The topic is managerial ethics concerning financial statements... Write a 1,000–

Question

The topic is managerial ethics concerning financial statements... Write a 1,000–1,350 word essay based on the topic you chose in Unit 3. Include the following in your essay: Identify an underlying ethical issue (like the ethics associated with earnings management decisions). Critique of ethical situation Determine who could be harmed by the ethical situation Assess the potential outcomes of the ethical situation from an accounting perspective Evaluate how these decisions could be avoided or prevented. Include a reference list incorporating a minimum of three credible sources and a title page. Comment

Explanation / Answer

Managerial Ethics in Financial Stattement - Backbone of Annual report.

A basic requirement of a Financial Stattement is that it should give a "Ture and Fair" view and should be free form mis-statements and mis-representation. Al lthe details provieded in a financial statement are widely used by various stakeholders and the same is important not only to the shareholers but other interested parties as well.

A strong ethic should be followed while giving any detail in the same. Since Financial Stattement aer used as toold by various outsiders to make important and viable decisions, so the source data (financial statement) should be feasible as well. To give a proper financial statement, Management should make sure that proper Standrard and General Accouynting Pricipals are followed without taking any undue advantage of the same.

A stingent and very deep internal control must be set to avoid any erroneous statement and the same can be achieved if the guidelines and polices are properly flown by Management without any intention of erroenous presentation of the same.

One of the most common misrepresentation is overstatement of earning/revenue or understatement of expense to increase the profitability. The same should be checked by management and a strong check-points should be instered in the system to identify any loop-hole or any flaw. Earning management has been an unethical pratice followed from centuries in order to show a good image of a company.

However, in long-run iit can give devastating results to the company and to its stakeholders. Not only the management but oursiders are also effected with the msae, thus endangering the concept of "Going Concern" for any organisation.

It is a prime duty of management to give true and fair view by inputting corect and complete data of transactions that have actually taken place to avoid and nethical pratice.

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