Ethics_Article_Review

Ethics Article Review The article, Keep Your Books Lean, discusses the differences between lean accounting and traditional accounting. In addition, this article discusses how some created financial reports can be easily distorted to make the stakeholder happy. Lean accounting has become the popular form of accounting when it comes to manufacturing and distribution companies. The lean accounting system focuses primarily on seeing a balance between actual production and customer demands. This creates a costly inventory because lean manufacturing penalizes production in regard to demand. Traditional manufacturing encourages the fact that a higher unit volume produces lower costs units. The traditional accounting system focuses on the fact that the easiest path to lower costs is higher volume. In several ways has this conflict created a dilemma with lean companies; including the need to calculate production variances and focuses plant management on satisfying customers instead of accountants, (Engle, P., 2005 pg. 22). This article purposes that the investment community demand a standardized approach to financial reporting that complies with GAAP. Keep Your Books Lean relates directly to the assigned readings this week in many ways. More so, in regard to how financial reports can be misleading to stakeholders because of the manipulation of numbers to improve the reputation of a company. The article discussed the conflict with traditional and lean accounting, which leads to the discussion in the reading about bookkeeping. “Bookkeeping is the preservation of a systematic, quantitative record of an activity, (Albrecht, W. S., 2005).” In the manufacturing industry, bookkeeping is vital because it keeps track of all activity including inventory. Along with bookkeeping will be the accounting portion that is primarily the focal point of cost, expenses, and overhead. Stakeholders look for a healthy and performing company to invest in and the bookkeeping records are the first place they look to see where that business is headed. Yokogawa Corporation of America, my employer, has become huge part of the engineering automation industry. This article relates to this company directly when discussing production and customer demand. The positive thing about this company is that both accounting approaches are used in many different situations. In addition, the manufacturing warehouse also uses the traditional and lean production characteristics. There are products that are produced in bulk to lower the production costs, which will in turn reduce material costs and expenses. In some cases, for customizations, production is done on customer demand; therefore, Yokogawa can simply produce products by customer demand and reduce costs. The accounting department and management work together to create a financial system that will work for the company, the stakeholders and the customers. At this time, financial reports and bookkeeping are completed daily to display the company’s room for improvement. Due to the versatility the accounting department and management, improvements are suggested before anyone on the outside can find an issue. The stakeholders of Yokogawa seem to be satisfied with the honesty of all financial reports and the mission of this corporation. Therefore, I do not have any recommendations to improve anything because everything is going so well. Due to the scandals of Enron, Tyco and WorldCom, on July 30, 2002 the Public Company Accounting Reform and Investor Protection Act was passed in an attempt to gain back the trust lost in accounting firms and auditors of public companies. This Act encouraged the importance of ethics in accounting and financial decision making because it forced auditors and accounting firms to make the rights decisions and promoted financial honesty. Unfortunately, the trust lost after the above-mentioned scandals, ethical values began to fall, which made people turn to the government for help. Once the act passed, many are still skeptical when making decisions; however, they are more knowledgeable about how to make the right decision for their company or their investments. References Engle, P. (2005, October). Keep your books lean. Industrial Engineer: IE, 37(10), 22-22. Retrieved October 8, 2007, form Academic Search Premier database. W. Steve Albrecht, James D. Stice, Earl K. Stice, Monte R. Swain. Accounting: Concepts and Applications. Copyright 2005. South-Western, part of the Thomson Corp.