Ethics of Accounting and Finance

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Presentation transcript:

Ethics of Accounting and Finance

Ethical Problem Areas in Accounting and Finance Bucket Shop: Brokerage firm that books retail customer orders without actually having them executed on, an operation in which the customer is sold a security but there is no transaction made on any exchange. The transaction goes in the bucket and is never executed. Insider Trading: A trading of corporation’s stock or other securities by individual with access to non-public information about the company. It is unfair and would destroy the security markets by destroying investor confidence.

Ethical Problem Areas in Accounting and Finance Fraud: A fraud is a dishonest act by an employee that result in personal benefit to the employee at a cost to the employer. Examples of fraud reported in the financial press include: A bookkeeper in a small company diverted $750,000 of bill payments to a personal bank account over a three year period. A shipping clerk with 28 years of service shipped $125,000 of merchandise to himself

Ethical Problem Areas in Accounting and Finance Misleading financial statement: Before investing money investor want to know the company’s financial position and performance. They want to see the balance sheet and the income statement. So financial companies sometime intentionally prepare false financial statement to improve their chances of getting invested.

Ethical Problem Areas in Accounting and Finance Forex Scam: Any trading scheme used to defraud traders by convincing them that they can expect to gain a high profit by trading in the foreign exchange market. In a typical case, investors may be promised ten of thousands of dollars in profits in just a few weeks or months, with an initial investment of only$500. often the investor’s money is never actually placed in the market through a legitimate dealer, but simply diverted or stolen for the personal benefit of the con artist

Standards of Ethical Conduct for Management Accountants Institute of Management Accountants has published and promoted standards of ethical conduct for management accountants. Principles: IMA’s ethical principles include: Honesty, Fairness, Objectivity, and Responsibility. Members shall act in accordance with these principles and shall encourage others within their organizations to adhere to them.

Standards of Ethical Conduct for Management Accountants Standards: A member’s failure to comply with the following standards may result in disciplinary action. Competence: Each member has a responsibility to Maintain an appropriate level of professional expertise by continually developing knowledge and skills. Perform professional duties in accordance with relevant laws, regulation and technical standards. Provide decision support information and recommendations that are accurate, clear, concise and timely.

Standards of Ethical Conduct for Management Accountants 2. Confidentiality: Each member has a responsibility to Keep information confidential except when disclosure is authorized or legally required. Inform all relevant parties regarding appropriate use of confidential information Refrain from using confidential information for unethical and illegal advantage.

Standards of Ethical Conduct for Management Accountants 2. Integrity: Each member has a responsibility to Mitigate actual conflict of interest. Abstain from engaging in or supporting any activity that might discredit the profession. 3. Credibility: Each member has a responsibility to Communicate information fairly and objectively. Disclose all relevant information that could reasonably be expected to influence and intended user understanding of the reports, analysis, or recommendations.

Resolution of Ethical Conflict When faced with ethical issues, accountants should follow their organization’s established policies on the resolution of such conflict. If these policies do not resolve the ethical conflict, accountant should consider the following course of action: Discuss the issue with his immediate supervisor except when it appears that the supervisor is involved. In that case, he should present the issue to the next level. Clarify relevant ethical issues by initiating a confidential discussion with an impartial advisor to obtain a better understanding of possible course of action.