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Ethics in accounting


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Ethics in accounting

  2. 2. Prepared for: Farhana Zaman Faculty Member Faculty of Business StudiesPrepared by:Md Mozammel Haque Bhuiyan, Roll No. 41, EMBA-4Syed Adnan Parvez Iftekhar, Roll No. 42, EMBA-4Hossain Mohammad Abad Roll No. 43 EMBA-4Shafi samiur Rahman, Roll No. 44, EMBA-4
  3. 3. AccountingIt provides information on financial position andprofitability of operationsfoundation of countries’ fiscal, monetary & financialsystemsThe accountancy profession comprises individualaccountants, firms of accountants and accountancybodies
  4. 4. Roles of accounting ProfessionalsThe traditional external audit functionTaxCorporate finance advice;Finance, accounting and treasury functions in industry andcommerceAnalysis & decision making for top level management
  5. 5. Tarnished ImageThe commercial interests of large firms ofaccountants had overwhelmed theallegiance to professional integrityNow a days, The moral and ethical practiceof accountancy professionals is questionedby the regulators / legislators / investors /stakeholders
  6. 6. Accounting ScandalsCompany Year Audit Firm Country Type Falsifying financialXerox 2000 KPMG United States results Hide debt fromEnron 2001 Arthur Andersen United States failed deals and projectsAOL 2002 Ernst & Young United States Inflated salesHalliburto Improper booking of 2002 Arthur Andersen United Statesn cost overruns MisleadingKmart 2002 PricewaterhouseCoopers United States accounting practices Distributed illNortel 2003 Deloitte & Touche Canada advised corporateSatyamComputer 2009 PricewaterhouseCoopers India Falsified accountsServices
  7. 7. EthicsEthics can be defined broadly as a set of moralprinciples or valuesThat many commonly held ethical values areincorporated into lawsIt is practical to have laws that deal with cheating,stealing, lying or deceiving othersIt is far more difficult to establish meaningful laws thatdeal with integrity, loyalty and the pursuit of excellence
  8. 8. Ethics for ProfessionalsProfessionals are expected to conduct themselves ata higher level than most other members of societyThe term professional implies a responsibility forconduct that extends beyond satisfying peoplesresponsibilities to themselves and beyond therequirements of our societys laws and regulations
  9. 9. Ethics for AccountantsCPAs and chartered accountants, as professionals,Must a responsibility to the public, to clients and tofellow practitioners that includes honorablebehavior, even if that means personal sacrificeManagement and external financial statementusers must have the confidence in the quality of theservices from a CPA or chartered accountant
  10. 10. Troubles in Recent YearIncreased competition made the publicaccounting firms more concerned aboutkeeping clients and maintaining profits thanwith providing high quality audits for usersPublic accounting firms are implementingphilosophies and practices that arefrequently referred to as improved businesspractices
  11. 11. Regulatory BodyInternational Federation of Accountants (IFAC) onInternational Standards of Auditing (ISA);International Accounting Standards Committee(IASC);In line with the instructions of professionalaccounting body of the country; andIn compliance with requirements of corporate lawsand relevant regulatory bodies and legislation.
  12. 12. IFAC Code of EthicsCode establishes a conceptualframework that requires aprofessional accountant toidentify, evaluate, and addressthreats to compliance with thefundamental principles
  13. 13. Framework for Code of EthicsIdentify threats to compliance with thefundamental principlesEvaluate the significance of the threatsidentifiedApply safeguards, when necessary, to eliminatethe threats or reduce them to an acceptable level
  14. 14. ThreatsSelf-interest threatsSelf-review threatsAdvocacy threatsFamiliarity threatsIntimidation threats
  15. 15. Self-interest threatThe threat that a financial orother interest willinappropriately influence theprofessional accountant’sjudgment or behavior
  16. 16. Self-Review ThreatsThe threat that a professional accountantwill not appropriately evaluate the results ofa previous judgment made or serviceperformed by the professional accountant, orby another individual within the professionalaccountant’s firm or employing organization,on which the accountant will rely whenforming a judgment as part of providing acurrent service
  17. 17. Advocacy ThreatThe threat that a professionalaccountant will promote aclient’s or employer’sposition to the point that theprofessional accountant’sobjectivity is compromised
  18. 18. Familiarity ThreatFamiliarity Threat occurs when,by virtue of a close relationshipwith a client, its directors,officers or employees, an auditorbecomes too sympathetic to theclient’s interests.
  19. 19. Intimidation ThreatThe threat that a professionalaccountant will be deterred fromacting objectively because ofactual or perceived pressures,including attempts to exerciseundue influence over theprofessional accountant
  20. 20. SafeguardsSafeguards created by the profession,legislation or regulationSafeguards within the clientSafeguards within the firm’s ownsystems and procedures
  21. 21. Safeguards created by the profession, legislation or regulationEducational, training and experience requirements for entry into theprofessionContinuing professional development requirementsCorporate governance regulationsProfessional or regulatory monitoring and disciplinary proceduresExternal review by a third party of the reports, returns, communicationsor information produced by a professional accountant
  22. 22. Safeguards within the ClientWhen the client’s management appoints the firm, persons other thanmanagement ratify or approve the appointmentThe client has competent employees to make managerial decisionsPolicies and procedures that emphasize the client’s commitment to fairfinancial reportingA corporate governance structure, such as an audit committee, thatprovides appropriate oversight and communications regarding a firm’sservices
  23. 23. Safeguards in the work environmentLeadership that stresses the importance of independence and theexpectation that members of the teams will act in the public interestPolicies and procedures to implement and monitor quality control ofthe engagementsDocumented independence policies regarding the identification ofthreats to independence, the evaluation of the significance of thesethreats and the identification and application of safeguards toeliminate or reduce the threats
  24. 24. ConclusionReasonable trade-off between the degrees of responsibilityand the audit cost to societyA regular monitoring of the accounting firmsRelying on the law-or a set of professional codes may not bealways adequateIt is in the professions self-interest to maintain public trustin the competent performance of the accounting profession
  25. 25. Q&A
  26. 26. Thank You