Research Topics: Accounting Code Of Ethics

Consolidated and Equity

Consolidated accounting reflects all the activities and its subsequent performance by the holding firm while equity accounting shows the retained earnings held by an affiliated company wherein the firm has stake on it.  Exemplified by the Cheung Kong financial data is consolidation of venture performance with less transparency in individual performance of affiliated companies.  As a result, investors could believe that they are earning or increasing their value within these affiliated firms, however, the absence of individual annual financial performance could be a loophole in accounting methods of the diversified-holding firm to the detriment of investors. In the holding firm’s 2004 report, it conceded that it will diversify through acquisitions.  As such, the management presented a 126-page report highlighting the advantages of infrastructure industries where investors can exploit off.  However, in its 2005 report, a minimal 48-page disclosure that did not have the similar emphasis on 2004 highlighted industries rather it hid their individual performance in consolidated financial statements.  To arrive at earnings per share and its specific computations are not disclosed that could imply management’s playing-safe to prevent investor queries.  As a result, investors would be easily manipulated showing them relatively high profits but limitedly so as no one knows how affiliate firms contribute to this amount and to what extent. Due to this, it can be emphasized the significance of equity accounting over the consolidated statements in this case for investors to polish and rationalize their voting rights when the holding company is making a decision.  The comprehensiveness of the latter is of little importance to the reliability of the former in terms of promoting sound management, investor-executive relations and accounting ethics.  The inclusion of affiliate companies in a corporate portfolio necessitates financial disclosure of these firms to provide the background for investors to base their future investment activities and leverage their business risks.  Supposed that two or three of these affiliates are year-on-year declining in business performance.   Investors may not know this fact and continued to be allured by consistent but increasing in a negative direction dividends and share value.  They might continue to believe the managerial capabilities of the holding firm’s managers until such time that failure of affiliated companies is felt by drastic decline in share value or divestment. Therefore, it is a recommendation to incorporate in the annual reports of the holding firm Cheung Kong equity accounts to show retained earnings and ample business performance measures of the individual affiliates.  The consolidated accounts would then serve as reference for “too busy” investors.  Even though there are investors that may find equity presentations are of little importance, there are definitely others who would want to glimpse them simply because it can affect the value of the holding company in which they have their individual stakes.  It will inculcate to corporate stakeholders managerial concern and accounting ethics that could enhance investor support for more acquisitions since they know they could have a black-and-white copy to monitor their performances.                    References: Wikipedia, Investopedia Credit:ivythesis.typepad.com

Consolidated and Equity

Consolidated accounting reflects all the activities and its subsequent performance by the holding firm while equity accounting shows the ...

To Qualify or Not?

