ACC 6213 PROFESSIONAL VALUE AND ETHICS

Understanding
business ethicS
& the nature of
accounting
NURRIN SAKINAH. (I18203150)

01
FAIZATUL MUNIRAH. (I17302527)
 Presentation
Outline
Nature of Accounting
Ethics of Disclosure
Financial Statement
Roles an Accountant can fulfill
Development of Explicit Accounting Standards
and Regulations

02 Recent scandals that provoke more regulation

 1.
Nature of Accounting

03
 About the Nature of
Accounting
The various definitions and
explanations of accounting have been
propounded by different accounting
experts from time to time and the
following aspects comprise the nature
of accounting :

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05 NATURE OF ACCOUNTING

I) ACCOUNTING AS A SERVICE
(IV) ACCOUNTING AS A LANGUAGE
ACTIVITY

(II) ACCOUNTING AS A PROFESSION (V) ACCOUNTING AS SCIENCE OR ART

(III) ACCOUNTING AS A SOCIAL (VI) ACCOUNTING AS AN INFORMATION

FORCE SYSTEM
 2.
Ethics of Disclosure

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 WHAT IS ACCOUNTING ETHICS

Accounting ethics refers to following specific rules and

guidelines set by governing bodies that every person
associated with accounting should follow to prevent misuse
of the financial information or their management position.

Ethics and ethical behavior refer more to general principles

such as honesty, integrity, and morals. The code of
professional conduct, however, is a specific set of rules set by

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the governing bodies of certified public accountants.
Although the rules set out by different bodies around the
world are unique, some rules are universal.
 ADVANTAGES OF ACCOUNTING ETHICS

AS THE DIFFERENT RULES AND GUIDELINES ARE SET BY

THE GOVERNING BODIES THAT GOVERN THE ACTION OF
THE PERSON ASSOCIATED WITH THE ACCOUNTING
PROFESSION,

DISADVANTAGES OF ACCOUNTING ETHICS

AS THE PROPER TRAINING SHOULD BE GIVEN TO EVERYONE

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ASSOCIATED WITH ACCOUNTING FOR PROVIDING THE
INFORMATION ON THE DIFFERENT RULES AND GUIDELINES
TO BE FOLLOWED FOR ACCOUNTING ETHICS
 CONCLUSION
ACCOUNTING ETHICS IS ONE OF THE CRITICAL
CONCEPTS ACCORDING TO WHICH EVERY PERSON
ASSOCIATED WITH THE ACCOUNTING HAS TO
FOLLOW CERTAIN TYPES OF RULES AND
GUIDELINES SET BY THE DIFFERENT GOVERNING
BODIES HAVING THE POWER TO SET THE SAME.
THESE RULES AND GUIDELINES PREVENT THE
MISUSE OF THE DIFFERENT POWERS GIVEN TO THE

09 VARIOUS ACCOUNTING PROFESSIONALS.

 3.
What is Financial Statement

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Financial statements are written records
that convey the business activities and the
financial performance of a company.
Financial statements are often audited by
government agencies, accountants, firms,
etc. to ensure accuracy and for tax,
financing, or investing purposes. Financial
statements include:

Balance sheet
Income statement
Cash flow statement

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 BALANCE
SHEET
THE BALANCE SHEET PROVIDES AN OVERVIEW OF
A COMPANY'S ASSETS, LIABILITIES, AND
STOCKHOLDERS' EQUITY AS A SNAPSHOT IN
TIME. THE DATE AT THE TOP OF THE BALANCE
SHEET TELLS YOU WHEN THE SNAPSHOT WAS
TAKEN, WHICH IS GENERALLY THE END OF THE
FISCAL YEAR.
LIABILITIES ARE LISTED IN THE ORDER IN
WHICH THEY WILL BE PAID. SHORT-TERM
OR CURRENT LIABILITIES ARE EXPECTED TO
BE PAID WITHIN THE YEAR, WHILE LONG-
TERM OR NON-CURRENT LIABILITIES ARE
DEBTS EXPECTED TO BE PAID IN OVER ONE
YEAR.

