Philosophical Definition of Justice: The Role of Accounting

Philosophical Definition of Justice The Role of news reportWhat is Justice?Justice means various things to divers(prenominal) people. It is really much a cultur eachy determined concept that requires an innate understanding of a exceptional person or group of people. For the purpose of this investigate paper justice is defined as the judgment and process involved with making something that is wrong or bad, right and good. Justice helps us as a family distinguish wrong from right and corrects what is wrong by making it right. But what is right and what is wrong? What is handsome and what is just? If something is wrong or un plumb, how should society make it right?Such questions gather in been asked since the beginnings of human interaction. Perhaps under a monarchy justice, for right or wrong, is more than(prenominal) easily determined as it is however if what the supreme ruler (or monarch) feels is just or fair. Under a monarchy or aristocratic rule, there is unless ca rdinal ruler and what that individual feels is right, just, or fair, exactly is and often gagenot be questioned. However, within the realm of more contemporary political systems such as democracy, the political theory of justice, while arguably more fair, can be much more difficult to establish and understand. Democracy, at least in theory, grants the power to the people and therefore places the burden of justice or defining what is fair or equal upon the masses. Since different people be possessed of different belief systems they argon often in disagreement on what is right or what is fair and let differences of opinion when it comes to justice. With egress the aristocracy, justice fixs a very argumentative and ambiguous concept.Philosophy, the Various Schools of Thought, and their Influence on the Ideology of JusticeDisagreements over what is fair (or just) have been around since the beginning of time, al near acceptedly since the very first of human interactions. At first glance we probably think we have a pretty uniform understanding of what justice might or should be. For example if someone commits premeditated first degree murder, most would probably agree the individual should be jailed and, depending on your belief system, either face a life sentence in jail or the death penalty. If someone embezzles money from their company, most would insist the individual should be forced to make restitution and face spargon criminal or civil penalty.But fifty-fifty in the evidently straightforward examples above, and within the realm of a relatively homogenous audience (those reading this paper), one can already start to see how complicated the ideology of justice can be. For example, some have very pixilated feelings ab off the death penalty and insist that no crime, even murder, would justify ending new(prenominal) persons life. Additionally, some feel that crimes such as embezzlement are a form of victimless crime and would never warrant a punishme nt as painful as jail time since no one individual had been harmed. (Hanlin 2004, pp. 527) Within the relatively straightforward scenarios above, one can already begin to imagine the mixed bag of opinions as to what is just and fair. Should the murder be murdered? Should the embezzler be jailed? What if he only stole the money to pay for chemotherapy for his dying wife?Luckily, numerous philosophers and historians have allowd us with rich literature that helps us decipher the complex ideology of justice. In fact, it is only after studying and detailedly evaluating several(prenominal) of these philosophers, their different schools of ethical and clean thought, and the way they define justice that one can start to understand the differences in perceptions of justice around the world. The next sections provide brief introductions into several of the various schools of ethical and moral thought and provide some insight into the individual philosophers that have undoubtedly helped to regularise ours and others understanding of justice. It is only after considering the various schools of thought that we can start to understand the differences in the perception of justice that live on around the world. utileismJeremy Bentham (1748-1832) was a utilitarian and insisted that justice is doing what allow foring produce the greatest happiness for the greatest occur of people. (Justice a contri neverthelessor pg. 9) The utilitarian school of thought considers the principle of utility as the basis of moral law. Bentham defines utility as whatever promotes pleasure or prevents pain. (Justice A Reader pg. 9) The major(ip) criticism / objection to Benthams utilitarian principals come from the perspective that maximum utility, or collective happiness, may come at the expense of violating individual rights. (Justice A Reader pg. 9)In order to refute some of the criticisms of Benthams utilitarianism, John Stuart Mill (1806-1873) argued that the intellection of justice rests ultimately on utilitarian considerations but in any case requires a respect for individual rights. (Justice A Reader pg. 9) But even with Mills come up to justice, it becomes extremely difficult to choose and/or decipher amid individual rights and the majority or maximum utility. This often leaves us with questions of where to draw the line between the greatest good for the majority