1.                  Recap the major issues in this case. What is/are the ethical dilemma(s) in this case?   The major issues in the case are questions of violations of the fundamental principles of accounting ethics. The primary ethical dilemma experienced by Jane Ashley is the proper course of action in dealing with the actions of her superiors Frankie Small and Mr. Vicio of covering a discrepancy in the items under audit, which in the point of view of Ashley is inconsistent with standards of good practice and inimical to the long-term interest of the client Models Inc.      2.                  Did Jane Ashley, the staff accountant, have any legitimate choice except to follow the direction of the partner on the job with regard to what happened on the job?   Jane Ashley has the option of putting into record her disagreement with the decision of the partner but she has to comply with orders unless she can find an alternative legitimate way of solving the problem.     3.                  Outline your understanding of the cut-off problem that has developed. What issues are involved?   Models Inc. has several suppliers, which the firm scheduled for payment. In auditing the accounts payable, the person in-charge looks into expense reports, invoices and other supporting documents to trace and account for payments. However, there were several missing documents, which may not be found and the person in-charge is faced with the dilemma of deciding on how to reflect the insufficiency of data in the audit report.   4.                  What are the fundamental principles underlying a professional accountant’s code of ethics applicable to this case?   There are five fundamental principles forming the foundations of the accountant’s code of ethics, which are: 1) integrity—being straightforward and honest; 2) objectivity—freedom from prejudice or bias and conflict of interest; 3) professional competence and due care—maintaining standards for professional knowledge and skills; 4) confidentiality—preservation of the privacy of clients and non-disclosure of sensitive information; and 5) professional behaviour—compliance with law and professional standards.   5.      What, if anything, should Jane Ashley do under the circumstances?   Jane Ashley may voice her opinion on the decision of the partner to her senior or to the partner. She should look for legitimate ways of resolving the lack of documentation and suggest this to the partner. If there is no way to find the missing documents, the she can find guidance in the company policies and accountant’s code of ethics. To Resign or Serve? 1.      What is/are the ethical dilemma(s) in this case?   The initial ethical dilemma of Ben Hunt revolves around integrity and professional competence on whether or not to report the risky and inimical practices of their client and the succeeding ethical dilemma revolves around objectivity and confidentiality on whether or not Ben Hunt should apprise concerned parties of the business practices of Prairieland.      2.      Was the renegotiation of overdue loans to current correct? If not, are there any conditions under which a “current” classification would be warranted?   Renegotiation to report the overdue loans as current loans is practiced but it is a risky move because the bank’s non-recognition of the possibility that a debtor may not be able to pay decreases its credibility to declare the loan later on as non-performing and invoke security nets in claiming payment.      3.      Was the arrangement for insurance against non-payment of loans and/or Prairieland’s (non)disclosure of the insurance arrangement acceptable? If not, how should it have been handled?   Even with an insurance against non-payment of loans obtained by the bank, the risk is still high because insurance companies conduct thorough investigation to ensure that the bank is not deliberately lax on their demands for payment since the payment of loans is insured. The non-disclosure of the insurance arrangement is also not acceptable because this is an important information to the accounting firm. The bank should practice reasonable loan assessments and disclose valuable information.   4.      As James London/Ben Hunt, what would you have done? What (if any) other options were available to James London/Ben Hunt beside resignation?   If I were James London/Ben Hunt, I would have supported the resignation. This is because when Ben Hunt expressed his concern over the banking practices of the client, the representatives of the bank were adamant. Provided Hunt and London explained the risks thoroughly but the bank still refused to budge, then there is no other option for Hunt and London but to resign.   5.      In this situation, what responsibilities does Jack London/Ben Hunt have to various stakeholders?   The responsibility of Hunt and London to inform stakeholders is subject to the confidentiality of information. Unless the bank and its representatives permit the disclosure or the disclosure is called for in a legal proceedings or in other authorized venues of disclosure, both Hunt and London are barred from disclosing sensitive information to stakeholders who are not a party to their previous business dealings. What are your thoughts on this situation? 1.      What do you think are his concerns? Jeff’s primary concern is the possibility that the judgment of Trevor regarding their client’s billing practices may have been clouded by Trevor’s personal relationship with the accounts receivable supervisor of their client company. The development of the personal relationship between the auditor and client gives rise to questions of conflict of interest of Trevor because he could have made a favourable report on the client company to be on the positive side of Fleurette or his objective judgment may have been overpowered by his personal emotions towards a representative of the client company. In this cases, the integrity of Trevor’s report becomes questionable and unreliable. 2.      What actions can be taken to address his concerns? Jeff has to make sure that the report passed by Trevor on the practices of the client are accurate and supported by sufficient documentary evidence to ensure the integrity of the entire audit report. During the remaining days before the report presentation, Jeff should remove Trevor as part of the audit team working with the client company to prevent further issues on the validity of the report. Jeff should also have Jeff’s report validated before the final report to ensure the accuracy of the favorable recommendations to the client. As a preventive measure, Jeff should also remind his employees or staff of their duties provided by the accountant’s code of ethics and the importance of practicing objectivity to the profession.        Credit:ivythesis.typepad.com

To Qualify or Not?

