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Ethical issue in Accounting

Presented by- Tejal GawandPresented to± Mrs.Neha Chouhan

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TYPES AND ROLE OF ACCONTANTS

Accountants employed by an organization Internal Management accountant

Financial accountants

Accountants in professional practice The auditor Accountants in related services

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W hat are ethics?

~ Derived from the Ancient Greek word µethikos¶ means customs andhabits,

~ Introduced by µLuca Pacioli¶

~ Choosing honest & fair actions

~ DEFINITION: A major branch of philosophy which is the study of values and customs of a person or group and covers the analysis andemployment of concepts such as right and wrong, good and evil and

do's and don'ts.

~ It is a belief that each member of a group bears some responsibilityfor the well being of other members. E.g. Bonus

~ Formal statement of the organization's values relating to the

profession and practice

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Role of Ethics

~ Provides fair and accurate reporting of the financialposition of a business

~ Increase public¶s trust on the organization

~ Maintains level of self discipline

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~ IssuesFalse information

Hiding cashOverbilling clientsDelaying vendor paymentsConcealed liabilities andexpensesReporting false incomeFraudulent asset valuationImproper or fraudulentcommissionBriberyInside trading

~ Possible reasonsAggressive financial targets

Dominations by higherauthorityPressure to reduce taxliabilitiesInadequate monitoring of significant controls

W eak corporate ethics

Ethical issues in accounting

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Raju confessed that Satyam's balance sheet of 30 September 2008contained:

~ inflated figures for cash and bank balances of 5,040 crore ( US$ 1.14billion) as against 5,361 crore ( US$ 1.22 billion) reflected in thebooks.

~ an accrued interest of 376 crore ( US$ 85.35 million) which was non-existent.

~ an understated liability of 1,230 crore ( US$ 279.21 million) onaccount of funds was arranged by himself.

~ an overstated debtors' position of 490 crore ( US$ 111.23 million)(as against 2,651 crore ( US$ 601.78 million) in the books

Burning examples :

EnronSatyam computers

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Enforcement of ethics

~ American Institute of Certified ProfessionalAccountants (AICPA) for the Certified

Professional Accountants~ Institute of Internal Auditors (IIA) for the

Certified Internal Auditors~ Institute of Management Accountants (IMA)

for certified management accountant~ Government regulatory bodies such as ±

SEC, FASB etc.

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Fundamental principles

INT EGR ITY

OBJ EC TIVITY

COMP ET EN CECONFID ENTI ALITY

P R OF ESS ION ALB EHA VIO R

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Conclusion :

³ W hen accountants (including auditors) fail toprovide investors with reliable information

that is relevant to their capital allocationdecisions, then investors and all citizens withstakes in the success of the economicsystem suffer.´

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Thank You