and the protection of individual rights.LibertarianismMilton Friedman and other libertarian thinkers were advocates of free marketplaces and critics of arrangement regulation. (Justice A Reader pg. 49) Underlying their (libertarians) laissez-faire stance is the idea that from each one of us has a fundamental right to liberty a right to do whatever we want with the things we own, provided we do not violate other peoples rights to do the same. (Justice A Reader pg. 49) Contrary to utilitarian thought, libertarians would never sacrifice individual rights for maximum utility or the benefit of t he majority.According to the Libertarians, only a tokenish giving medication is necessary. In essence the government should only be vest in place such that it enforces contracts, protects private property, and keeps the peace. (Justice A Reader pg. 49) Justice would watch that we own ourselves and the fruits of our labor, and therefore, as the proprietors of our own person, each of us has the right to decide what to do with our bodies and our labor, with the money we earn, and the goods we possess. (Justice A Reader pg. 49) Justice would be the protection of those rights as well as the individual rights of others.The biggest challenges to libertarian policy usually come in the form of paternalist and/or redistributive laws. Paternalist and redistributive laws typically are enacted such that a society can tax the rich to help the poor. While utilitarian principles strongly favor such laws, Libertarians typically argue that such laws are a form of coerced generosity that makes ev ery person the property (perhaps even the slave) of the majority. (Justice A Reader pg. 49) Pure Libertarianism teaches that welfare is a violation of individual rights. Liberationists believe that while the poor should have every right to reveal themselves, that right should not come at the expense of anyones individual right to what they own or produce.EgalitarianA troika school of thought that attempts to define the part of justice in society is egalitarianism. John Rawls (1921-2002) was often described as an egalitarian liberal (Justice A Reader pg. 263) and defined justice as fairness. Rawls believed that justice is a kindly contract in which people come together to choose the basic principles that will govern their society and proposed that the way to think about justice is to ask what principles would be chosen by people who came together behind a veil of ignorance that temporarily deprived them of any knowledge about where they would wind up in society. (Justice A Reader pg. 203) Accordingly, Rawls moral reasoning requires us to be abstract from the particular circumstances in which we find ourselves (Justice A Reader pg. 203), and justice is the first virtue of social institutions, as truth is of systems of thought. (Justice A Reader pg. 203)Rawls rejected utilitarianism and believed that certain individual rights are so fundamental that utilitarian considerations should not override them. (Justice A Reader pg. 203) However, contrary to Freidman and the libertarians, Rawls did not believe that the results of a free market are necessarily fair and was not opposed to the taxation of the intimate to help the poor. In Rawls opinion it would be accept open, under certain circumstances, to take from the privileged as long as it were helping the underprivileged.Accounting and Justice no matter of how you define justice or what school of thought you most closely denote to, it is clear the accountant plays a significant role in the establishment and pres ervation of justice for society. Accounting is the expression of rail line (Bloomfield, 2008) and without it justice cannot cost. Since the beginnings of specialization, when humans halt being self sufficient and started specializing, bartering, and trading, accountancy has become a critical part of human interaction. In todays society accountants serve in many another(prenominal) roles critical to the defense and preservation of justice. For example, in the U.S., IRS accountants ensure that citizens pay the appropriate amount of tax, forensic accountants provide investigative services for criminal and civil proceedings, and many of the FBIs anti-terrorist agents call their accountancy backgrounds to trace terrorist funding.History of the Spanish conglomerateOne only has to look back a few hundred years to see a perfect example of how the role of an accountant can protect and help preserve, or fail to protect and preserve, an entire civilization. In his book For Good and u nfairness The Impact of Taxes on the Course of Civilization, Charles Adams describes how tax fraud lead to the demise of one of the largest and most wealthy empires found in modern times majestic Spain. Around the time Chri bursther Columbus discovered the new world (the 14th and 15th centuries), the Spanish Empire was the strongest empire in the world which has never been equaled in terms of size or money. (Hanlin 2004, pp. 529) It controlled significant portions of Europe, the Americas, Africa, Asia, and Oceania (Australia and the Pacific Islands), and at its peak Spains conquered overseas empire was the largest the world has ever known. (Hanlin 2004, pp. 529)However, in the 17th century the grand empire started to disintegrate. Contrary to conventional wisdom, it was not the English fleet defeating the Spanish Armada