1. Recap the major issues in this case. What is/are the ethical dilemma(s) in this case? The major issues in the case...

Accounting Ethics and Islamic Banking

Accounting Ethics and Islamic Banking   Free Thesis Statements             Although there is no strictly static set of rules regarding the Sharia or the Islamic laws, it is still considered as the legal basis of all the private and public aspects of life. The systems indicate to serve the humanity and it should be impose on all the routinely activities of an individual which are being influenced by politics, economics, banking, business, family, sexuality, hygiene and the social issues.             The principles of this Islamic law are consistently imposed on Islamic banking. As part of their tradition, the implementation of the entire system prohibits the business organization to commit themselves to unlawful practices. Actually, the Islamic banking still has the concept of an ordinary bank. Except that they have just incorporated the laws of Sharia. However, the banking system is not greatly affected by the incorporation of their tradition, Hence, it triggers more the people to do their duties better.             Moreover, it would be beneficial to apply the study of moral values and judgments to the concepts of accounting. This is what they refer to as the accounting ethics or more or less the professional ethics. It is normal for professionals to have additional moral responsibilities as they are more entitled for big responsibilities and decision making. Also, the professionals should keep their reputations as if it their most important possessions.             In the ethics of accounting, what is important is that the professionals should establish a positive and reliable personality for they are the one that handles the each complicated situations in the business.  In relation to the Islamic banking, they have imparted their own beliefs and tradition in their professions so in that way people from other nation may consider them as nation who has unity and perseverance.                                                                                                                                       Credit:ivythesis.typepad.com

Accounting Ethics and Islamic Banking

Accounting Ethics and Islamic Banking Free Thesis Statements Although there is no strictly static set of rules regarding ...

Accounting Ethics Cases

bordercolor=”#111111″ width=”100%”> The First Publication 1.      The first involves the various requirements of several institutions, one of which is the tenure offered by the university based on the number of publications, the second is the required number of pages for publication on a journal, and the final is the agreement made with the accounting firms on the study concerning the publication. 2.      The ethical issues involve the possible withdrawal from a commitment to the accounting firms and the tenure policies of the university. The major stockholders are the writer (me), the accounting firm, and the editor of the journals although not so much as the first two. 3.      These are the agreement that was made with the accounting firm which has extensively helped the writer with the study in exchange for a particular demand on the article publication. 4.      Alternatives are find another journal that will allow publication of five more pages and requesting for a change in the agreement with the accounting firm. 5.      The decisions that each corporation—including the writers’—are all greatly focused on the advantages that will be given to them, and the greatest norm is with the compliance with the agreement that involve both verbal or non-verbal. Regulations are also greatly met especially with the decisions of the company. 6.      A great consequence is the loss of points for tenure for the writer. 7.      I would ask around in other publications first while also contact the accounting firm for the possible change in the agreement.   The Kardell Paper Co. 1.      The CEO and the shareholders of Kardell Paper Co. for the need to ensure the operation of the company; there are also the workers within the company who live near the mill and are affected by the major changes in the company. 2.        The major issues involve the environmental safety of the mill and how they affect the people, as well as the amount of money it will take to ensure that the company will be able to comply with the needed changes in order to continue with their company. 3.      They should be ranked as one of the top although, with the question on environment and safety of the people, it should not be the highest because they are not the ones who are risking their lives, they are simply risking their money and their reputation. 4.      Environmental analyses of the effects of sonox to people especially as based on the climates, as well as the relation of the miscarriages, respiratory ailments, and other health problems by Riverside and for more safety. 5.      I would allow for more studies done on the environment and also for minimal changes or alternatives in providing safety to the workers and environmental concerns that will naturally affect everyone. 6.      They were more concerned with the length in which the company will have to close. Also the money that may be spent rather than the workers’ safety. 7.       might go to the media or file a suit against the company for negligence of the workers’ safety, and thus effectively ruining the company’s reputation and thus affect the working environment, performance, and reputation. Which Responsibilities Take Precedence? 1.      Manley’s firm believes that they should lower the standards of the policies on the financial institutions on the debt securities to allow more investors, which  clients believe should not in order to protect themselves. 2.      The stakeholders are the firm and their stance to allow investors to come in without fear of possible debt,  clients who fear that this may ruin them, and  himself as a leader of the organization and opposing the proposal in order to raise the standards of the firm yet is loyal to the firm. 3.       The principles are honor and loyalty to the firm, then to the clients, and the need to stand up for what they believe in while also weighing the advantages and disadvantages of both situations while also including the values. 4.      Each of the sides will be presented with each presenting both the advantages and the disadvantages. Also, lower the standards a bit so clients will feel not be threatened, while accepting suggestions from the clients on the conditions. 5.      They have different perspectives and various things to protect.  believes in the cause, the firm believes that they will be helping the investors, while the clients believe they are protecting their own workers and therefore have different ideas and purposes. 6.      Problems can arise where clients will express distaste and change auditors without considering the auditors’ side. 7.      Present my case to the firm if I do not believe in it. If I do not believe in it, then I do not, and thus will be explained according to the advantages and disadvantages. I am loyal to them, to the point of being honest. Credit:ivythesis.typepad.com

