ETHICAL ISSUES IN ACCOUNTING: Professional practices Role of
Accountants and Auditors
IMPORTANCE OF ETHICAL VALUES Ethical values provides the
foundation for a civilized society. For any firm to increase its
wealth requires publics trust that depends on ethical values.
Ethics is of utmost importance to accounting professionals and
those who rely on their services. Ethical codes calls to maintain a
level of selfdiscipline that goes beyond the requirement of laws
ACCOUNTING??? The process by which any business keeps track of
its financial activities by recording its debits and credits and
balance in its accounts.
INSTITUTIONS LAYING THE ETHICAL CODESAICPA IMA IIA
OBJECTIVES OF ETHICAL AUDIT To determine the long-term ownership
value and to achieve distributive justice To help in providing a
critical assessment by systematically evaluating its business
practices To help in scrutinizing the basis and information on
which the accounts are drawn Helps business undergoing major
alterations like restructuring Helps in determining the type of
CONT To help in establishing code of conduct of business To
enhance, measure and promote the quality that increases the
business performance to help the stakeholders to evaluate the
performance of the directors and vice versa.
STANDARDS OF ETHICAL CONDUCTS Competence Confidentiality
TYPES AND ROLE OF ACCONTANTS Accountants employed by an
organization management accountant financial accountants
Accountants in professional practice the auditor Accountants in
REASONS FOR FRAUD IN ORGANISATION Unduly aggressive financial
targets Domination by person or group without controls Major
performance related compensation Pressure to reduce tax liabilities
Aggressive accounting practices to keep stock prices high.
Inadequate monitoring of significant controls Week corporate ethics
Non financial personnel involved in accounting matters. High degree
of innovation and progress such as in the technology industry
FRAUD IN FINANCIAL STATEMENT Fictitious revenues Fraudulent
timing differences Concealed liabilities and expenses Improper or
fraudulent disclosers or omissions Fraudulent asset valuations
Bribery Inside trading
Burning examples:SATYAM COMPUTERS ENRON WorldCom
ConclusionWhen accountants (including auditors) fail to provide
investors with reliable information that is relevant to their
capital allocation decisions, investors and all citizens with
stakes in the success of the economic system suffer.
Four enduring reasons for ethics1. Accountancy is a profession,
which lacks the history, tradition, and self-understanding of the
traditional profession. 2. Accountants must state the truth in a
way adequate to particular circumstancesthey need an inner
orientation to the truth. 3. Accountants must serve as watchdogs
and thus be especially able to resist greed and greediness. 4.
Accountants (Auditors) are not paid by those whose interests they
are supposed to represent, and regulation cannot solve this.