Ethical Issues In Accounting

Ethical issues in accounting and finance.

Summary

This task analysis the issue of ethics in accounting and finance as discussed in the International Journal of accounting and finance. Currently, ethics of any firm is an important topic due to the numerous scandals that have taken place in different countries which have resulted in damage to the economy and society. These scandals have made the morality of accountants and businesspeople. The main contributors of business ethical standards are the accountants. The accounting profession has a duty to play so as to reduce the corporate scandals. They should make sure that there is proper financial management, quality audit, ethical standards improvement and that the governance regimes are strengthened

One of them is underreporting income. The reason why accountants underreport profits in different firms is so as to avoid paying massive taxes. Underreporting income is illegal, and individuals or companies caught doing so pay large penalties an if the case is extreme they are charged in a court of law. Underreporting income makes the government lose tax revenue that could be used to provide various social amenities to its citizens. The ethical issue in such an instance is the accountant reporting the true financial status of an organization in regards to the profit, liabilities and companies assets. It is easy for those accountants that are unethical to alter the financial records of a company. This makes the company seem to be doing well in the short term, but in the long run, it leads to failure of the company. The other ethical issue is a falsification of documents. Falsification of documents involves changing the details of the documents which are original so that they can appear real ( Bampton and Cowton, 2013, p.552).this is done with the aim of deceiving another person. Some of the documents that are easily falsified are personal checks, tax returns, bank accounts records and birth certificates among others. Tax evasion is usually a major reason for falsifying documents. A person can only be held liable if the aim of falsifying the document is to deceive another person. However, if a person a person unknowingly is found

These are the set rules to guide accountants in their work of preparing and standardizing the financial statements such as income statements, balance sheet, and cash flow statements. This is important because investors rely on these statements to make their investment decisions. GAAP aids in the preparation of statements that reflect the economic reality making the financial statements comparable and easy to understand. For financial information to be useful to the users, GAAP requires the used information to be consistent, reliable, relevant and comparable. Implementation of GAAP is done through disclosure and measurement principles (Bampton and Cowton, 2013, p.557). Disclosure principles explain the actual figures and other necessary information useful to be presented the financial statements. Measurement principles determine and recognize the basis and timing of items that are to be in the accounting cycle and lead to an impact on the financial statements. In summary, GAAP is concerned with; economic activity measurement, the time to measure and record such measurements, the disclosures surrounding this activity and preparing and presenting of financial statements in a summarized form. In the absence of GAAP, it would be hard for investors and creditors to make decisions since different companies would be free to choose what financial