Accounting Ethics Cases

bordercolor=”#111111″ width=”100%”> The First Publication 1. The first involves the various requirements of several institutio...

Analysis on CHEUNG KONG (HOLDINGS) LIMITED

Consolidated accounting reflects all the activities and its subsequent performance by the holding firm while equity accounting shows the retained earnings held by an affiliated company wherein the firm has stake on it.  Exemplified by the Cheung Kong financial data is consolidation of venture performance with less transparency in individual performance of affiliated companies.  As a result, investors could believe that they are earning or increasing their value within these affiliated firms, however, the absence of individual annual financial performance could be a loophole in accounting methods of the diversified-holding firm to the detriment of investors. In the holding firm’s 2004 report, it conceded that it will diversify through acquisitions.  As such, the management presented a 126-page report highlighting the advantages of infrastructure industries where investors can exploit off.  However, in its 2005 report, a minimal 48-page disclosure that did not have the similar emphasis on 2004 highlighted industries rather it hid their individual performance in consolidated financial statements.  To arrive at earnings per share and its specific computations are not disclosed that could imply management’s playing-safe to prevent investor queries.  As a result, investors would be easily manipulated showing them relatively high profits but limitedly so as no one knows how affiliate firms contribute to this amount and to what extent. Due to this, it can be emphasized the significance of equity accounting over the consolidated statements in this case for investors to polish and rationalize their voting rights when the holding company is making a decision.  The comprehensiveness of the latter is of little importance to the reliability of the former in terms of promoting sound management, investor-executive relations and accounting ethics.  The inclusion of affiliate companies in a corporate portfolio necessitates financial disclosure of these firms to provide the background for investors to base their future investment activities and leverage their business risks.  Supposed that two or three of these affiliates are year-on-year declining in business performance.   Investors may not know this fact and continued to be allured by consistent but increasing in a negative direction dividends and share value.  They might continue to believe the managerial capabilities of the holding firm’s managers until such time that failure of affiliated companies is felt by drastic decline in share value or divestment. Therefore, it is a recommendation to incorporate in the annual reports of the holding firm Cheung Kong equity accounts to show retained earnings and ample business performance measures of the individual affiliates.  The consolidated accounts would then serve as reference for “too busy” investors.  Even though there are investors that may find equity presentations are of little importance, there are definitely others who would want to glimpse them simply because it can affect the value of the holding company in which they have their individual stakes.  It will inculcate to corporate stakeholders managerial concern and accounting ethics that could enhance investor support for more acquisitions since they know they could have a black-and-white copy to monitor their performances.                      Credit:ivythesis.typepad.com

Analysis on CHEUNG KONG (HOLDINGS) LIMITED

Consolidated accounting reflects all the activities and its subsequent performance by the holding firm while equity accounting shows the ...

