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Importance of ethics in accountancy
Importance of ethics in accountancy
Importance of ethics in accountancy
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Case 1: In this case. As a certified public accountant, Erickson oversaw and initiated an arbitrary adjustment to increase cash and decrease accounts receivable. Also, Erickson signed Form 10-K with full knowledge that the financial statements include therein incorporated entries misstating revenues. As we can see from this case, Erickson’s behavior not only violate the Business and Professions Code, Division 3, Chapter 1, § 5100(g) and (i), but also against the ethical theories. Besides, a CFO is responsible for providing investors with an accurate reporting. On the other hand, ethical responsibilities of the professional accountant is essentially important. As a CPA, they must take all the facts into consideration that which action are …show more content…
The specific obligations in this case would include monitor corporate governance activities and compliance with organization policies, and assess audit committee effectiveness and compliance with regulations Case 4: In this case, The PCAOB found that Ligand Pharmaceuticals restated the financial statements for the year 2003, and recognized around $59 million less in revenues from product sales than originally recognized and reported a net loss more than 2.5 times the net loss originally reported. As a result, PCAOB ordered that James was prohibited from associating with any registered public accounting firm for at least two years from the date of its order. As a partner in the public accounting firm of Deloitte & Touche. LLP. James, in this case, was responsible for this violation. First, James was no on the basis of full inspection of the subsequent discovery existing at the date of the auditor 's report. Second, he did not detect and address problems regarding Ligand Pharmaceuticals ' exclusion of certain types of returns from the evaluation of future returns. Last but not least, he did not adequately perceive the reasonableness of Ligand’s estimates of future product
Andrea may decide not to inform the limited partners about the misrepresentation of Skyline Views’s financial statements; to avoid conflict, this decision permits Ed to deceive the company and limited partners. In addition, by deciding not to inform the limited partners of Ed’s deceit, Andrea would be disregarding the American Institute of Certified Public Accountants Code of Professional Conduct in her being unreliable, dishonest and deceitful. Andrea has the responsibility of protecting her client, which involves encouraging the correction of financial statements in order to prevent suspicion during audits that could lead to fines and imprisonment. Andrea’s second option is to inform the limited partners about how misrepresentations of Skyline Views’s financial statements are permitting Ed to claim a higher management fee; this decision will fulfill her due diligence obligation to the limited partners while maintaining her integrity as a certified public accountant in supporting the American Institute of Certified Public Accountants Code of Professional Conduct.
Ethics plays a vital role in developing accurate and high quality financial statements for management, financial institutions, and investors. As management utilizes financial statements to make decisions regarding the operations of the business, it is necessary to review accurate financial statements to make strategic decisions about the future of the organization. Investors and financial institutions require accurate financial statements to make informed decisions upon whether to invest funds into the organization or the wisdom of lending funds to said organization.
Although the plant accountant knew it was wrong to charge motors to operating expenditures, the accountant bowed to the pressure to do it anyway. The accountant violated the AICPA code of conduct, especially regarding serving the public interest. There were also issues with honesty and integrity.
First, the Code of Professional Conduct encourages accountants to behave ethically. Encouraging accountants to behavior ethically is a strength because it helps create customer loyalty, positive work environments, and dedicated employees, which helps avoids legal issues. Accounting professionals have to behave ethically just because of the profession they are in. Accountants need to behave ethically because the investors, creditors, and rest of the public rely on an accountant’s professional judgment to make
Profits were inflated by $1.7 billion to meet earnings targets which resulted in investors losing more than six billion dollars while the perpetuators made their illegal loot. The officers were engaged in improper accounting practices to achieve their selfish objectives. These practices included among others: excluding depreciation charges on their garbage trucks, extending their useful lives, capitalized operating expenses and failed to make provisions to pay income tax and other expenses. In addition, Arthur Andersen, has been appointed auditor for a considerable period and issued unqualified audit opinions on accounts which contained many fraudulent
Madura, Jeff. What Every Investor Needs to Know About Accounting Fraud. New York: McGraw-Hill, 2004. 1-156
With every business activity come opportunities for fraudulent behavior which leads to a greater demand for auditors with unscathed ethics. Nowadays, auditors are faced with a multitude of ethical issues, and it is even more problematic when the auditors fail to adhere to the standards of professional conducts as prescribed by the American Institute of Certified Public Accountants (AICPA). The objective of this paper is to analyze the auditors’ compliance with the code of professional conduct in the way it relates to the effectiveness of their audits.