that brought down the Empire, rather it was tax evasion and revolt by the masses against the funding system that ultimately lead to the bankruptcy of the empire . After several revolts from within the empire, and long civil war, the Spanish Empire was forced to increase taxes to pay soldiers to put down the various rebellions. As a result, many of the people in the colonies engineered what was probably the best system of fraud and evasion that history has ever known. (Hanlin 2004, pp. 530) When the Spanish authorities tried to tax goods that passed through the major ports, the Spanish businessmen created complicated schemes to have silver and gold shipped to alternate ports away from the customs officials, even laundering it through foreign countries. (Hanlin 2004, pp. 530) In order to avoid the Royal Fifth a 20% customs tax and a 35% escort tax on good from the colonies, the Spanish businessmen transformed commerce into one massive smuggling operation by avoiding the authorities and therefore the taxes. (Hanlin 2004, pp. 530) The Empire tried to stop the smuggling and division of money and goods away from the taxing authorities but simpl y did not have the means to control and stop the smuggling and tax evasion. As a result, the overseas empire could not defend itself and stealing the colonies of Spain became an international sport as most of the colonies were lost to the British, Dutch, and at long last the United States.Contemporary Accounting and JusticeGiven its role as the language of business, historys integral role in society continues to grow as worldwide economies grow and become increasingly interconnected. World GDP has grown from $1.34 jillion in 1960 to $60.6 trillion in 2008. (The World Bank, 2009). The Association of Certified blind Examiners estimates that in the U.S. 7% of total GPD is lost to fraud and injustice. (ACFE, 2008) When applied to a global GPD of $60.6 trillion loses resulting from fraud and injustices are estimated to have been $994 billion in 2008. $994 billion is a staggering number but in fact may be under acresd as many developing countries face an even higher serving of fraud due to the lack of infrastructure and the ability to combat fraud. According the Corruption Perception Index (CPI), the U.S. ranks 19th (with 1st indicating the least amount of corruption) out of 182 countries surveyed for the amount of perceived corruption within a particular country indicating that, on a global scale, losses probably well exceed the trillion dollar mark annually.So who is best equipped to protect and defend the innocent from the injustices of fraud? The answer is simple, the accountants around the world. Accountants understand the language of business better than anyone and therefore are best suited to be the defenders of justice and fight the injustices that exist across the globe. Just or unjust, they may have even been able to preserve the Spanish Empire.Distributive JusticeAnother manner in which accountants play an integral role in society is through distributive justice. Utilitarian principles have led to many governments and societal systems that incorpora te and rely upon paternalist or redistributive laws. For example, the U.S. and many other countries tax their wealthy citizens and use the funds to run social support programs for the poor such as welfare, unemployment, section 8 housing, etc. Such programs are a form of distributed justice.Robert Nozick describes distributive justice as follows In contemporary political theory, distributive justice is primarily about the allocation of income, wealth, and opportunity. (Justice A Reader pg. 263) If distributive justice does represent the allocation of income and wealth, than who other than that accountant, who understands the language of business and taxation, would be best equipped to establish and preserve distributed justice?Another example of distributive justice and the role that an accountant plays is the concept of wrong gauging. Michael Sandel uses a great example in his teachings at Harvard when discussing the events that often transpire in the aftermath of a hurricane. Oft en, in the days following a major hurricane, for example Hurricane Charley in 2004 and Hurricane Katrina in 2005, local retailers charge prices for common goods such as bags of ice and gas powered generators in excess of 1000% of their normal price. (Justice, 2009) Should such practices be considered simply the effects of supply and demand or is it injustice on the part of the retailer in the form of price gauging?Regardless of your opinion on price gauging laws, it is evident the accountant is best equipped to understand and determine whether or not price gauging exists and how to best allocate monies. Who other than the accountant would understand all the minutes taking place between retailers and consumers? In both cases above, the enforcement of paternalistic laws and analysis of price gauging activities, accountants are the ones that ensure monies are appropriately being collected and allocated, thereby defending justice as a society sees fit.Justice and the Role of the Acco untant GloballyIncreasingly, corporations and businesses are taking on the global environment. This requires that accountants and auditors be able to identify the different risks associated with international interconnectedness and be able counteract these risks