Republic of the Philippines

CEBU TECHNOLOGICAL UNIVERSITY

DAANBANTAYAN CAMPUS
Agujo, Daanbantayan, Cebu
Website:https://www.ctu.edu.phE-mail:info-daanbantayan@ctu.edu.ph
Tel. No. (032) 437-85261437-3383 Fax. No.: (032) 437-8523

Name: JESSA DELA ROSA TORING Date: May 07,2021

Program: MAED-AS Term: 1stTrimester
Course: Educ- 607 – Fiscal Administration and Supervision Professor: Dr. Tracy L. Mantos

BIBLIOGRAPHIES
on
Government Accounting and Auditing

1. Title: Government Accounting and Auditing Manual

Contributor: Philippines Commission on Audit
Publisher: Commission on Audit, Republic of the Philippines, 1992

2. Title: Governmental Accounting and Auditing: International

Comparisons Croom Helm International Accounting
Nissan Institute/Routledge Japanese Studies Series
on international accounting and finance
Author: James L. Chan
Rowan Jones
Publisher: Commission on Audit, Republic of the Philippines, 1992

3. Title: Diagnostic Study of Accounting and Auditing Practices in Sri

Lanka Diagnostic study of accounting and auditing
Author: Francis B. Narayan
Publisher: Asian Development Bank, 2002
4. Title: Ethical Issues in Accounting
Edited by: Catherine Gowthorpe
John Blake
Publisher: Routledge, 1998

5. Title: Governmental Accounting, Auditing, and Financial Reporting

Author: Stephen J. Gauthier
Contributor: Government Finance Officers Association
Publisher: Government Finance Officers Association, 2005

6. Title: Governmental Accounting and Auditing Update

Author: Melisa F. Galasso, CPA
Publisher: Association of International Certified Professional
Accountants, Inc., 2020

7. Title: Wiley Federal Government Auditing

Author: Edward F. Kearny
Contributor: Roldan Fernandez
Jeffrey W. Green
David M. Zavada
Publisher: John Wiley & Sons, Inc., Hoboken, New Jersey, 2013

8. Title: Comparative Issues in Local Government Accounting

Edited by: Eugenio Caperchione
Riccardo Mussari
Publisher: Springer Science+Business Media New York, 2000
9. Title: The Public Sector Accounting, Accountability and Auditing in
Emerging Economics
Editors: Kelumm Jayasinghe
Nirmala D. Nath
Radiah Othman
Publisher: Emerald Group Publishing Limited, 2015

10. Title: Government Accounting and Budget Execution

Document (United Nations)
Document/ United Nations
United Nations publication sales no
United Nations. [Document] ST/ECA/16
United nation publication
Author: United Nations. Department of Economic Affairs
Original Form: the University of Michigan
Digitized: 3 Feb 2009
Publisher: United Nations, Department of Economic Affairs, 1952
 Reaction Paper on Ethical Issues in Accounting

“Accountants and the accountancy profession exist as a means of public service; the
distinction which separates a profession from a mere means of livelihood is that the
profession is accountable to standards of the public interest, and beyond the
compensation paid by clients”

- Robert H. Montgomery, describing ethics in accounting

Accounting ethics is primarily a field of applied ethics, the study of moral values
and judgement as they apply to accountancy. It is an example of professional ethics are
thought in accounting courses at higher education institutions as well as by companies
training accountants and auditors. Due to the diverse range of accounting services and
recent corporate collapse, attention has been drawn to ethical standards accepted
within the accounting profession. These collapses resulted in a widespread disregard
for the reputation of the accounting profession. To combat the criticism and prevent
fraudulent accounting, various accounting organizations and governments have
developed regulations and remedies for improved ethics among the accounting
profession.

The nature of the work carried out by accountants and auditors requires a high
level of ethics. Shareholders, potential shareholders, and other users of the financial
statements rely heavily on the yearly financial statements of a company as they can use
this information to make an informed decision about investment. They rely on the
opinion of the accountants who prepared the statements as well as the auditors that
verified it, to present a true and fair view of the company. Knowledge of ethics can help
accountants and auditors to overcome ethical dilemmas, allowing for the right choice
that, although it may not benefit the company, will benefit the public who relies on the
accountant/auditor’s reporting.

