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Accounting in Business:
Ethics, Fraud, and
Internal Control
By
Dina El Bassiouny
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Outline
Accounting as Part of Everyday Life.
Importance of Ethics in Accounting. Facts and Figures.
Fraud. Losses on the Way.
Motivating Forces for Unethical Behavior.
Effective Ethical Controls.
Effective internal controls. Conclusion.
References.
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Importance of Ethics in AccountingFacts & Figures
In the U.S., according to the Association of CertifiedFraud Examiners (ACFE), losses from fraud and abuse=> $600 billion
In Egypt,
..??????? Classic Case of Deception andDouble Interests: Enron
Arthur Andersen =Auditor +Internal Auditor +Managementconsultant!!!!!!!!!!!!!!
In Egypt: NO regulation in place requiringindependence of auditors
Those who violate rules should be disciplined orsuspended from practice
(Gamal, 2002)
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Importance of Ethics in AccountingLosses on the Way
Losses due to Unethical Behavior:
Costs of legal action taken against perpetrators.
Costs of reduced productivity.
Increased unemployment as companies are forced to
downsize or go out of business.
Economic loss to organization, hence to society.
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Solution???
InvestigateMotives for
Unethical
Practice
Administer
Effective
Ethical and
Internal
Controls
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Motives for Unethical Behavior
High Low
High
Low
Low
High
Opportunities
Situational Pressures
Personal Characteristics (Integrity)
Unethical Ethical(Hall, 2004)
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Effective Ethical Controls
A code of conduct that applies to the practice
of a profession.
AICPA adopted codes of professionalconduct that must be followed by CPAs.
Integrity
Objectivity
Independence
Due Care
Integrity
Objectivity
Independence
Due Care
Integrity
Objectivity
Independence
Due Care
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Effective Internal Control SystemControl Environment:
Influence Control
Awareness of
Management and
Employees.
Risk Assessment:
Identify, Analyze, and
Manage Risks Relevant
to Financial Reporting.
Monitoring:
Entities Activities.
Information and
Communication:
Quality of Info Impacts
Reliability of Financial
Statements.
Control Activities:
Transaction Authorization
Segregation of DutiesSupervision
Accounting RecordsAccess
ControlIndependent Verification
Safeguard Assets of the Firm Ensure Accuracy & Reliability of ACCT
Records & InfoPromote Efficiency in the Firms
Operations
Fulfill
Main
Objectives
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Conclusion
SituationalPressure
Opportunities
Effective Ethical Control
Personal
Integrity
Effective Internal Controls
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References
Gamal, Wael (2002). Book-Fixing, Here andThere.Al Ahram Weekly. 22-28 August.
Hall, James A (2004). Accounting InformationSystems. Thomson. South Western.
Needles, Belverd E., Jr.; Powers, Marian;Crosson, Susan V. (2002). Principles of
Accounting. Houghton Mifflin Company.Boston. New York.
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hankYou