with the necessary precautions. The global environment adds additional complications for the role of the accountant and actually increases the responsibilities as the defender of justice. In a global spectrum, there are many different laws and regulations and and then, the role of the accountant changes depending on the environment in which the rules are generated. Culture is a huge influence on account statement regulation. Additionally, culture is intertwined within the market and political forces that help to shape the resulting business relationship system. The different interaction of these forces in an environment helps to determine the place of the accountant in the economic system, which has a direct effect on the accountants role as the defender of justice. Justice can only prevail in a society that embraces it.Perceived levels of corruption can be indicative of the state of the economy of a particular country which can help to define or determine the role of the accountant. If there are very few cases of fraud, but high levels of corruption perception it can be an indication that the appropriate level of justice is not being achieved. If enforcement of laws and regulation is inconsistent then a tougher approach may be needed to combat corruption. Transparency International states that in order to minimize corruption there needs to be strong oversight by governments, law enforcement, media, and the society. If a country is lacking oversight, corruption can continue to get worse. As a result, the role of the accountant in these environments would be limited since rules, laws, and regulations are not embraced and enforced.Regulation is only part of the battle. Change will only be effective if it comes from a commitment that is make by businesses and governments of all sizes. Stronger institutional oversight is needed across the world. There needs to be strict legal frameworks and more alert regulation by enforcement agencies in addition to accountants and auditors that ensure lower levels of corruption. As noted in an article issues by Transparency International, persistently high corruption in low-income countries amounts to an current humanitarian disaster.According to the CPI index, China has improved over last year showing that their efforts to reduce corruption by enacting reforms, the implementation of forceful investigation, and earnest sentencing have created less perceptions of corruption than before, but still re master(prenominal)s a very heartrending problem. Norways relieve oneself indicates that as a result of some serious scandals that have emerged over the last few years there is a significant problem in the private and prevalent sectors. However, a growing number of cases being investigated and prosecuted demonstrates that they are at least trying to make headway. Italy is declining in the corruption index because of severe fraud and corruption that exist in the public health system and because of the recent arrests of politicians and public officials in the Abruzzo region. France too has standardizedly seen several cases of public officials that were connected to corrupt activities surface recently. Somalia, having the lowest CPI score highlights that there is a link between economic and political collapse. Additionally, Iraqs score of 1.3 shows the importance of establishing solid and billeting institutions capable of preventing corruption and implementing the rule of law. In all cases, the examples provide insight and indicate a need for regulation and an increased role for accountants because justice is not being found.Accounting Regulation GloballyAccounting rules can indicate a lot about a country. Accounting rules a re created in such a way that they fit the environment that they exist in, which varies across countries and cultures. If society wishes to protect the investor, the accounting system will have disclosure rules that enable investors to gain culture and protect themselves. While some countries are developing regulations that contain investor protection improvements, in many cases much more work needs to be done. The manner in which markets function and the way political sympathies are conducted greatly affect accounting systems and often lead to drastic differences across countries. The role of the accountant and, furthermore, the way that justice is enforced will also vary greatly amongst countries.Common law countries differ from codified law countries because common law countries have an independent body to interpret the law. Accounting rules in common law countries are determined by the private sector and require lengthy disclosure since there are no close relationships with co rporations. However, engrave law countries require that corporations be heavily involved the government. The government often includes banks, labor unions, and major suppliers in rule-making decisions. As a result, transactions in these countries ladder to be focused more on private information.There are institutional differences between all countries. Institutional differences enable economic and accounting systems to differ, thus the role of the accountant and the justice that results will differ amongst these countries. Accounting regulation in Germany allows more discretion on the accountant because it is written in more general terms. However, in France the regulation is more