Ethical issues in AccountingProvides fair and accurate reporting
of the financial position of a businessEthical issues Reporting
income, falsifying documents, allowing or taking questionable
deductions, illegally evading income taxes, engaging in frauds
etc
Fraud in financial statement can be committed in 5
ways:Fictitious revenue-revenues not actually earnedFraudulent
Timing differencesConcealed liabilities and expensesFraudulent
disclosures or OmissionsFraudulent asset valuation-false statement
of the inventory available
Types of AccountsFinancial Accounts >company uses to report
to their shareholdersInternal Management Accounts >shows the
internal operations of the business and its financial
activities
Role of AccountantsTo provide information to the new investors2
types of accountants
Accountants employed by the orgn >takes care of the internal
management accounts of various depts
2 types>Management accountant- formulating policiesplanning
and controlling the activities of the employees decision making
disclosure to shareholders etc>Financial accountantEconomic
information to the investors, employers, suppliers, outside people
involved in the business etc
Accountants in professional practiceprovides 2 types of
accounting service1. The auditorAppointed by shareholders to to
audit a particular companyDuties include:to give an accurate
statement about the state of affairsto meet the objectives of the
Companies Actto be reasonably skillful and careful in identifying
the true nature of accounts
2. Accountants in related servicesOffer services in different
fields like:Tax servicesManagement consultanciesInsolvency
servicesEnvironmental audits
The Ethical AuditMain purpose- check the actions of a
firmObjectivesAssess the bus. structure and procedures, systems and
policiesWhether busi. Activities comply with the standardsTo
identify the way in which it does businessEvaluate whether mgmt has
relevent infor. in running the busi.
To help busi. undergo major alterations like restructuringTo
identify the training necessary for the employeesEstablishing
ethical conduct of business to attract valuable
investmentsEstablish code of conductHelps the shareholders to
evaluate the performance of the directors and vice versa
Ethical issues in FinanceImportance of Financial Statement Steps
to be taken by the management for true, fair and reliable mgmt
accounts:Determining the key elements of the business like the
objectives and see how they are defined and measuredMaking sure
that the funds are allocated to different activities on the basis
of their importanceFrame rules that have a positive effect on
business activities
