Transcript Document
Accounting in Business: Ethics, Fraud, and Internal Control
By
Dina El Bassiouny 1
Outline
Accounting as Part of Everyday Life.
Importance of Ethics in Accounting.
Facts and Figures.
Fraud.
Losses on the Way.
Motivating Forces for Unethical Behavior.
Effective Ethical Controls.
Effective internal controls.
Conclusion.
References.
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Accounting as Part of Everyday Life
Is one discipline of study that all people regardless of job position should have some knowledge of …
How to read your bank statement? Know your financial gains and losses … Your income!
What are your tax dues?
Its useful in
people ’ s everyday lives
.
Companies must have reliable financial statements for both internal and external users.
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Importance of Ethics in Accounting
Facts & Figures
In the U.S., according to the Association of Certified Fraud Examiners (ACFE), losses from fraud and abuse => $600 billion …
In Egypt, … ..???????
Classic Case of Deception and Double Interests:
“ Enron
”
… Arthur Andersen = consultant !!!!!!!!!!!!!!
Auditor + Internal Auditor + Management
In Egypt: “ NO regulation in place requiring independence of auditors ” Those who violate rules should be disciplined or suspended from practice
…
(Gamal, 2002) 4
Importance of Ethics in Accounting
Fraud
Fraud
is an intentional deception, misappropriation of a company of perpetrator.
’ s assets, or manipulation of its financial data to advantage Symptoms can include: •Key executives appearing to be living beyond their means.
•Key executives have close associations with suppliers.
•Company uses several different banks, none sees full financial picture.
•One or two individuals dominate the company.
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Importance of Ethics in Accounting
Losses on the Way
Losses due to Unethical Behavior:
Costs of legal action taken against perpetrators.
Costs of reduced productivity.
Increased unemployment as companies are forced to downsize or go out of business.
Economic loss to organization, hence to society.
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Investigate Motives for Unethical Practice
Solution???
Administer Effective Ethical and Internal Controls
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High
Motives for Unethical Behavior
Situational Pressures Low High Opportunities Low Low Unethical
(Hall, 2004)
Personal Characteristics (Integrity) High Ethical
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Effective Ethical Controls
A code of conduct that applies to the practice of a profession.
AICPA adopted codes of professional conduct that must be followed by CPAs.
Integrity Integrity Objectivity Independence Due Care
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Effective Internal Control System
Control Environment:
Influence Control Awareness of Management and Employees.
Information and Communication:
Quality of Info Impacts Reliability of Financial Statements.
Risk Assessment:
Identify, Analyze, and Manage Risks Relevant to Financial Reporting.
Fulfill Main Objectives Monitoring:
Entities’ Activities.
Control Activities:
Transaction Authorization – Segregation of Duties – Supervision – Accounting Records – Access Control – Independent Verification Safeguard Assets of the Firm Ensure Accuracy & Reliability of ACCT Records & Info Promote Efficiency in the Firm’s Operations 10
Conclusion
Effective Ethical Control
Effective Internal Controls
Situational Pressure
Personal Integrity Opportunities 11
References
Gamal, Wael (2002). “ Book-Fixing, Here and There.
” Al Ahram Weekly. 22-28 August.
Hall, James A (2004). Accounting Information Systems. Thomson. South Western.
Needles, Belverd E., Jr.; Powers, Marian; Crosson, Susan V. (2002). Principles of Accounting. Houghton Mifflin Company. Boston. New York.
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T
hank
Y
ou
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