rigid, enables less discretion, and thus provides less wiggle room on the part of corporations. In Switzerland there are very few disclosure requirements, which can facilitate the inform of smooth earnings through the usage of hidden reserves. Further, some accounting systems are difficult to match bec ause they do not fit within any particular mold. For example, the accounting system in Finland was created specifically for use by the foresting industry.By looking at international comparisons of accounting systems, it is evident there is no single way of performing accounting. As a result, the accounting rules are different and change to become an integral part of the markets and politics of each country and culture. Market demand affects the financial statements because the corporations must pay to prepare them. The political environment is important because the government has the ability to control regulators and possibly interfere with regulation. In order to perform and understand the different accounting processes, accountants must be aware of the different forces that exist in a particular country. By being aware of the different forces, accountants will be able to more aptly ensure that justice prevails in the country they operate.As evidenced above, accounting regulations vary across countries, time, and cultures which causes significant variations in the role of the accountant. While countries have been extending efforts to strengthen accounting rules and oversight, this alone cannot and will not prevent future fraud. (Leuz, 2002). But there are many benefits to implement strong laws and enforcement in order to protect shareholders rights. U.S. firms are not the only ones experiencing problems, as many firms globally are suffering from accounting irregularities. Some countries experience self-dealings and misappropriations of profits because of weaker legal measures. Weak legal measures create a great fillip to manipulate the financial statements to conceal poor business performance. Manipulation is less apparent in places where outside investors have legal rights to vote out corrupt managers. However, manipulation is predominant in places like Austria, Italy, Germany, Southeast Asia, South Korea and Taiwan, because they do not have investor prot ection.East Asian PerspectiveThe East Asian countries, Hong Kong, Malaysia, Singapore, and Thailand can help accountants see the way that accounting standards interact with the incentives of managers and auditors. (Ball, Ashok, et al, Incentives versus standards) The accounting standards in these countries come from a common law environment. Common law countries broadly create high quality financial reporting. However, in these countries the preparers incentives generate low quality financial statements. The preparer incentives again, depend on the market and political forces and how these forces interact with one another. Market forces are dependent on the demand for high-quality financial reporting. The political forces depend on the government involvement in the creation and enforcement of the regulation. The interaction of these forces with the accounting system can drastically change the role of the accountant in these countries. The standards themselves are viewed as high-qua lity, but the institutional structure creates incentives for preparers incentives to issue low-quality financial reports. pecuniary reporting in East Asia generally exists with an incentive structure that is similar to a code-law model. However, the East Asian countries do not follow that model. Their governments have code-law reporting incentive features, but also have indications that the environment reduces the financial reporting quality. The large amount of family-owned businesses and enterprises is a cause for the low need of quality financial statements. One family generally owns investments that are inter-related. These networks are commonly referred to guanxi networks. These networks attempt to take away the demand of required disclosures and timely loss recognition and it also reduces the intercourse required with stakeholders.The extent of government involvement in the standard setting and the financial reporting practice differs across these countries. Political factors can create an incentive to hide large profits and losses. The political environments in these East Asian countries have a tendency to want companies to succeed, so they recommend companies hide losses. They also are afraid of other countries becoming involved in their practices because they do not want to be held accountable for any misstatements. The companies are also pass judgment to report smooth earnings, which reinforces the desire to report, cover, and hide losses. Litigation is minimal in these countries since there is a large incentive to hide earnings, which the government reinforces. There have been very few cases of judicial actions in these countries. Audit quality in these countries is poor primarily due to lack of auditor independence. The influence and independence of the accounting profession is an indicator of ineffective enforcement of accounting standards. Considering the financial incentives for managers and auditors there is a greater incentive for reduced ti meliness and conservatism in accounting earnings. maneuver is continuing to go undetected in Hong Kong. Although