This review of the organisation helps to keep it honest and reassures the employees and investors of the financial position of the company. They will reveal accounting mistakes and the misuse of funds. Audits can be done either internally by the accounting department of the company concerned, or externally by an independent neutral third party. 5. What are: a)
Ethicality of Accounting Activities The WorldCom case is an example of unethical behavior performed by a company by abusing accounting activities to reflect misleading financial information. In this case the main cause of this unethical behavior is greed and neglect by the executives that allowed and encouraged this behavior. On the other hand, WorldCom employee Cynthia Cooper is a prime example of ethical behavior that took place to uncover the wrong doing of individuals. Upon reading an article of a former financial analyst, Cynthia Copper’s mind was intrigued, an audit was conducted on capital spending. In the WorldCom and Cynthia Cooper case unethical behavior was evident in multiple departments and involved top key players that tried to cover up the fraud.
Although confusing, portions of the code have been around for longer than the code itself and is known as the foundation of ethical reasoning. Accountants everywhere are required to follow this code in order to even be a member in the AICPA and should follow it even if they are not. Building the trust of the public is not an easy task in light of all the scandals that have been uncovered even under close scrutinization from the AICPA. This code provides rules and explains the meaning behind what “ethics” really means and is therefore referred to as “the foundation” of ethical reasoning. The most important purposes behind the Code of Professional Conduct are to protect the investor, the employee, and the creditor.
The purpose of the financial statement audit is to ensure the entity being audited is preparing the financial statements in conformance with General Accepted Accounting Principles (GAAP). The information is important to investors, managers, banks,
Internal auditors guarantee that the internal controls are sufficient and calculate the company’s financial and information systems for accurateness. A series of audits such as financial statements, fraud, compliance, and operational can be made with the hiring of an internal auditor. The most beneficial audit for Whitfields Company would be an operational audit. Operational Audits can be done if upper-level management thinks that there is a need for operational improvements. It is a review of management and how operating procedures work.
In addition, if a CEO/ CFO do not meet these requirements they can be criminally sanctions; which could include jail time reach up to 20 years if found guilty of willful neglect. Furthermore, a CEO/ CFO must understand the implications of section 303 in that improper influence or misleading of auditors can also render finical statements misleading, it is therefore to the CEO/CFO’s advantage to hire and retain highly capable and ethical auditors to ensure the company’s accuracy financial reporting, it is the CEO/CFO’s responsibility to set up “internal control over financial reporting” (White & Case LLP, 2003). The auditors responsible must ensure the internal controls
If this was not the case, Congress would not have enforced the Sarbanes-Oxley Act. In 2002, the financial scandals that occurred by multiple corporations proved that the accounting profession was in dire need of some regulation by the government. I predict that corporate fraud will remain the same based on the research produced during the writing process for this assignment. There is no fool proof way to completely diminish financial fraud or to protect investors. As people as a whole have proven time and time again, there are rules and laws and there are people whom break those rules and laws for personal gain.
● ● Requires codes of ethics for senior financial officers. In addition, Section 404 of the Sarbanes-Oxley Act requires public companies to attest to the effectiveness of their internal controls over financial reporting. 29. Some major challenges facing the accounting profession relate to the following items: Nonfinancial measurement—how to report significant key performance measurements such as customer satisfaction indexes, backlog information and reject rates on goods purchased. Forward-looking information—how to report more future oriented information.
( Weygandt,Kimmel & Kieso, 2008) It is more than quite obvious that in business dealings all parties involved for do not always conduct themselves in an ethical manner. The same can be said about employees as well as consumers. There are internal controls set in place when you have employees that are dishonest or simply inefficient so that they can be quickly identified for their wrong doings. On the other hand, there are internal controls that can reveal honest mistakes when necessary. While inputting entries and reviews, it is possible that an accountant or employee can make an error.
Financial ratios should be analyzed by a professional accountant. In order to keep a record of the company’s financial health, ratio analysis is used as a tool. Ratio analysis determines and interprets how efficiently a company is working in terms of its finances. Ratio analysis presents a simple and comprehensible understanding of the accounting variables. It is an effective tool for understanding a business’s success in terms of financial undertaking and