Ethics of Accounting and

Finance
Ethical Problem Areas in Accounting and
Finance
 Bucket Shop: Brokerage firm that books retail customer
orders without actually having them executed on, an
operation in which the customer is sold a security but
there is no transaction made on any exchange. The
transaction goes in the bucket and is never executed.
 Insider Trading: A trading of corporation’s stock or other
securities by individual with access to non-public
information about the company. It is unfair and would
destroy the security markets by destroying investor
confidence.
Ethical Problem Areas in Accounting and
Finance
 Fraud: A fraud is a dishonest act by an employee that
result in personal benefit to the employee at a cost to the
employer. Examples of fraud reported in the financial
press include:
 A bookkeeper in a small company diverted $750,000 of bill
payments to a personal bank account over a three year
period.
 A shipping clerk with 28 years of service shipped $125,000
of merchandise to himself
Ethical Problem Areas in Accounting and
Finance
 Misleading financial statement: Before investing money
investor want to know the company’s financial position
and performance. They want to see the balance sheet and
the income statement. So financial companies sometime
intentionally prepare false financial statement to improve
their chances of getting invested.
Ethical Problem Areas in Accounting and
Finance
 Forex Scam: Any trading scheme used to defraud traders
by convincing them that they can expect to gain a high
profit by trading in the foreign exchange market.
 In a typical case, investors may be promised ten of
thousands of dollars in profits in just a few weeks or
months, with an initial investment of only$500. often the
investor’s money is never actually placed in the market
through a legitimate dealer, but simply diverted or stolen
for the personal benefit of the con artist
Standards of Ethical Conduct for
Management Accountants
 Institute of Management Accountants has published and
promoted standards of ethical conduct for management
accountants.
 Principles: IMA’s ethical principles include: Honesty,
Fairness, Objectivity, and Responsibility.
 Members shall act in accordance with these principles and
shall encourage others within their organizations to
adhere to them.
Standards of Ethical Conduct for
Management Accountants
 Standards: A member’s failure to comply with the following
standards may result in disciplinary action.
1. Competence: Each member has a responsibility to
 Maintain an appropriate level of professional expertise by
continually developing knowledge and skills.
 Perform professional duties in accordance with relevant
laws, regulation and technical standards.
 Provide decision support information and recommendations
that are accurate, clear, concise and timely.
Standards of Ethical Conduct for
Management Accountants
2. Confidentiality: Each member has a responsibility to
 Keep information confidential except when disclosure is
authorized or legally required.
 Inform all relevant parties regarding appropriate use of
confidential information
 Refrain from using confidential information for unethical
and illegal advantage.
Standards of Ethical Conduct for
Management Accountants
2. Integrity: Each member has a responsibility to
 Mitigate actual conflict of interest.
 Abstain from engaging in or supporting any activity that might
discredit the profession.
3. Credibility: Each member has a responsibility to
 Communicate information fairly and objectively.
 Disclose all relevant information that could reasonably be
expected to influence and intended user understanding of the
reports, analysis, or recommendations.
Resolution of Ethical Conflict

When faced with ethical issues, accountants should follow their

organization’s established policies on the resolution of such
conflict. If these policies do not resolve the ethical conflict,
accountant should consider the following course of action:
1. Discuss the issue with his immediate supervisor except when it
appears that the supervisor is involved. In that case, he should
present the issue to the next level.
2. Clarify relevant ethical issues by initiating a confidential
discussion with an impartial advisor to obtain a better
understanding of possible course of action.