ACCOUNTING ETHICS CASES

The First Publication 1.      The first involves the various requirements of several institutions, one of which is the tenure offered by the university based on the number of publications, the second is the required number of pages for publication on a journal, and the final is the agreement made with the accounting firms on the study concerning the publication. 2.      The ethical issues involve the possible withdrawal from a commitment to the accounting firms and the tenure policies of the university. The major stockholders are the writer (me), the accounting firm, and the editor of the journals although not so much as the first two. 3.      These are the agreement that was made with the accounting firm which has extensively helped the writer with the study in exchange for a particular demand on the article publication. 4.      Alternatives are find another journal that will allow publication of five more pages and requesting for a change in the agreement with the accounting firm. 5.      The decisions that each corporation—including the writers’—are all greatly focused on the advantages that will be given to them, and the greatest norm is with the compliance with the agreement that involve both verbal or non-verbal. Regulations are also greatly met especially with the decisions of the company. 6.      A great consequence is the loss of points for tenure for the writer. 7.      I would ask around in other publications first while also contact the accounting firm for the possible change in the agreement.   The     Paper Co. 1.      The CEO and the shareholders of    Paper Co. for the need to ensure the operation of the company; there are also the workers within the company who live near the mill and are affected by the major changes in the company. 2.       The major issues involve the environmental safety of the mill and how they affect the people, as well as the amount of money it will take to ensure that the company will be able to comply with the needed changes in order to continue with their company. 3.      They should be ranked as one of the top although, with the question on environment and safety of the people, it should not be the highest because they are not the ones who are risking their lives, they are simply risking their money and their reputation. 4.      Environmental analyses of the effects of sonox to people especially as based on the climates, as well as the relation of the miscarriages, respiratory ailments, and other health problems by Riverside and for more safety. 5.      I would allow for more studies done on the environment and also for minimal changes or alternatives in providing safety to the workers and environmental concerns that will naturally affect everyone. 6.      They were more concerned with the length in which the company will have to close. Also the money that may be spent rather than the workers’ safety. 7.      Jack might go to the media or file a suit against the company for negligence of the workers’ safety, and thus effectively ruining the company’s reputation and thus affect the working environment, performance, and reputation. Which Responsibilities Take Precedence? 1.          ’s firm believes that they should lower the standards of the policies on the financial institutions on the debt securities to allow more investors, which    ’s clients believe should not in order to protect themselves. 2.      The stakeholders are the firm and their stance to allow investors to come in without fear of possible debt,      ’s clients who fear that this may ruin them, and        himself as a leader of the organization and opposing the proposal in order to raise the standards of the firm yet is loyal to the firm. 3.       The principles are honor and loyalty to the firm, then to the clients, and the need to stand up for what they believe in while also weighing the advantages and disadvantages of both situations while also including the values. 4.      Each of the sides will be presented with each presenting both the advantages and the disadvantages. Also, lower the standards a bit so clients will feel not be threatened, while accepting suggestions from the clients on the conditions. 5.      They have different perspectives and various things to protect.      believes in the cause, the firm believes that they will be helping the investors, while the clients believe they are protecting their own workers and therefore have different ideas and purposes. 6.      Problems can arise where clients will express distaste and change auditors without considering the auditors’ side. 7.      Present my case to the firm if I do not believe in it. If I do not believe in it, then I do not, and thus will be explained according to the advantages and disadvantages. I am loyal to them, to the point of being honest. Credit:ivythesis.typepad.com

ACCOUNTING ETHICS CASES

The First Publication 1. The first involves the various requirements of several institutions, one of which is the tenure offered by...

