Ethical And Legal Obligations In Accounting Essay

2. Laws must be static and unyielding in order to provide stability for a society.

In this paper I have defined accrual and cash basis accounting. Also, I have answered the following questions: Explain the difference between the accrual basis of accounting and the cash basis of accounting. What are the major reasons for using accrual accounting? What are the purpose of a journal and a ledger? Give an example of a contra-asset, and explain how it is recorded on the ledger as a transaction. Explain what a “prepaid expense” is and how it is recorded on the ledger as a transaction. What are the major differences in recording transactions for a for-profit organization versus a not-for-profit, or are there any? List and record each transaction

The purpose of this paper is to define accounting, and identify the four basic financial statements. The paper also explains how the different financial statements are interrelated to each other and why they are useful to managers, investors, creditors, and employees.

     The accounting system is constantly changing. During these changes, it is important for accountants to adhere to the high ethical standards that they have always lived by. Adhering to the high ethical standards is an accountant's obligation to the public, the profession, and themselves. An accountant's ethical conduct usually lies within four different areas. This includes competence, confidentiality, integrity, and objectivity. NYSSCPA.ORG states, "Members also have a continuing responsibility to cooperate with each other to improve the art of accounting, maintain the public's confidence, and carry out the professions special responsibilities for self-governance," (Article 1).

Separately, the balance sheet reports a company’s financial position while the income statement reports a company’s fiscal year profits and losses. The balance sheet measures a company’s financial position by reporting its assets, liabilities, and owner’s (shareholder’s) equity. The income statement measures a company’s financial performance by reporting its revenues, expenses, and net income/loss. When combined, they serve two vital purposes: (1) expand the accounting equation and (2) enable analysis using ratios to determine industry position or potential material misstatements. The increase or decrease in owner’s (shareholder’s) equity on the balance sheet is a direct result of the net

The accounting equation is, Assets are equal to Liabilities plus Stockholders’ Equity. Assets are resources owned by a business. Liabilities are the debts and obligations of the business. Liabilities represent claims of creditors on the assets of a business. Stockholders’ equity represents the claims of owners on the assets of the business. This equity is divided into two parts: common stock and retained earnings. The balance sheet reports assets and claims to assets at one specific point in time. Claims to assets are subdivided into two categories: claims of creditors and claims of owners. The accounting equation must always balance. Each transaction has a dual effect on the equation. As an example if an individual asset is increased,

Therefore, Market West accepted the corporation stock as partial debt. Hooper and Yoder agreed to add Brian Bradley who worked for Market West as the third director. Hooper colluded with Bradley and violated a fiduciary duty to Yoder by issuing 95 shares of stock to himself, 5 shares to Bradley, and none to Yoder. Furthermore, Hooper got paid $141,000 salary from the business without Yoder knowing. More importantly, Hooper and Bradly voted to force Yoder to leave the corporation. After Yoder found out that Hooper broke their agreement, violated Yoder’s rights and duties, acted dishonestly, and made unethical decisions, Yoder sued Hooper and Beautiful Daydreams in the District Court. Under the common law, with these facts, the court supported Yoder and ordered Hooper to give back one-half of the salary plus one-half of the shares of stock to Yoder.

The structure of company Q is not currently formed to accommodate social responsibility or practice social ethics. Since the business is already in a heavily populated area and had to close down some of the stores due to high crime rates in those areas, maintaining a healthy relationship with the community in the area they are located is essential for the success of the business. The company has started to form a relationship with the community by listening to what the customers want and supplying the demand for those products. However, the chain is carrying all high margin products in all stores which may not suit the needs of those in lower income areas.

What does ethics have to do with accounting? Everything, since there have been some recent financial accounting scandals; a few examples being Xerox, WorldCom, Enron, which have generated much unwanted and unfavorable publicity for CPA's, including those working as controllers or chief financial officers for organizations.

This dilemma in this ethical case is whether or not Daniel Potter (Dan), staff accountant for Baker Greenleaf accounting firm, should report unethical changes his immediate supervisor, Oliver Freeman, made to an audit report. The problem is that a large piece of real estate was valued on the balance sheet at $2 million. Dan had estimated the property at $100,000. Dan based his value estimate on the condition, location, and how long the property had been vacant. He approached the managers of the subsidiary with a proposal to write down the value of the property by

In general, the importance of accounting regulations resides in its ability to provide standards. The latters are necessary in determining whether a company is reporting its activities or not to the shareholders. Accounting regulations also protect the mean interest of the external and internal users. Information is prepared according to specific guidelines.

Big Ben or Big Brother is an article that discusses a major aspect of today's ethical issues in the business world. This ethical issue has to do with invasion of privacy. Each year, the national members and affiliated organizations of Privacy International present the "Big Brother" awards to the government and private sector organizations which have done the most to threaten personal privacy in their countries. "Big Brother" awards are presented to the government agencies, companies and initiatives which have done most to invade personal privacy (Privacy International, n. d.). There are numerous amounts of countries that participate in the ceremonies for these awards, England being one of them.

The Public Company Accounting Oversight Board was created in 2002 by the Sarbanes –Oxley Act and is a non-profit and private sector corporation. The PCAOB was established in reaction to the increased number of corporations reporting changes to their past financial statements. The US Securities and Exchange Commission appoints of four members to the board. Two members must be certified public accounts and each member serves a term of five years. Much like the SEC board, the members terms are staggered and the headquarters in located in Washington DC. Their mission is “to oversee the auditors of public companies in order to protect the interest of investors and further the public interest in the preparation of informative, fair and independent audit reports.” (PCAOB website) The Act of 2002 gave the PCAOB four major responsibilities; registration of accounting firms that audit public companies that are trading in US Securities markets,

Ethics concern an individual’s moral judgment about right and wrong. Most decisions in an organization are made by individuals or groups that influence the culture of the company. Several factors determine the success of a company other than the scope of financial statements. No matter the size, industry or level of profitability, business ethics are the most important aspects of success. Being ethical is an individual decision; employees and management must comply with the local, national and international laws when operating to avoid potential fines. They should decide what they think is the right course of action to take. This may involve rejecting the route that would lead to the biggest short-term profit.

Ethics in business is important of everyday moral and ethical norms to business. Perhaps, the Ten Commandments from Bible come to mind as an example of morality that still used by many today. These commandments carry concept of being truthful and honest, and try to stay away from theft and greed. An idea of stewardship can be found in the Bible as well as many other religious literatures that can be and have been applied to business.