Venture capital firms rely on the mandatory disclosure of financial statements specified in the Generally Accepted Accounting Principles (GAAP) and the International Financial Reporting System (IFRS) (Gibson, 2013). The article of focus is to acquire knowledge to create sound judgment and to provide harmony because accurate financial statements create effective communication across borders. Ethics Various organizations maintain a stable financial position to obtain short-term investments. The Investopedia (2014), profit is from the surplus of stocks and bonds, which earn high-level dividends instead of a standard interest bearing account. “The Dangerous Morality of Managing Earnings,” illustrates the direction of ethical behavior of corporate managers to influence financial statements to benefit managers or the organization (Bruns & Merchant, 1990, pp.1).
Historical Accounting Versus Fair Value Accounting A company’s financial statements offer numerous types financial information that stockholders and creditors use to determine a company’s economic wealth. Financial statements also deliver past performance results along with future financial abilities. The information obtainable in a financial report is governed by laws and/or by accounting standard practices. Accounting information should be consistent to a degree and should be confirmable as well as good faith reporting. Trustworthiness is inevitability for companies or businesses that have experienced financial officers to evaluate the truthfulness of the company’s financial information.
Internal auditors have a inner knowledge of business process. Auditor has access to the much confidential information and all levels of management. But they may lose their judgement and they are not acceptable by the shareholder. “The overall objective of the external auditors is to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to report on the financial statements in acco... ... middle of paper ... ...pendence, whether pro forma or substantially, the quality of professional assurance service of professional accountants will be doubted by public and that will probably lead to serious results. The factors affecting independence of external auditors are multiple.
Besides, a transparency committee can also help with internal auditor appreciate its primary responsibility lies with the board, not for personal interest and pleasing the leader. ii. Corporate culture In Enron, it was dictatorial and revenue-based to new ideas. Leaders not only fostered a wrong sense of security for employees, paying high wages to keep workers dependent on the system via golden handcuffs, but also may allows employees did unethical behaviors. This repressive and illegal corporate would eventually make company lost creditability, or else, make company
In recent history, there have been quite a few memorable cases of corporations manipulating financial reports in order to deceive stakeholders. Deceptive accounting practices are like a disease, and should be rooted out immediately. These practices undermine the stability of U.S. financial markets, and can make people less willing to invest in stocks. Financial reporting is the key to maintaining trust in the financial system and any manipulation should not be tolerated. The purpose of financial statements Financial statements are the primary instruments used in assessing the performance of a business and its managers (Gibson , 2013).
Introduction The increased incidence of the economic crisis in affect to all the world economy, especially the leading developed country, United States and Britain in1980’s (Weir & Laing, 2001) and has become to importance of corporate governance and also in developing countries (Rasiah, 1999), The economic loss and damage of investment of investors are the result of inefficiency of corporate governance, which caused of lack of the inspection and monitoring the actions of management and directors should protect the interests of the shareholder from inappropriate behavior that is include dishonest, misconduct or even distort the number in financial statements to mislead the stakeholders make wrong decision affect to loss a lot of money (Mohammad Abdullah, 2008). Corporate governance is created because of the failure operation of the company between the owner and management team known as Agency Problem is a contract between the owner and the executive cannot eliminate the problem and this cause lead to adjust the rules. Definition of corporate governance has variety of meaning. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined.” (OECD, 2004). According to Magdi and Naradereh(2002) argues that corporate governance focus on business will continue to be well by investors get fairly return.
These principles cover the following areas: rights of shareholders; equitable treatment of shareholders; the role of stakeholders; disclosure and transparency; and responsibilities of the board. Moreover, the World Bank has proposed guidelines for good corporate governance in the financial sector. All of these should inform how well a company preforms and result are reported to its stakeholders. http://www.federalreserve.gov/newsevents/press/bcreg/20140326a.htm
Accountants have been a necessary tool in all organizations such as individual companies, partnerships, schools and governments. Indeed, they have great professional technique in a rule of accountancy that government are able to measure and report financial information as organizations. This can also provide a lot of positive impacts in the running of a business. Research shows there are three main ways accountants can keep business costs down which involve internal and external actions. For internal control, the accountant has a responsibility to monitor finances of a company.
One cannot deny the importance of a good financial reporting system for ensuring sound corporate governance. There is now a clear need to restore confidence in capital markets and elsewhere by enhancing corporate governance in order to provide financial information of the highest quality. The lifeblood of markets is information and barriers to the flow of relevant information represent imperfections in the market. The need to sift and correct the information put out by companies adds cost and uncertainty to the market¡¦s pricing function. The more the activities of companies are transparent, the more accurately will their securities be valued.
To be a trustworthy person in this field it is a requirement that you refrain from bad accounting practices such as aggressive accounting. Aggressive accounting is where numbers are changed in order to make investors/shareholders feel comfortable with their investment. Aggressive account also inflates stock prices using false data to report income, not reporting all the expenses occurred within the company, concealing losses the company experienced, and overall not reporting an accurate financial statement to increase or stabilize the stock price and keep investors happy. This type of accounting practice is unethical and is an outright lie to investors and or stockholders. This type of accounting fraud involves one or more employees or an entire accounting division, modifying , getting rid of or marring accounts so the true information on these accounts are not revealed to stockholders.