Cardinal virtues and ethics have long standing relationship with each other. They are “Two sides of a coin” and highly dependent on each other for the purposes of effective corporate governance. Accounting ethics is no exception to the cardinal virtues and they are embedded in APES 110, code designed for the accountants and includes guidelines for members in the public practice as well as for members in business. This assignment analyses the application of cardinal virtues in alignment with fundamental principles of APES110 Code of Accounting ethics with relevant examples and discusses the specific sections where cardinal virtues are applied in relation to the examples.
Virtues are those character traits that dispose a person to act ethically
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In short, it is to do right thing complying with the laws and jurisdictions applicable to specific situations. Self-mastery best describes the fundamental principle of Professional Behaviour.
I have taken the Case study of Parmalat in Italy to understand and discuss the problems associated with fall out of the multinational empire in breach of accounting principles and fraud involving the auditors firm Grant Thornton and Deloitte & Touche as well as discusses the sections of APES 110 code of ethics and cardinal virtues applicable to the above situation as per the current accounting norms
Parmalat was giant conglomerate in dairy food industry. Parmalat Group, together, was composed of Parmalat SPA and other off-shore subsidiaries. They contributed to 49 percent of the group’s total assets and 30 percent of the consolidated revenue as per 2003 non-standard audit report submitted by Deloitte & Touche. In December 2003, the company collapsed leaving huge €14 billion holes in its financial statements. The fraud actually came out when they defaulted on the payment of $150million bond payment, despite having large sum of alleged cash of € 4 Billion in Bank of
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1. Members in business Investigation revealed that the accounting division of the company found guilty of creating false accounting records of fictitious sales, overstatement of assets, double billing , recording debts as equity, not recording debts, fabrication of operating subsidiaries sales, and even forming fake €3.95 billion Bank of America’s Account.
These were created to hide accumulating losses that were the result of a series of expensive acquisitions after Parmalat went on a buying spree in the 1990s following a flirtation with bankruptcy and a restructuring of its operations. Many of the purchases were financed by bond issues underwritten by the leading investment banks.
The key sections comprises Section 310 Potential Conflicts and Section 320 Preparation and Reporting of Information, identifies the ethical reasons for flaws in behaviour of professional accountants in the Parmalat
By deliberately falsification of their financial statements, by Martin Grass, Brown and Bergonzi. Among other things like:
As what it came to be as one of the notorious case of fraud in the mid-1980s; the electronic store well known as (Crazy Eddie), its owner Eddie Antar and CFO Sam Antar committed every possible act fraud there is. Just to mention two of which they perpetrated; tax evasion and securities fraud. Basically, the tax evasion was committed for many years, it was not until the company became public in 1984 that their wrong doing near its end. Once Crazy Eddie went public, a new set of rules took place, such as compliance with the Securities Exchange Commission and the scrutiny of its investors. Soon, they both realized that their long committed fraud was nearing its end, when an external audit found the real numbers on the company’s inventory, revenues,
Verschoor, CMA, Curtis C. "Ethics: Do The Right Thing." Strategic Finance (2006). Retrieved on 18 September 2006 .
...urvey of ethical behavior in the accounting profession. Journal of Accounting Research, 9 (2), pp. 287-306.
Dunlap had used manipulative accounting techniques to report a profitable of Sunbeam’s financial result. According to SEC Finding, the manipulative accounting techniques are used as following...
Phar-Mor was known as one of the major discount chain retailers in the late 1980’s - early 1990’s. It was founded by Mickey Monus, a gambler in nature, who with the help of senior management was “cooking the books” for years to cover up his loses. The reason why senior management agreed to do this fraud is the belief in unique ability of their leader to fix everything later on. This case is known as one of the biggest accounting frauds in the corporate history of the U.S. This paper will analyze who was affected by this fraud, the motives behind it and what systems of control failed to prevent it.
With every business activity come opportunities for fraudulent behavior which leads to a greater demand for auditors with unscathed ethics. Nowadays, auditors are faced with a multitude of ethical issues, and it is even more problematic when the auditors fail to adhere to the standards of professional conducts as prescribed by the American Institute of Certified Public Accountants (AICPA). The objective of this paper is to analyze the auditors’ compliance with the code of professional conduct in the way it relates to the effectiveness of their audits.
For a company to be successful ethically, it must go beyond the notion of simple legal compliance and adopt a values-based organizational culture. A corporate code of ethics can be a very valuable and integral part of a company’s culture but I believe that it is not strong enough to stand alone. Thought and care must go into constructing the code of ethics and the implementation of it. Companies need to infuse ethics and integrity throughout their corporate culture as well as into their definition of success. To be successfully ethical, companies must go beyond the notion of simple legal compliance and adopt a values-based organizational culture.
Seawell, Buie 2010, ‘The Content and Practice of Business Ethics’, Good Business, pp. 2-18, viewed 22 October 2013, .
Due to such lack of monitoring, management continued to be unaware of such transactions that continued to impact the company negatively. This provided the Rigas family many opportunities to override controls since the lack of corporate governance enabled the decisions to be made by Rigas family without oversight. For example, the article “Adelphia Officials are Arrested, Charged with ‘Massive’ Fraud” discuses how Timothy Rigas had to limit himself to $1 million a month of compensation that was withdrawn from the company for personal use. All decisions were continuously made by such members of the family, in which case for Adelphia, was the team of management. With the lack of controls creating opportunity, they were free to do what they wished- which is something they took incredible advantage
This essay will talk about the ethical standards and code of conduct in the accounting profession, in particular for CPA Australia, the importance of ethical education for accounting students, the importance for ethical financial reporting and also addresses ways to deal with conflicts that arise from ethical issues in the
The Code of Ethics of the professional accounting bodies in Australia and its fundamental principles ………………………………………………………………………….…………3
In 2002, WorldCom’s bankruptcy was the largest in US history; WorldCom admitted that it had falsely booked $3.85 billion in expenses to make the company appear more profitable. Ebber who was CEO of WorldCom created fictitious some more than questionable accounting practices. Thus began the practice of taking an operating expense and reclassifyin...
In today’s day and age, there is a lot of news that is related to corporate accounting fraud as companies intentionally manipulate their financial statements to show a better picture of their financial health. The objective of financial reporting is to provide financial information about a company to its various stakeholders such as investors and creditors so that these stakeholders can make decisions accordingly. Companies can show a better image of their financial well being by providing misleading information. This can be done by omitting material information from the books or deceitful appropriation of assets such as inventory theft, payroll fraud, check forgery or embezzlement. Fraudulent financial reporting will have an effect on the This includes but is not limited to; check forgery, inventory theft, cash or check theft, payroll fraud or service theft.
They were committing fraud by creative accounting, acting illegally when using insider trading and shredding their documents relevant to the investigation. Next, consider the stakeholders. Anyone who owns stock in the company would suffer, along with every employee. Under the values bullet we can assume that they have none. Greed and power got the better of every one of them.