2.7: ETHICAL - PowerPoint Presentation

Slide1

2.7: ETHICAL AND LEGAL ASPECTS

Matt Lyons and Shan Bryce Slide2

In this unit we look at some of the typically unethical financial behaviours and consider how they might be controlled. Perhaps the most important thing you need to think about is that ethical behaviour is an important value that we should aspire to.

Over ViewSlide3

Auditing is a process designed to establish the truth and fairness of the financial reports. Audits are conducted by qualified accountants who check representative samples, chosen at random, to ensure the overall accounts are accurate. Both public and private businesses are required to have their accounts audited.

Audited AccountsSlide4

There are two types of audits:

Internal audits

are established by the business’s management as a control mechanism to ensure the accuracy of the accounts and to ensure there has been no misuse of funds.

External audits

are conducted by independent accountants. They allow external users of the

information, such as investors and the Australian Taxation Office, to be confident that the

financial reports are true and fair.Slide5

The financial reports of a business must be prepared according to the conventions and

standardsing

the accounting framework. This enables all financial reports to be compared and easily understood.

One important convention in the accounting framework is that profits need to be matched

with the costs and revenues that generated that profit. The problem is that, when the business

has to report regularly, a subjective judgement must be made on the cut-off period.

Inappropriate Cut-off PeriodsSlide6

The misuse of funds refers to a range of dishonest practices. These practices generally refer to stealing and they are very common. Frequently these practices are linked to a gambling debt or business debt where people are desperate.

Dishonest practices are best dealt with by having effective systems and procedures where all financial transactions are carefully analysed by different sections of the business and discrepancies quickly investigated. It is very unwise to rely on an employee’s honesty. The system and procedure should prevent fraud.

Misuse of FundsSlide7

It this is done dishonestly or incompetently and the cut-off period is inappropriate, the reports will give a false impression.

Ethics training, where accountants are trained in the need to be transparent and accountable, is the best management strategy to deal with this problem.Slide8

The Australian Securities and Investments Commission (ASIC) is the independent body that is responsible for enforcing the corporation laws in Australia. The role of the organisation is to ensure transparency or openness, honesty and fairness in Australia’s financial markets

Australian Securities and Investments CommissionSlide9

The old fashioned idea of a corporate raider relates to an entrepreneur who purchases an undervalued business, breaks it up, sacks the employees and makes a great deal of money selling off the assets.

The ethical position of the modern corporate raider is not so black and white. When the raider buys an underperforming business, replaces the management and improves the value of the business, there is no ethical problem. The ethical aspects arise when employees are sacked and the business is sold in parts because the value of the parts is greater than the whole business.

Corporate Raiders and Asset StrippingSlide10

http://www.youtube.com/watch?v=BGviXZqpQjU

CLIPSlide11

The endddddddddddddd!

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