Likewise, in the case of bad or doubtful debts, an estimate for provision is usually done to know as to how much of the trade receivables the company might not be receiving. This provision is created to safeguard the company from the losses from debts. Given these points, estimation appears to be beneficial. However, “estimates are inherently subjective and therefore lack precision as they involve the use of management's foresight in determining values included in the financial statements” (Accounting-simplified.com, 2013). They can sometimes downsize the dependability on the
In addition a description of the Sarbanes-Oxley Act and its influence on accounting and financial decision making will be included. Professional Ethics in Accounting According to Mantzke (2005) “Ethics has always been significant for accounting professionals and the constituencies they serve. CPAs have developed a reputation as trusted business advisors; in part due to the general perception that accounting professionals behave ethically” (Incorporating Professional Ethics Throughout an Accounting Curriculum). The training that accounting professionals receives focuses on the details about account rules, and regulations as it pertains to the laws that govern account principles. What is absent from the curriculum is understand the Ethics involved in the same accounting principles.
Integrity is the trait that an accountant needs to have in order to be completely honest, integrity is the act of knowing right from wrong and following through with doing the right thing, and being honest is one of the ways that an accountant can insure that they are following the AICPA Code of professional conduct. Due care is the last purpose of the AICPA. Due care is the act of making sure that the accountant is up to date on the most recent code of conduct, and have the training and education needed to be the best accountant that the public needs. My conclusion is that in order for an accountant to fully uphold the AICPA Code of Professional Conduct they must know the
Although there are some argument for and against for each theory, in my point of view, both theories are contributing to the accounting theory development. For the positive theory views, it has been discussing some areas in term of accounting choices and disclosure decisions. There were two theories which are positive accounting theory (PAT) and institutional theory (IT) explained accounting choices (Collin et al., 2009). First, PAT as a theory that seeks to explain why managers within the organization will select to adopt particular accounting method in preference to other. A set of firm-specific characteristics (earning-based bonus plans, debt and political process) linked to Costly Contracting Theory that explains management’s choice of accounting policies.
3. Why were the actions taken by WorldCom managers not detected earlier? Actions taken by WorldCom managers not detected earlier because of many factors. One of the contributing factor is Ebbers has created a culture in which the legal function was less influential and less welcome in WorldCom. As the CEO of the company, Ebbers should play an important role in ensuring the company conducts business in accordance with the law and is on the right track.
(Osmond, 2014) Accountants do not always follow the moral guidelines set out by the company’s managerial accounting and thus creating ethical problems within the business. The resultant effect of not following the set out moral values is that stakeholders lose confidence with the company’s financial stability. Ethics will be important in ensuring that the accountants always prepare the books of account in time and update them in time. The accountants will also be in a position to report correct, accurate and ethical information on the financial position of the organization (Osmond, 2014) Managerial accounting is characterized by forecasting for the future sales of the business. It focuses on the users of the company’s business details.
Managerial Accountants should calculate net income or loss in a manner that accurately reflects the closest true costs and profits as determined by the International Federation of Accountants (IFA). To effectively help Management Accountants do this, the IFA has set in place a code of conduct that should regulate the integrity, competence, confidentiality, and credibility of a corporation. Introduction To fully understand the ethical issues of Managerial Accounting, you must first assess the difference between Managerial Accounting and Financial Accounting. Financial accounting is used for to present the status of the company to external sources such as board of directors, investors, auditors, and for reporting purposes as well. The financial side of accounting is used to represent the company’s current standing based on the past profits, net income, bad debts, and current ratio of assets to liabilities.
When a situation occurs that interferes with an individual’s goals, emotions, interests, perceptions, and/or values it is considered a conflict. Conflict occurs when one person believes that someone else or multiple people have different views or if one feels that he or she is trying to change his or her views. This happens frequently in the business and academic world. For example, if one person in the group’s major concern is accuracy and someone else does not care whether the project is accurate or not, this causes a conflict. This conflict would cause the one person to rush and not verify the information that they received, when the other person would be doing double the work to make sure those were accurate sources.
Financial statements are simply the framework of a financial picture created over a given period of time. Through the use of such tools as ratio analysis, a financial manager is able to make the best possible decisions for the company Ratio uses and Benefits Ratios are used to take the information from the financial statements and make sense of them in such a way that is useful for a particular organization. “Financial ratios can be used to develop a set of statistics that can reveal key financial characteristics of a company “(Droms, & Wright, 2012, p. 88). Ratios allow managers to compare companies of unequal size, determine its rank within the industry, and compare performance of a single company from year to year. Before attempting to utilize ratios to analyze financial statements, managers must clearly understand the purpose of each financial statement and its content.