THE BALANCE SHEET FORMULA : ITEMS INCLUDED IN THE BALANCE SHEET

ASSETS=(LIABILITIES+OWNER’S EQUITY) :
DATA FROM THE BALANCE SHEET :
ASSETS
THE BALANCE SHEET IDENTIFIES HOW ASSETS
LIABILITIES
ARE FUNDED, EITHER WITH LIABILITIES, SUCH AS

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DEBT, OR STOCKHOLDERS' EQUITY, SUCH AS
SHAREHOLDERS'
RETAINED EARNINGS AND ADDITIONAL PAID-IN
EQUITY

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CAPITAL. ASSETS ARE LISTED ON THE BALANCE
SHEET IN ORDER OF LIQUIDITY.
 INCOME STATEMENT
TYPES OF EXPENSES
THE INCOME STATEMENT COVERS A RANGE OF TIME,
PRIMARY EXPENSES ARE INCURRED DURING THE
WHICH IS A YEAR FOR ANNUAL FINANCIAL STATEMENTS
PROCESS OF EARNING REVENUE FROM THE
AND A QUARTER FOR QUARTERLY FINANCIAL
PRIMARY ACTIVITY OF THE BUSINESS.
STATEMENTS.
EXPENSES THAT ARE LINKED TO SECONDARY
INCOME STATEMENT FORMULA : ACTIVITIES INCLUDE INTEREST PAID ON LOANS
NET INCOME=(REVENUE−EXPENSES) OR DEBT. LOSSES FROM THE SALE OF AN ASSET
ARE ALSO RECORDED AS EXPENSES.
DATA FROM INCOME STATEMENTS :
THE MAIN PURPOSE OF THE INCOME STATEMENT
AN INCOME STATEMENT IS ONE OF THE THREE IS TO CONVEY DETAILS OF PROFITABILITY AND
IMPORTANT FINANCIAL STATEMENTS USED FOR THE FINANCIAL RESULTS OF BUSINESS
REPORTING A COMPANY'S FINANCIAL PERFORMANCE ACTIVITIES.
OVER A SPECIFIC ACCOUNTING PERIOD. INVESTORS CAN ALSO SEE HOW WELL A
COMPANY'S MANAGEMENT IS CONTROLLING
TYPES OF REVENUE
EXPENSES TO DETERMINE WHETHER A
OPERATING REVENUE IS THE REVENUE EARNED BY COMPANY'S EFFORTS IN REDUCING THE COST OF
SELLING A COMPANY'S PRODUCTS OR SERVICES. SALES MIGHT BOOST PROFITS OVER TIME.
NON-OPERATING REVENUE IS THE INCOME EARNED FROM

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NON-CORE BUSINESS ACTIVITIES.
CASH FLOW STATEMENT
THE CASH FLOW STATEMENT (CFS) MEASURES HOW WELL A
COMPANY GENERATES CASH TO PAY ITS DEBT
OBLIGATIONS, FUND ITS OPERATING EXPENSES, AND FUND
INVESTMENTS.
THE CASH FLOW STATEMENT COMPLEMENTS THE BALANCE
SHEET AND INCOME STATEMENT.

DATA FROM THE CASH FLOW STATEMENT :

THE CFS ALLOWS INVESTORS TO UNDERSTAND HOW A

COMPANY'S OPERATIONS ARE RUNNING, WHERE ITS MONEY
IS COMING FROM, AND HOW MONEY IS BEING SPENT. THE
CFS ALSO PROVIDES INSIGHT AS TO WHETHER A COMPANY
IS ON A SOLID FINANCIAL FOOTING.