ANALYSIS ON CHEUNG KONG ( HOLDINGS ) LIMITED

Consolidated accounting reflects all the activities and its subsequent performance by the holding firm while equity accounting shows the retained earnings held by an affiliated company wherein the firm has stake on it.  Exemplified by the Cheung Kong financial data is consolidation of venture performance with less transparency in individual performance of affiliated companies.  As a result, investors could believe that they are earning or increasing their value within these affiliated firms, however, the absence of individual annual financial performance could be a loophole in accounting methods of the diversified-holding firm to the detriment of investors. In the holding firm’s 2004 report, it conceded that it will diversify through acquisitions.  As such, the management presented a 126-page report highlighting the advantages of infrastructure industries where investors can exploit off.  However, in its 2005 report, a minimal 48-page disclosure that did not have the similar emphasis on 2004 highlighted industries rather it hid their individual performance in consolidated financial statements.  To arrive at earnings per share and its specific computations are not disclosed that could imply management’s playing-safe to prevent investor queries.  As a result, investors would be easily manipulated showing them relatively high profits but limitedly so as no one knows how affiliate firms contribute to this amount and to what extent. Due to this, it can be emphasized the significance of equity accounting over the consolidated statements in this case for investors to polish and rationalize their voting rights when the holding company is making a decision.  The comprehensiveness of the latter is of little importance to the reliability of the former in terms of promoting sound management, investor-executive relations and accounting ethics.  The inclusion of affiliate companies in a corporate portfolio necessitates financial disclosure of these firms to provide the background for investors to base their future investment activities and leverage their business risks.  Supposed that two or three of these affiliates are year-on-year declining in business performance.   Investors may not know this fact and continued to be allured by consistent but increasing in a negative direction dividends and share value.  They might continue to believe the managerial capabilities of the holding firm’s managers until such time that failure of affiliated companies is felt by drastic decline in share value or divestment. Therefore, it is a recommendation to incorporate in the annual reports of the holding firm Cheung Kong equity accounts to show retained earnings and ample business performance measures of the individual affiliates.  The consolidated accounts would then serve as reference for “too busy” investors.  Even though there are investors that may find equity presentations are of little importance, there are definitely others who would want to glimpse them simply because it can affect the value of the holding company in which they have their individual stakes.  It will inculcate to corporate stakeholders managerial concern and accounting ethics that could enhance investor support for more acquisitions since they know they could have a black-and-white copy to monitor their performances.                    References: Credit:ivythesis.typepad.com

ANALYSIS ON CHEUNG KONG ( HOLDINGS ) LIMITED

Consolidated accounting reflects all the activities and its subsequent performance by the holding firm while equity accounting shows the ...

CASE STUDY

To Qualify or Not? 1.                  Recap the major issues in this case. What is/are the ethical dilemma(s) in this case?   The major issues in the case are questions of violations of the fundamental principles of accounting ethics. The primary ethical dilemma experienced by        is the proper course of action in dealing with the actions of her superiors           of covering a discrepancy in the items under audit, which in the point of view of         is inconsistent with standards of good practice and inimical to the long-term interest of the client Models Inc.      2.                  Did         , the staff accountant, have any legitimate choice except to follow the direction of the partner on the job with regard to what happened on the job?         has the option of putting into record her disagreement with the decision of the partner but she has to comply with orders unless she can find an alternative legitimate way of solving the problem.     3.                  Outline your understanding of the cut-off problem that has developed. What issues are involved?   Models Inc. has several suppliers, which the firm scheduled for payment. In auditing the accounts payable, the person in-charge looks into expense reports, invoices and other supporting documents to trace and account for payments. However, there were several missing documents, which may not be found and the person in-charge is faced with the dilemma of deciding on how to reflect the insufficiency of data in the audit report.   4.                  What are the fundamental principles underlying a professional accountant’s code of ethics applicable to this case?   There are five fundamental principles forming the foundations of the accountant’s code of ethics, which are: 1) integrity—being straightforward and honest; 2) objectivity—freedom from prejudice or bias and conflict of interest; 3) professional competence and due care—maintaining standards for professional knowledge and skills; 4) confidentiality—preservation of the privacy of clients and non-disclosure of sensitive information; and 5) professional behaviour—compliance with law and professional standards.   5.      What, if anything, should           do under the circumstances?          may voice her opinion on the decision of the partner to her senior or to the partner. She should look for legitimate ways of resolving the lack of documentation and suggest this to the partner. If there is no way to find the missing documents, the she can find guidance in the company policies and accountant’s code of ethics. To Resign or Serve? 1.      What is/are the ethical dilemma(s) in this case?   The initial ethical dilemma of          revolves around integrity and professional competence on whether or not to report the risky and inimical practices of their client and the succeeding ethical dilemma revolves around objectivity and confidentiality on whether or not          should apprise concerned parties of the business practices of Prairieland.      2.      Was the renegotiation of overdue loans to current correct? If not, are there any conditions under which a “current” classification would be warranted?   Renegotiation to report the overdue loans as current loans is practiced but it is a risky move because the bank’s non-recognition of the possibility that a debtor may not be able to pay decreases its credibility to declare the loan later on as non-performing and invoke security nets in claiming payment.      3.      Was the arrangement for insurance against non-payment of loans and/or Prairieland’s (non)disclosure of the insurance arrangement acceptable? If not, how should it have been handled?   Even with an insurance against non-payment of loans obtained by the bank, the risk is still high because insurance companies conduct thorough investigation to ensure that the bank is not deliberately lax on their demands for payment since the payment of loans is insured. The non-disclosure of the insurance arrangement is also not acceptable because this is an important information to the accounting firm. The bank should practice reasonable loan assessments and disclose valuable information.   4.      As          , what would you have done? What (if any) other options were available to       beside resignation?   If I were        , I would have supported the resignation. This is because when         expressed his concern over the banking practices of the client, the representatives of the bank were adamant. Provided               and       explained the risks thoroughly but the bank still refused to budge, then there is no other option for         but to resign.   5.      In this situation, what responsibilities does               have to various stakeholders?   The responsibility of          to inform stakeholders is subject to the confidentiality of information. Unless the bank and its representatives permit the disclosure or the disclosure is called for in a legal proceedings or in other authorized venues of disclosure, both            are barred from disclosing sensitive information to stakeholders who are not a party to their previous business dealings. What are your thoughts on this situation? 1.      What do you think are his concerns? ‘s primary concern is the possibility that the judgment of Trevor regarding their client’s billing practices may have been clouded by Trevor’s personal relationship with the accounts receivable supervisor of their client company. The development of the personal relationship between the auditor and client gives rise to questions of conflict of interest of Trevor because he could have made a favourable report on the client company to be on the positive side of           or his objective judgment may have been overpowered by his personal emotions towards a representative of the client company. In this cases, the integrity of Trevor’s report becomes questionable and unreliable. 2.      What actions can be taken to address his concerns?  has to make sure that the report passed by           on the practices of the client are accurate and supported by sufficient documentary evidence to ensure the integrity of the entire audit report. During the remaining days before the report presentation,       should remove       as part of the audit team working with the client company to prevent further issues on the validity of the report.        should also have    ’s report validated before the final report to ensure the accuracy of the favorable recommendations to the client. As a preventive measure,          should also remind his employees or staff of their duties provided by the accountant’s code of ethics and the importance of practicing objectivity to the profession.             Credit:ivythesis.typepad.com

