大四上高級會計(jì)上課課件chapter

1、Chapter 1Ethical Issues in Advanced Accounting2Scope of ChapterWhy need ethical conduct in accounting?What is fraudulent financial reporting?Ethical standards for preparers of financial statements & reports.Significant events in establishment of ethical standards.3Scope of ChapterIMA standards of et

2、hical conduct.FEI code of ethics.AICPA code of professional conduct.Resolutions, articles, definitions, rules, appendices.Examples, review questions and case studies.4Why To Study Ethical Issues In Accounting?Critics have alleged that ethical standards of accountants have deteriorated.Cute accountin

3、g to describe stretching the form of accounting standards to the limit, regardless of the substance of the underlying business transactions or events.Cooking the books to indicate fraudulent financial reporting.5Fraudulent Financial ReportingMisstatements in financial statements.Intentional misstate

4、ment or omission of amounts or disclosures in financial statements to deceive users.Reasons & Methods of committing fraud.Manipulation, Falsification, or Alteration of accounting records or supporting documents.6Fraudulent Financial ReportingMisrepresentation in or intentional omission from, the fin

5、ancial statements of events, transactions or other significant information.Intentional misapplication of accounting principles relating to amounts, classification, presentation or disclosure.7Fraudulent Financial ReportingFraud frequently involves either a pressure or an incentive to commit fraud.Fr

6、aud may be concealed through falsified documentation, including forgery.Fraud also may be concealed through collusion among management, employees or third parties.8An Example ofFraudulent Financial ReportingThe SECs accounting and auditing enforcement release no. 923 provides an example of fraudulen

7、t financial reporting. According to the SEC, the four officers overstated the companys net e for the quarters ended Dec 31, 92 and Mar 21, 93 by taking following “ cooking the books” actions:9An Example ofFraudulent Financial ReportingRecognizing January 1993 revenues in December 1992 and April 1993

8、 revenues in March 1993.Deferring write-offs of uncollectible accounts past the end of the appropriate quarter.Recognizing as assets certain expenses incurred during the quarters ended December 31, 1992 and March 31, 1993.10An Example ofFraudulent Financial ReportingMaking fictitious journal entries

9、 in connection with business combinations plished in march 1993, the effect of which was to understate doubtful accounts expense.Recognizing in the 1st quarter of 1993, a gain from the sale of an asset during the quarter ended June 30, 1993.11Ethical StandardsAmerican Institute of Certified Public A

10、ccountants (AICPA) adopted first code of ethics in 1917.The Institute of Management Accountants (IMA) first issued its “Standards of Ethical Conduct for Management Accountants” in 1983.The Financial Executives Institute (FEI) first issued its “Code of Ethics” in 1985.12Significant Events inEstablish

11、ment of Ethical StandardsThe Seaview Symposium of 1970The Equity Funding Fraud of 1973Action by IMA in 1983Action by FEITreadway Commission mendationsSarbanes-Oxley Act in 200213The Equity Funding FraudIn 1973, a major fraud was discovered at Equity Funding Corporation of America (equity), a seller

12、of mutual fund shares that were pledged by the investors to secure loans to finance life insurance premiums. During the nine-year period, at least $143 million of fictitious pretax e was generated.14The Equity Funding FraudA period in which the equity reported a total net e of $ 76 million, instead

13、of the real pretax losses totaling more than $ 67 million.The fraud was carried out by at least 10 executives of Equity, including the chief executive officer (CEO), chief financial officer (CFO), controller, and treasurer.Several of the executives were CPAs with public accounting experience.15Tread

14、way CommissionThe National Commission on Fraudulent Financial Reporting.Sponsored by the AICPA, IMA, FEI, the American Accounting Association, and the Institute of Internal Auditors.Defined “Fraudulent Financial Reporting” as “intentional or reckless conduct, whether act or omission, that results in

15、 materially misleading financial statements.”16Treadway CommissionThe Treadway Commission made 49 mendations for curbing such reporting.The mendations dealt with the public company; the independent public accountant; the SEC, financial institution regulators, and state boards of accountancy; and edu

16、cation.17Treadway CommissionThe responsibility for reliable financial reporting resides first and foremost at the corporate level.Public companies should maintain accounting functions that are designed to meet their financial reporting obligations.18Sarbanes-Oxley Act 2002Authorized the establishmen

17、t of Public Company Accounting Oversight Board Purpose: Regulate conduct of accountants both public practice and publicly owned business enterprises 19Analysis of Ethical Standards ForManagement & Financial Execs.The ethics pronouncements of IMA, FEI and AICPA have several similarities.All three req

18、uire members to be competent, act with integrity and objectivity, maintain confidentiality of sensitive information, and avoid discreditable acts.20Analysis of Ethical Standards ForManagement & Financial Execs.The IMA & AICPA codes specifically prohibit conflicts of interest, but the FEI code only i

19、ndirectly addresses such conflicts in its confidentiality provision.21Analysis of Ethical Standards ForManagement & Financial Execs.Only IMA and FEI codes specifically require communication of complete information to users of their members reports; AICPA members are indirectly comparably obligated b

20、y rule 202.22Analysis of Ethical Standards ForManagement & Financial Execs.The IMA standards in essence require members to report violations of the standards by members of their organization to responsible officials of the organizations. The FEI and AICPA codes have no such requirements.23Analysis o

21、f Ethical Standards ForManagement & Financial Execs.The FEI code requires members to conduct their personal, as well as their business affairs with honesty and integrity. The IMA and AICPA standards do not address personal affairs.24Conflict of InterestConflict of Interest results when individuals r

22、eap inappropriate personal benefits from their acts in an official capacity.25Conflict of InterestFor example, a chief accounting officer might cook the books to overstate pretax e of the employer corporation in order to obtain a larger performance bonus.The controller of a publicly owned corporatio

23、n might involve in “insider trading” to maximize gains or minimize losses on purchase or sales of the employer corporation securities.26Discreditable ActsNone of the three codes defines “Discreditable Acts”.The term can not be adequately defines or circumscribed.A discreditable act to one observer m

24、ight not be so construed by another.27Concluding ObservationsThe number of SEC proceedings against reporting companies from 1981 to 1986 was less than 1% of the number of financial reports filed with the SEC during that period.28Concluding ObservationsThe Chairman of the Federal Deposit Insurance Corporation contended that management fraud (presumably including cooking the books) contributed to one-third of bank failures.10% of total bankruptcies in a study authorized by the Tr