The oversight responsibilities of the board, the CAE lacking of expertise or broad understanding of financial controls and responsibilities, and the understaffed internal audit functions lacking of independence and direct access to the board of directors contributed to the absence of internal controls. To begin with, the board should be retrained to achieve financial literacy to review financial reporting. Other than attending formal meetings, the board of directors should be more involved with the management. For the Audit Committee, the two members who were recruited as acquaintances to Brennahan need be replaced with experts who are more sufficiently knowledgeable about accounting rules beyond merely “financially literate”. Furthermore, the internal audit functions need to expand with different expertise commensurate with the expanded activities of the organization, testing financial reporting rather than internal controls from an operational perspective. The CAE should be more independent and proactive to execute audit plans, instead of following orders from the CFO, and initiate a direct and efficient communication between internal audit and audit
... been prevalent in the audit review included large amounts of receivables in the final month of the fiscal year 1995. The accounts of West Coast Liquidators and Wow Wee International Ltd. showed large credit sales in the final days of 1995. This was unusual for both of these accounts and Cooper & Lybrand should have taken steps to verify these sales beyond just a confirmation letter. If a confirmation cannot be acquired, then the audit team needs to review prior transactions that the company has had made with that particular customer to see if the large sales are regular or irregular. Because of Cooper & Lybrand’s deficiency in conducting a proper audit, insider trading information was provided to outside individuals who could profit from the deception. Cooper & Lybrand are liable for the damages to Happiness Express’s shareholders because of their ineffectiveness.
His project manager, Oliver Freeman, changed the analysis. that Daniel submitted in order to get a clear opinion so that their firm may get an exclusive account. The. My decision was to report the incident so that the correct information would be supplied in the audit documents. The decision I chose may cost Baker Greenleaf to lose an important client and Oliver Freeman to lose his job, but it will uphold the integrity of the accounting profession and keep Daniel Potter safe from the liability of providing false information.
When working within any professional body, an individual will be subjected to circumstances in which personal ethics will come into play. The Accounting profession is no different as ethical questions arise as part of any working day and can effect how an individual or the company conducts business. These questions can vary greatly in practice from selection of new customers to the rates at which those clients are going to be charged. These ethical questions are raised regularly within the workplace and each employee will react to them differently. The varying reactions will depend on the morality of each individual, or each employees own ‘ethics’. As each employee has their own set of values companies must be alert to the fact that some of their employees may have more ‘flexible’ morals than others. This ‘flexible’ morality can lead to corruption and manipulation within the workplace and can give companies serious problems. As a result of this, all of the main professional accounting bodies have begun to re-introduce mandatory courses teaching ethics to their employees. As well as this, ‘A Guide to professional ethics’ was published which contains a number of different principles in order to govern the behaviour of accountants and also to identify and reduce the greatest areas of risk with respect to unethical behaviour.
In 2002, WorldCom’s bankruptcy was the largest in US history; WorldCom admitted that it had falsely booked $3.85 billion in expenses to make the company appear more profitable. Ebber who was CEO of WorldCom created fictitious some more than questionable accounting practices. Thus began the practice of taking an operating expense and reclassifyin...
It was discovered by a federal regulator from the Office of the Comptroller of the Currency through an audit that the books had been falsified for several years making the bank insolvent. Criminal charges were brought against the managers and the Comptroller closed the bank. Grant Thornton, the bank’s accounting firm, was fined $300,000 by the Comptroller for recklessly failing to meet the generally accepted auditing standards during the years it audited the bank. The Comptroller alleged that Thornton had violated federal law by “participating in unsafe and unsound banking practice” that lead Thornton to appeal, challenging that they were not involved in the bank’s operations to that extent based on its audit function. The legal issue being presented in this case is the extent of an accountant’s
What does ethics have to do with accounting? Everything, since there have been some recent financial accounting scandals; a few examples being Xerox, WorldCom, Enron, which have generated much unwanted and unfavorable publicity for CPA's, including those working as controllers or chief financial officers for organizations.
Unethical accounting practices involving Enron date back to 1987. Enron’s use of creative accounting involved moving profits from one period to another to manipulate earnings. Anderson, Enron’s auditor, investigated and reported these unusual transactions to Enron’s audit committee, but failed to discuss the illegality of the acts (Girioux, 2008). Enron decided the act was immaterial and Anderson went along with their decision. At this point, the auditor’s should have reevaluated their risk assessment of Enron’s internal controls in light of how this matter was handled and the risks Enron was willing to take The history of unethical accounting practic...