Accounting ethics has been deemed difficult to control as accountants and

auditors must consider the interest of the public while ensuring that they remained
employed by the company they are auditing. They must consider how to best apply
accounting standards even when faced with issues that could cause a company to face
a significant loss or even be discontinued. Due to several accounting scandals within
the profession, critics of accountants have stated that when asked by a client “what
does two plus two equals?” the accountant would be likely to respond “what would you
like it to be?”. This thought process along with other criticisms of the profession’s issues
with conflict of interest have led to various increased standards of professionalism while
stressing ethics in the work environment. The role of accountants is critical to society.
Accountants serve as financial reporters in the capital markets and owe their primary
obligation to the public interest. The information they provide is crucial in aiding
managers, investors and others in making critical economic decisions. Accordingly,
ethical improprieties by accountants can be detrimental to society, resulting in distrust
by the public and disruption of efficient capital market operations.

We have written two cases regarding accounting issues:

Case 1

Pedro Santos is the controller of a corporation whose stock is not listed on a

national stock exchange. The company has just received a patent on a product that is
expected to yield substantial profits in a year or two. At the moment, however, the
company is experiencing financial difficulties; and because of inadequate working
capital, it is on the verge of defaulting on a note held by its bank.

At the end of the most recent fiscal year, the company’s president instructed
Santos not to record several invoices as accounts payable. Santos objected since the
invoices represented bona fide liabilities. However, the president insisted that the
invoices not to be recorded until after year-end, at which time it was expected that
additional financing could be obtained. After several very strenuous objections –
expressed to both the president and other members of senior management – Santos
finally complied with the president’s instructions.

What can you say about the action of Pedro Santos?

 If the new product fails to yield substantial profits and the company becomes
insolvent, can Santos’ action can be justified by the fact that he was following orders
from a superior?

Reaction

In this case MR. Santos did not act in an ethical manner. In complying with the
president’s instruction to omit liabilities from the company’s financial statement he was
direct violation of the IMA’S Standards of Ethical Conduct for Management Accountants.
He violated both the ‘integrity’ and objectivity guidelines on the code of the ethical
conduct. The fact that the president ordered the omission of the liabilities is immaterial.

Santos’ action can’t be justified. In dealing with similar situations, the SEC has
consistently ruled that “corporate officers cannot escape culpability by asserting that
they acted as a ‘good soldier’ and cannot rely upon the fact that the violate conduct may
have been condoned or ordered by their corporate superior. Thus, Santos not only
acted unethically, but he could be held legally liable if insolvency occurs and litigation is
brought against the company by creditors or others. It is important that student
understand this point early in the course, since it is widely assumed that “good soldiers”
are justified by the fact that they are just following the orders. In the case at hand,
Santos should have resigned rather than become a party to the fraudulent
misrepresentation of the company’s financial statement.

Case 2

Mayora, Inc., operates a chain of department stores located in the northwest.

The first store began operation in 1965, and the company has steadily grown to its
present size of 44 stores. Two years ago, the board of directors of Mayora approved a
large-scale remodeling of its stores to attract a more upscale clientele. Before finalizing
these plans, two stores were remodeled as a test. Lisa Perez assistant controller, was
asked to oversee the financial reporting for these test store, and she and other
management personnel were offered bonuses based on the sales growth and
profitability of these stores. While completing the financial report, Perez discovered a
sizable inventory of outdated goods that should have been discounted for sale returned
to the manufacturer. She discussed the situation with her management colleagues the
consensus was to ignore reporting this inventory as obsolete, since reporting it would
diminish the financial result and their bonuses.

Reaction

Failure to report the obsolete nature of the inventory would violate the standard
of ethical conduct as competence, integrity and objectivity.

As discussed above, the ethical course of action would be for Perez to insist on
writing down the obsolete inventory. This would not, however be an easy thong to do.
Apart from adversely affecting her own compensation, the ethical action may anger her
colleagues and make her very unpopular. Taking the ethical action would require
considerable courage and self-assurance.

Submitted by:
JESSA DELA ROSA TORING
CTU-Daanbantayan Campus Graduate Student