there is a 22% incidence of fraud, much more is expected to be going on effrontery the different forces that are currently having an effect on the country. As a result, currently more scrutiny is being given to the monitoring of financial transactions and corporations are beginning to make it a priority. There are currently programs that are offered for certification in forensic accounting, which is having an impact on fraud detection. most of the fraud cases that exist in Hong Kong are internet banking fraud, computer fraud, misuse of corporations credit card, and electronic funds transfer fund.There is a need for more forensic accountants in Singapore in order to ensure sufficient justice as many significant fraud cases are going undetected. both important fraud cases involved Fibrechem Technologies and oriental Century. In the Fibrechem Technologies audit, Ernst Yo ung Singapore were not certain of the cash and trade debtor balance. KPMG had the same problem with Oriental Century. Another notable case is one in which a Singapore monk, who was in charge of Singapores well-known charities, received 10 months in prison for committing fraud.In Malaysia, the role of accounting in the fight for justice is very small. abuses are beginning to become more and more complicated and controlled but forensic accounting is viewed as a service that only larger companies can afford. This makes catching fraud more difficult. Cases that are investigated are generally handled by the Bukit Aman Commercial Crime Division. This group was able to catch a large fraud that involved the CEO and two others of Transmile Group Bhd for publishing misleading financial statements and has often been called Malaysias Enron.Fraud and forensic accounting is a relatively new topic in Thailand. According to an Ernst Youngs global survey, more than half of the companies in Thailan d have suffered significant fraud. The trouble of the corporations was responsible for over half while employees ranked second, responsible for 45% of the fraud incidents reported. Asset misappropriation was the biggest concern. (MPA Program Forensic accounting project) The commercial crimes in Thailand are becoming more and more complicated and organized. Forensic accounting is used to combat this to an extent, but is only utilized in the public sector. It is also noted in Thailand that there remains an enormous amount of well documented corruption related to the government amounting to billions of US dollars. There are many cases where Thailands auditor general, Jaruvan Maintaka, was able to bring about cases against members of the government but there are even more cases linked to the military involving loans from politicians.Chinese PerspectiveThis accounting profession is still at the early stage of development in China, and a lack of skilled professionals creates problems for regulators. To a large extent the accounting standards and practices in China lack conservatism Doupnik and Perera note in their International Accounting textbook. There are also no sound interpretations of the relevant requirements that need to be implemented to have an effective accounting system. The theory of true and fair presentation and transparency may not be clearly understood by Chinese accountants. Until the 1980s, those who carried out accounting work were not held in high regard which had a very negative effect on the development of the accounting profession in China. Unlike in other countries, accounting and auditing have taken different paths in their development as rival disciplines with the support of different government agencies. However, there has been some growth in the accounting profession due to the recent economic reform program and the demand for financial information from investors has increased.There are many fraud cases evident in China. One high-profil e case that deserves mentioning was with Zhu Xiaohua who was the chairman of state-owned company, Everbright Group. Zhu was convicted to 15 years in prison for taking $500,000 in bribes. These bribes were taken between 1997 and 1999. The bribes were for the purchase of shares in a company that resulted in large losses. Another example of fraud in China was when a business woman, Du Yimin, was sentenced to death for running a Ponzi scheme that cheated investors out of YUAN700m ($102 million). (Lin, 2009) According to Lin, the Chinese Ministry of Public Security has been stepping up such prosecutions and says there are now 1,416 similar cases open, involving YUAN10bn ($1.5 billion) in investors money. In China it is still possible to receive the death penalty for fund-raising fraud, however, if a Chinese person is charged with collecting money lawlessly from private investors, the maximum sentence is 10 years in prison. In China is evident that ethics are not being followed across the board.Japanese PerspectiveJapan also differs from other cultures and has a different role of the accountant and effectively different need for justice. The Japanese attitudes towards external auditors and the audit function are different from others. This is due to the cultural value orientation of not trusting someone from outside the group. Companies are not under pressure from their main providers of finance to disclose information publicly and companies are reluctant to provide information voluntarily. As a result, the a