CASE STUDY

To Qualify or Not? 1. Recap the major issues in this case. What is/are the ethical dilemma(s) in this case? The maj...

Accounting

Consolidated accounting reflects all the activities and its subsequent performance by the holding firm while equity accounting shows the retained earnings held by an affiliated company wherein the firm has stake on it.  Exemplified by the Cheung Kong financial data is consolidation of venture performance with less transparency in individual performance of affiliated companies.  As a result, investors could believe that they are earning or increasing their value within these affiliated firms, however, the absence of individual annual financial performance could be a loophole in accounting methods of the diversified-holding firm to the detriment of investors. In the holding firm’s 2004 report, it conceded that it will diversify through acquisitions.  As such, the management presented a 126-page report highlighting the advantages of infrastructure industries where investors can exploit off.  However, in its 2005 report, a minimal 48-page disclosure that did not have the similar emphasis on 2004 highlighted industries rather it hid their individual performance in consolidated financial statements.  To arrive at earnings per share and its specific computations are not disclosed that could imply management’s playing-safe to prevent investor queries.  As a result, investors would be easily manipulated showing them relatively high profits but limitedly so as no one knows how affiliate firms contribute to this amount and to what extent. Due to this, it can be emphasized the significance of equity accounting over the consolidated statements in this case for investors to polish and rationalize their voting rights when the holding company is making a decision.  The comprehensiveness of the latter is of little importance to the reliability of the former in terms of promoting sound management, investor-executive relations and accounting ethics.  The inclusion of affiliate companies in a corporate portfolio necessitates financial disclosure of these firms to provide the background for investors to base their future investment activities and leverage their business risks.  Supposed that two or three of these affiliates are year-on-year declining in business performance.   Investors may not know this fact and continued to be allured by consistent but increasing in a negative direction dividends and share value.  They might continue to believe the managerial capabilities of the holding firm’s managers until such time that failure of affiliated companies is felt by drastic decline in share value or divestment. Therefore, it is a recommendation to incorporate in the annual reports of the holding firm Cheung Kong equity accounts to show retained earnings and ample business performance measures of the individual affiliates.  The consolidated accounts would then serve as reference for “too busy” investors.  Even though there are investors that may find equity presentations are of little importance, there are definitely others who would want to glimpse them simply because it can affect the value of the holding company in which they have their individual stakes.  It will inculcate to corporate stakeholders managerial concern and accounting ethics that could enhance investor support for more acquisitions since they know they could have a black-and-white copy to monitor their performances.                      Credit:ivythesis.typepad.com

