ETHICAL ISSUES IN ACCOUNTING

WITH REAL WORLD EXAMPLES

Types of Ethical issues in Accounting and Finance

Under-reporting Income
Under-reporting is a term describing the crime of intentionally
Under-reporting Income reporting less income than was actually received.

Fraudulent Financial Reporting

Fraudulent Financial Reporting
Misappropriation of Assets
Fraudulent financial reporting is the intentional misrepresentation of a
firm’s financial statements with the aim to give investors a mistaken
impression about the firm’s financial performance.
Misappropriation of Assets
Misappropriation of assets refers to the stealing of another
person’s assets.

Falsifying Documents
It refers to providing some fake legal documents such as passports,
Falsifying Documents Bank account records, Visa, etc.

Omission of Financial Records

When some transactions are completely omitted from the books of
Omission of Financial Records accounts, they are treated as errors of omission.
 SATYAM SCAM (2009)
(About- Corporate Governance And Fraudulent Auditing Practices)
 How They Got Caught?

 Ramalinga Raju send off an email to

SEBI and BSE.
 he admitted and confessed to inflating
the cash and bank balances of the
company.

Merger of Satyam and Mahindra

 Tech Mahindra acquired Satyam on Penalty

April 13,2009 by owning 46% of  B. Ramalinga Raju resigned and
stake. sentenced him 7 years of
 July 2009, Satyam rebranded its imprisonment and imposed a fine of
services as Mahindra Satyam. Rs. 5.5 crore.
.  Other culprits - Rs. 25 lakhs each
 PWC - $6 million fine by SEC.
 HOW AMAZON PAYS $0 IN TAXES
1. Amazon carried forward losses to 2. Amazon spends billions of dollars
cut future tax bills. in Research & Development.

3. Amazon offers its employees stock 4. Amazon received a $129 million

based compensation. tax rebate.

 SAHARA GROUP SCAM
INITIAL STAGE
 Sahara Prime City filed a DRHP
with SEBI for IPO.
 SEBI detected error in fund raising.
 SEBI received complaints about
Sahara groups.
 SEBI objected on Sahara for
permission regarding fund raising.
COURT PROCEEDINGS
 SC ordered to deposit money of
OFCD holders with 15% interest
within 3 months, with SEBI.
 Submission of details of OFCD
holders to SEBI.
 Sahara sent 127 trucks containing
details of the holders to SEBI
office.
 SEBI rejected second batch of
SAHARA ‘S TAKE
 Sahara claimed that the bonds are
hybrid products.
 Sahara said to have taken
permission from ROC.
 SEBI ordered to stop raising
money and return the money to
the investors with 15% interest.
SAHARA’S FAILURE
 SEBI doubted for a case of money
laundering.
 Sahara failed to submit the money
with 15% interest within 3 months.
 SC ordered to make payment in 3
installments.
 Sahara paid the 1st installment and
not the other two.
COURT PROCEEDINGS
 Sahara approached high court.
 High court restricted SEBI’s order
then cancelled the mentioned
restriction.
 The case went to supreme court.
 Sahara failed to provide evidence
of the source of funds.
COURT DECISION
 Only a few investors came to claim
their money.
 Sahara could not prove repayment
to others nor their source of money
for repayment.
 Bank accounts and assets of
Sahara group got freezed.
 F INAL COU R T
OR DER
On 26th February 2014, the Chairman of Sahara Group,
Subrata Roy was arrested upon the orders of the
Supreme Court. In November 2017, Enforcement
Directorate charged Sahara Group with the case of money
laundering. Sahara Group has had a shady business for a
long time. But this time, they’ve finally been caught in
sight.

This was not for the first time that Sahara Group was
caught in conducting illegal activities. In 2007-08
subsidiary of Sahara Group SIFC or Sahara India
Financial Corporation was banned on issuing fresh
deposits by RBI since it was caught doing unethical
activities. But Sahara didn’t learn from it and finally ended
up doing a huge scam. up doing a huge scam.
CONCLUSION
Professional and personal ethical values are very important for
01 reducing ethical issues in accounting that can result in diminishing
the reputation and values of accounting profession.

Financial managers assume the duty of care to internal and

02 external users thus should perform their duties with integrity; they
should follow code of ethics required for the profession.

Relying on the law or a set of professional codes may not

03 be always adequate.

Ethics, in general, is made up of smaller parts that all work

04 together to build the moral fabric of society
THANK YOU