Question

a dilemma in accounting

Answer 1

Conflict of interest is a very common ethical dilemma in the practice of accounting.

Such conflict of interest arises if employers and employees evaluate and analyze a particular thing or matter based on their self-interests. Suppose shareholders of a corporation want more net income so that their value of shares to increase through higher earnings per share (EPS) ratio, which is [EPS = Net income / Number of outstanding shares]; but, managers of that corporation want incentive earnings (such as commission on sales), which is treated as an expense and reduces the net income; therefore, conflict of interest arises.

Although there is no harm or illegal act of supporting such self-interests, this situation should not be continued and must be settled amicably for the sake of healthy environment in business.