Ethical principles

in accounting
Naledi Botho Manyothwane
Gofaone Amantle Nkomeni
Kago Nfila
Barbara Rkhane
Loshatho Chikumu
 INTRODUCTION

Ethics in accounting is a matter of both guidelines and principles, which are set
by governing bodies and trade organizations who craft the rules of accounting.
In addition personal values and professional ethics must guide accountants. This
extra layer of ethical judgement helps in making decisions in the face of
ambiguities and gray areas.
 
 RESULTS OF POOR BOOKKEEPING ON THE
COMPANY’S FINANCIAL POSITION

1. Not separating personal from business accounts - this can make

life difficult during an audit.
2. Not keeping old records - financial records must be kept for 6yrs.
3. Not counting inventory regularly also not updating the books
regularly – inventory needs to be counted regularly.
Overstocking or understocking causes your business to lose
money. Also if you are not updating your books regularly, then
you are unable to make proper business decisions as the numbers
are not current and relevant.
 The need to undertake proper Reconstruction in
Accounting firms

Concepts and types of reconstruction:

When a company is suffering loss for several past years and suffering
from financial difficulties, it may go for reconstruction .In other words ,
when a company’s balance sheet shows huge accumulated losses, heavy
fictitious and intangible assets or is in financial difficulties, and then the
process of reconstruction is restored.
 Types of reconstruction

 Internal reconstruction – refers to the internal re-organisation of the

financial structure of a company. It is also termed as re-organization
which permits the existing company to be continued. Generally ,
share capital is reduced to write off the past accumulated losses of the
company. The accounts procedure of internal reconstruction is
distinct from that off external reconstruction.
 External reconstruction- when a company is suffering losses for the
past several years and facing financial crisis, the company can sell its
business to another newly formal company. The new company is
formed to take over the assets and liabilities of the old company.
Key Causes Of Poor Accounting Standards
by Firms

1. Accounting Irregularities
2. Fraud Prevention
3. Environment and Culture
4. Proficient Work Force
5. Requirements of Skills and Training
6. Auditing Requirements
 Recommendations companies should take to
maintain effective Accounting Standards

 Be consistent with an underlying accounting conceptual framework

 Result in comparable accounting by registrants for similar transactions , by
avoiding or minimizing alternative accounting treatments
 Require consistent accounting policies from one period to the next
 Be clear and unambiguous
 Conclusion

The role of the Auditor in the application of the Standards:

High quality accounting standards and an effective interpretive process are not
the only requirements for effective financial reporting .Without competent,
independent audit firms and high-quality auditing procedures to support the
application of accounting standards , there is no assurance that the accounting
standards will be applied appropriately and consistently.
 Reference

 Business 2 Community, Business & Finance

 Blog / Article (Accounting learning, blog spot.com)
Accounting Management/ learning Materials for Accounting
Management, Business and Economics
 SEC Concept Release: International Accounting Standards