Corporate

Report-
ing

ACCT-5201
 Team Members
NAME ID
Md. Ibn Fahad Redoy M220201011
Jui Akter M220201024
Tasnim Jahan Labanno M220201031
Anik Das M220201037
Shakil Alam M220201041
Akash Sutrodhar M220201067
 Dr. Niluthpaul Sarker
Professor
Department of Accounting & Information
Systems
Jagannath University, Dhaka
Ethical Issues in Financial
Reporting
Definition of Ethics

Ethics refers to the branch of philosophy that

deals with principles of right and wrong behavior,
guiding individuals and societies in determining
what is morally acceptable.
Definition of Financial Re-
porting
Financial reporting refers to the process of preparing
and presenting financial information about an
organization to its stakeholders, such as investors,
creditors, regulators, and management.
The objectives of ethical issues in
financial reporting
1. Promoting Accuracy and Reliability
2. Maintaining Transparency
3. Ensuring Compliance with Standards
4. Protecting Stakeholders' Interests
5. Building Trust and Credibility
6. Minimizing Risk of Fraud
7. Upholding Professional Integrity
8. Facilitating Sound Decision-Making
The scopes of ethical issues in financial
reporting

Misrepresentation of Financial Information

Deliberate manipulation or falsification of
financial data to mislead stakeholders.
Non-Compliance with Accounting Standards
Failure to adhere to Generally Accepted
Accounting Principles (GAAP) or International
Financial Reporting Standards (IFRS).
Fraudulent Practices
Engaging in fraudulent activities such as
embezzlement, misappropriation of funds, or
creation of fictitious transactions.
QUESTION -ANSWER
Question 1

What are the ethical issues related to

financial reports?
There are many types of ethical issues in financial
reporting
Conflicts of interest
When an accountant's personal or financial
interests could influence their professional
judgment.
Misrepresentation of Financial Information
Deliberately misstating revenues, expenses, or
profits to mislead stakeholders.
Lack of Transparency
Using complex financial instruments or off-
balance-sheet transactions to obscure true
Question 2

What ethical principles guide financial

reporting?
Key ethical principles are:
Integrity: Being honest and transparent in
financial disclosures.
Objectivity: Avoiding conflicts of interest or
bias.
Professional competence: Ensuring accurate
and compliant reporting.
Confidentiality: Safeguarding sensitive
financial information.
Compliance: Following relevant laws and
accounting standards.
Question 3

What are the consequences of unethical

financial reporting?
The Consequences of unethical financial
reporting are:
Legal repercussions: Fines, penalties, and
lawsuits.
Loss of credibility: Erosion of trust among
stakeholders.
Financial losses: Declining stock prices and
reduced investment.
Corporate collapse: Examples include
Case Study
1
A Small Business Owner's Dilemma
Issue: A small business owner is struggling to
meet quarterly revenue targets. They are
considering manipulating revenue figures by
recognizing revenue early, or by including
estimated future sales in current quarter figures.
Ethical Violations:
• Fraudulent financial reporting:
Misrepresenting financial information to
stakeholders.
• Lack of integrity: Compromising ethical
principles for personal gain.
Solution
1. Fair Labor Practices: Prioritize employee well-
being and comply with all labor laws and
regulations.
2. Transparent Communication: Communicate
openly and honestly with employees and suppliers
about the company's financial situation.
3. Negotiate Fairly: Work with suppliers to find
mutually beneficial solutions, such as extended
payment terms or reduced costs.
4. Ethical Decision-Making: Consider the long-
term consequences of cost-cutting measures and
prioritize ethical choices.
 Case Study 2:

A Mid-Sized Company's Cost Cutting Measures

Issue: A mid-sized company is facing economic pressures and
is considering aggressive cost-cutting measures, including
reducing employee benefits and delaying payments to
suppliers.
Ethical Violations:
• Unfair Labor Practices: Potentially violating labor laws and
harming employee wellbeing.
• Breach of Contract: Failing to fulfill contractual obligations
to suppliers.
Solution

1. Fair Labor Practices: Prioritize employee well-

being and comply with all labor laws and regulations.
2. Transparent Communication: Communicate
openly and honestly with employees and suppliers
about the company's financial situation.
3. Negotiate Fairly: Work with suppliers to find
mutually beneficial solutions, such as extended
payment terms or reduced costs.
4. Ethical Decision-Making: Consider the long-
term consequences of cost-cutting measures and
prioritize ethical choices.
Case Study 3

A Public Company's Revenue Recognition

Practices
Issue: A public company is under pressure to meet
quarterly earnings expectations. The company's sales
team is incentivized to accelerate revenue recognition,
even if certain conditions for revenue recognition have
not been met.
Ethical Violations:
• Fraudulent Financial Reporting: Misrepresenting
the timing of revenue recognition.
• Conflict of Interest: Sales team's incentives may
conflict with accurate financial reporting.
Solution:

1. Strict Revenue Recognition Policies: Implement

clear and stringent revenue recognition policies that
align with accounting standards.
2. Independent Oversight: Establish an
independent review process to monitor revenue
recognition practices.
3. Ethical Training: Provide regular ethics training to
all employees, emphasizing the importance of
accurate financial reporting.
• 4. Balanced Incentives:S Design compensation
plans that reward long-term performance and ethical
behavior, rather than short-term revenue targets
Conclusion
In conclusion, ethical issues in financial statements are critical as
they directly impact the accuracy, transparency, and reliability of
financial reporting. The manipulation or misrepresentation of
financial data can lead to misleading information for stakeholders,
including investors, regulators, and employees, undermining trust
and financial stability. Ethical practices, such as adhering to
accounting standards, ensuring transparency, and avoiding conflicts
of interest, are essential to maintain the integrity of financial
reporting. Organizations must foster a culture of ethical decision-
making and implement strong internal controls to mitigate risks
related to financial misstatements.
conclusion, ethical issues in financial statements are critical as they directly impact the accuracy, transparency, and reliability of financial reporting. The

manipulation or misrepresentation of financial data can lead to misleading information for stakeholders, including investors, regulators, and employees, undermining trust and financial stability. conclusion, ethical issues in financial statements are critical as they directly impact the accuracy, transparency, and reliability of
financial reporting. The manipulation or misrepresentation of financial data can lead to misleading information for stakeholders, including investors, regulators, and employees, undermining trust and financial stability. Ethical practices, such as adhering to accounting standards, ensuring transparency, and avoiding conflicts of interest, are essential to maintain the integrity of financial reporting. Organizations must foster a culture of ethical decision-making and implement
strong internal controls to mitigate risks related to financial misstatements. Ultimately, maintaining ethical standards in financial statements is vital for safeguarding the long-term success of both businesses and the broader economy.