THREE COMPONENTS OF THE CFS ARE LISTED BELOW :

OPERATING ACTIVITIES
INVESTING ACTIVITIES

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FINANCING ACTIVITIES
 4.
Roles an Accountant can Fulfill

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 Roles an Accountant
can Fulfill
MANAGERIAL
ACCOUNTING

TAX
AUDITING ACCOUNTING CONSULTING

FINANCIAL
ACCOUNTING

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 Auditing
The most important role is the role of the independent
accountant (auditor)

Auditors evaluate the financial actions of the company that

employs them and make certain of the smooth running of
the organisation.

Role of Auditor

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increased operational productivity
risk controlling
supervisory compliance
 Managerial Accounting
A second role for accountants is managerial accounting.

A method of accounting that creates statements, reports,

and documents that help management in making better
decisions related to their business’ performance.

The main objective of managerial accounting is to assist the

management of a company in efficiently performing its
functions: planning, organizing, directing, and controlling. 18
 Tax Accounting
A third role for accountants is the determination of tax
liabilities for clients, either individual or corporate..

Finance professional responsible for helping individuals

and organizations file their taxes appropriately while
following legal guidelines and obtaining the maximum
possible tax return.

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 Financial Planning
A Financial Planner – also referred to as a Personal or
Certified Financial Planner

A qualified financial or investments advisor.

They provide their clients with professional advice

regarding investments, insurance, tax, wealth

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management, and retirement planning.
 Consulting
Because an accountant is exceedingly familiar with the
financial status of the companies he/she serves, the
accountant can become a valuable company consultant in
money management, income distribution, and accounting
and auditing functions.

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 5.

Development of Explicit

Accounting Standards & Regulations

 23
Development of Explicit
Accounting Standards and
Regulations
HTTPS://WWW.ACCOUNTINGFOUNDATION.ORG/JSP/FOUNDA
TION/PAGE/FAFSECTIONPAGE&CID=1351027541272
 6.

Recent Scandal that Provoked

More Regulation
The WorldCom scandal immediately followed the Enron/Andersen
scandal. WorldCom started its questionable practices when the company
did not meet earnings expectations. Its fraudulent accounting led to a $9
billion restatement that was the largest in the history of the United States.

Moreover, cooking the books didn’t stop with the demise of Enron, Ander-
sen, and WorldCom – or even with the passage of the Sarbanes–Oxley Act.
Since then, there have been other scandals, the most notorious of which
is HealthSouth, where recent estimates indicate that accounting fraud
may have manufactured $4 billion of false earnings (2004).

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Reports say that the accountants focused on changing the contractual
adjustments account – the difference between the gross billings and
what the health care providers will pay – to increase revenues. This
serves to increase net revenue; adjustments are made in the balance by
falsifying fixed-asset accounts.

It is speculated that because many of HealthSouth employees were for-

merly employees of Ernst and Young, they knew the sort of adjustments
that they could make without detection, and if the adjustments were
noticed, the employees simply provided false documents to back the
numbers up.

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The SEC accused HealthSouth management of fabricating $2.74 bil- lon
in earnings. Five CFOs were convicted; 15 financial employees pleaded
guilty. Former CEO Richard Scrushy is the first CEO to be charged under
the Sarbanes–Oxley Act for signing a false certification of financial
statements. Although he avoided conviction, he was indicted on 85
counts and subse- quently lost a civil suit fining him $2.9 billion.

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28 01 https://www.indeed.com/employers/job
-description/tax-accountant

02 https://www.zoho.com/books/guides/
References management-accounting.html

03 https://www.accountingfoundation.org
/jsp/Foundation/Page/FAFSectionPage
&cid=1351027541272

04 https://corporatefinanceinstitute.com/re
sources/careers/jobs/financial-planner/

05 https://www.accountancyage.com/job-
role-auditor/
 thank You
DONT FORGET TO WEAR YOUR MASK,
SANITIZING YOUR HAND &
PRACTICE SOCIAL DISTANCING