This document discusses ethical issues in accounting and finance. It outlines five ways that fraud can occur in financial statements, such as through fictitious revenue or concealed liabilities. It describes the roles of different types of accountants, including those employed by organizations and those in professional practice. The document also discusses the purpose of an ethical audit in assessing a business's compliance with standards and identifying necessary changes or training.
2. Ethical issues in Accounting
Provides fair and accurate reporting of the financial
position of a business
Ethical issues
Reporting income, falsifying documents, allowing or
taking questionable deductions, illegally evading income
taxes, engaging in frauds etc
3. Fraud in financial statement can be committed in 5
ways:
Fictitious revenue-revenues not actually earned
Fraudulent Timing differences
Concealed liabilities and expenses
Fraudulent disclosures or Omissions
Fraudulent asset valuation-false statement of the
inventory available
4. Types of Accounts
Financial Accounts
>company uses to report to their shareholders
Internal Management Accounts
>shows the internal operations of the business and its
financial activities
5. Role of Accountants
To provide information to the new investors
2 types of accountants
Accountants employed by the orgn
>takes care of the internal management accounts of
various depts
6. 2 types
>Management accountant-
formulating policies
planning and controlling the activities of the employees
decision making
disclosure to shareholders etc
>Financial accountant
Economic information to the investors, employers,
suppliers, outside people involved in the business etc
7. Accountants in professional practice
provides 2 types of accounting service
1. The auditor
- Appointed by shareholders to to audit a particular
company
- Duties include:
to give an accurate statement about the state of
affairs
to meet the objectives of the Companies Act
to be reasonably skillful and careful in identifying the
true nature of accounts
8. 2. Accountants in related services
- Offer services in different fields like:
Tax services
Management consultancies
Insolvency services
Environmental audits
9. The Ethical Audit
Main purpose- check the actions of a firm
Objectives
Assess the bus. structure and procedures, systems and
policies
Whether busi. Activities comply with the standards
To identify the way in which it does business
Evaluate whether mgmt has relevent infor. in running the
busi.
10. To help busi. undergo major alterations like restructuring
To identify the training necessary for the employees
Establishing ethical conduct of business to attract valuable
investments
Establish code of conduct
Helps the shareholders to evaluate the performance of
the directors and vice versa
11. Ethical issues in Finance
Importance 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
measured
Making sure that the funds are allocated to different
activities on the basis of their importance
Frame rules that have a positive effect on business
activities