Accounting

Consolidated accounting reflects all the activities and its subsequent performance by the holding firm while equity accounting shows the ...

Accounting Ethics

Accounting Ethics   Ethics in Accounting is crucial to the development of any organization. As indicated in the code of ethics and professionalism principles of accounting practitioners, they should provide information to guide operations in an internal setting and to provide sufficient information to allow outside financiers to make valid judgments about the creditworthiness of a company. Thus, many people rely on the decisions made with the accounting data. As such, the accuracy of the information is vital. If a practitioner’s ethics are compromised, then the resulting information will be, as well.   In our current case, in which Craig, the financial controller, are doing some unethical spending of company’s fund. I, as a senior auditor should maintain professionalism and transparency in giving financial reports.  Thus, I will still raise the matter with my auditor partner, even though they are in very good relationship. Actually, this decision is crucial to any accounting practitioners. Decision making process is a knowledge-intensive process which can be considered as an important part of professionalism. In addition, it is considered as a central factor for giving relevant information because it provides the company the assurance that each and every operations and activities made by the organisations adheres to a common goal which is set in the decision making plans.   My decision to raise the issue with my auditor partner, Richard is one of best decision that I should do.  Actually, this decision is based on the American Accounting Association model, which is to: Ø  determine the facts- Dishonest practices of Craig i.e. spending of company funds for personal purposes. Ø  define the ethical issue – The ethical issue here reflects to dishonesty of Craig and the Integrity of accounting reports. Ø  identify the major principles, rules and values involved – One of the major principles involved in this case is Integrity. Accounting practitioners should be straight forward and honest in performing professional services. Aside from this, objectivity is also at stake. It is important for me as senior auditor to be fair and do not allow prejudice or bias, conflict of interest or influence of others to override objectivity. My professional competence and due care will be involved if I allow practices like this. As accounting practitioner, I should perform professional services with due care, competence and diligence. Recognize the continuing duty to maintain professional knowledge and skill at a level required to ensure that an employer or client receives the advantage of competent professional service based on up-to-date developments in practice, legislation and techniques. Act in a manner consistent with the good reputation of the profession and refrain from any conduct that might bring discredit to the profession. Ø  specify alternatives- The alternative in this case is not tell or ignore the dishonestly of Craig and maintain good relationship with your auditor partner.  This act is actually based on Deontology ethics in which the consequence is not considered as compared to action. Ø  compare the values and alternatives – the alternative will actually maintain good relationship with your auditor partner and even to Craig but my professional competence, integrity  and due care will be questioned. Ø  assess the consequences -  If I allow dishonestly of Craig, this will cause negative impact to the business of my long-standing client.  Aside from this, my professionalism as accounting practitioner will be at risk. Ø  make a decision- Reveal the dishonesty of Craig and give the right information in accordance to financial accounting reports. This is actually based Teleology ethics in which it considers actions or behavior according to the consequences of that behavior. In any current business organisation, progress that the company is making is recorded as basis for, among a host of other essential things, decision-making and as a benchmark for measuring the firm’s performance for the period under scrutiny.  Accounting ethics is to direct accountants to abide by a code of conduct that facilitates, if not encourages, public confidence in their job. Hence, accounting fraud (mispricing or mis-stating financial items in business balance sheets or other accounting books) is an example of what ‘accounting ethics’ try to avoid. Credit:ivythesis.typepad.com

Accounting Ethics

Accounting Ethics Ethics in Accounting is crucial to the development of any organization. As indicated in the code of ethics and prof...