actions for the protagonist rather than vague ethical platitudes, grounding the argument in real decision-making.
Key academic technique demonstrated
The paper uses a scenario-based ethical analysis structure: it identifies the parties involved, names the specific ethical violations (unethical accounting, corruption, cognitive bias), and prescribes actionable responses. This technique is common in business ethics writing and allows the student to demonstrate both conceptual knowledge and practical judgment simultaneously.
Structure breakdown
The paper is organized into two self-contained ethical cases. The first case covers the Pulaski bonus scenario, moving from problem identification to recommended actions. The second case addresses cognitive biases — motivated reasoning and surrogation — their ethical implications, and their effect on balanced scorecards, closing with prevention strategies. A shared references section supports both cases.
Introduction: The Bonus Dilemma
Les Pulaski is facing an ethical dilemma relating to a bonus generated from a product that was returned to the company. The dilemma arises from the fact that the firm's accountant labeled the returned product as an overhead expense in the plantwide overhead account, resulting in the erroneous award of a bonus exceeding $1,000. This situation reflects the kind of ethical dilemmas that can emerge within a company.
One of the ethical issues in this situation is unethical accounting by the company's accountant. Unethical accounting is a practice typically fueled by greed, management pressure, incentives, and bonuses (Oseni, 2011). This conduct could result in significant losses for the company, since the order for 7,500 units of a new product was returned and yet labeled as an overhead expense. The second ethical issue is whether Pulaski should accept the bonus at all. By receiving it, Pulaski would effectively endorse the accountant's unethical practice.
Recommended Actions for Pulaski
One of the actions Pulaski should take is to reject the bonus, since it is erroneously rooted in a misclassified expense. Because the products were returned to the company, they do not represent a legitimate overhead expense to the plantwide overhead account. By rejecting the bonus, Pulaski would act in the best interest of the company and all its stakeholders. In essence, rejecting the bonus is simply doing the right thing.
The second course of action is to notify the accountant of the erroneous labeling and its inclusion in the bonus calculations. In doing so, Pulaski would extend the benefit of the doubt — assuming the accountant did not deliberately misclassify the returned products. By providing this notification, Pulaski gives the accountant the opportunity to make the necessary corrections and prevent losses for the organization. Any additional courses of action would depend on the accountant's response to that notification.
References
Oseni, A. I. (2011). Unethical behavior by professional accountants in an organization. Research Journal of Finance and Accounting, 2(2), 1–8.
Warren, C. S., Jones, J. P., & Tayler, W. B. (2018). Financial and managerial accounting. Boston, MA: Cengage Learning.
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