Required: a. Identify the accounting concept from the above situation. b. Explain why the accountant has not shown the value of the building at $300 000. I have just received my business reports from my accountant. I cannot understand why the value of the building is shown at $120 000. I bought the building at $120 000 around 5 years ago but now the building is valued at least around $300 000. I think the accountant has overlooked the value of the building.
SENIOR ACCOUNTING FOR YEAR 13 19 1.2 ETHICS AND FRAUD Ethics Ethics are moral principles that guide the way an individual behaves. Accountants at the workforce are faced with numerous situations to make financial and economic decisions. As individuals they need to practise ethical conduct at all facets of work. Unethical practices by individuals have resulted in an increase in business failures around the world such as the collapse of 1 Enron and Arthur Andersen internationally. The increase in business failures has raised awareness on the importance of ethics. Therefore, it is important for all the people working in a business entity to be honest, abide by the rules and do the right thing so that the business entity can function effectively. Role of the Accounting Profession The role of the accountancy profession is the responsibility to act in the public interest. The professional accountant should observe and comply with the ethical requirements of the ethical code of conduct while acting in public interest. Code of Conduct for Professional Accountants The Ethical Code of conduct establishes ethical requirements for professional accountants. The ethical code of conduct requires the professional accountants to comply with five fundamental principles: integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. Integrity: to be straightforward and honest in all professional and business relationships. Objectivity: to not allow bias, conflict of interest or undue influence of others to override professional or business judgments. Professional Competence and Due Care: to maintain professional knowledge on current developments in practice, legislation and techniques and act diligently and in accordance with applicable technical and professional standards. Confidentiality: not to disclose any information to third parties without proper and specific authority, unless there is a legal or professional right or duty to disclose, nor use the information for the personal advantage. 1 Enron was one of the largest energy trading companies in United States (U.S.) before its collapse in 2001. The Enron Company had to be liquidated due to its unethical accounting practises. The firm Arthur Andersen which was the external auditor of Enron also collapsed in 2001. Arthur Anderson was one of the biggest accounting firms in the United States. It was the auditor of Enron for sixteen years. Arthur Andersen was accused of using unethical practises to hide Enron’s fraud. One of the unethical practise s by Arthur Andersen was destroying all the auditing documents for Enron to hide Enron’s wrongdoing when the investigation was underway to unveil fraud.
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