Ethical and legal obligations

Recently, accounting professionals have been put under immense pressure from changes in the size and scope of financial markets. The main means of communication of the financial effects of organizational activities and transactions of a society of strangers is the financial reporting system. This monitoring system includes the disclosure of financial information through various forms such as a prospectus forecasts, annual reports, and other financial press. The budget is the main source of information provided to external parties.

The reporting process is a means to "increase confidence by investors, lenders, and other subjects with which they deal. Process of financial reporting is based on the confidence of their users, and this trust has been threatened because of unreliable and misleading accounting reports "(Whittington, 1999, p. 3). The difficulty in securing reliable information may be more evident when "a manager's compensation is directly tied to the accounting-based performance measures. Since those measures are generated within the company, essentially by the same group of people whose decisions are driving business performance, the opportunity for manipulation is present "(Weinberg, 2003, p.5). Financial reporting is designed to meet the needs of users, providing information that is relevant to make rational investment and credit decisions, and other informed judgments (Marshall, 2004, p.18).

The relationship between the SEC, FASB and PCAOB

He fraudulent financial reporting are the Achilles heel 'of U.S. Corporate
Financial markets? Accounting scandals are not new. Episodes of accounting fraud have occurred repeatedly in the history of U.S. financial markets. The SEC, FASB, PCAOB and are designed to provide the application of honest corporate governance.

The relationship between the SEC, FASB, and PCAOB is that these agencies:

o Provide leadership,

Ø Establish the rules and regulations governing the operation of audit,

o Enhancing the accounting standards, and

or the goal is to ensure a healthy financial report

SEC

"Following the stock market crash of 1929, public attention and Congressional investigation led to allegations of unsavory practices by some financial market participants during the previous boom" (Weinberg, 2003, p.5). This activity has directly led to the creation of the Securities and Exchange Commission in 1934. A founding principle of this agency is that public companies that offer securities for sale in interstate commerce must tell the public the truth about their activities.

FASB

In the early 1970's as today, accounting problems caused concern within the accounting profession. To answer the critics of the Financial Accounting Standards Board (FASB) was created and began working on draft conceptual framework. In addition, the FASB has developed generally accepted accounting principles (GAAP) with the SEC, AICPA, and GASB. These concepts provided the accounting principles to be followed in the preparation of financial statements "(Ng, 2004, p. 3). FASB rules is the official organ of the accounting profession. FASB's mission is to create, improve and maintain independent accounting standards and financial reporting.

PCAOB

The year 2002 was one of great tumult for the American society. The accounting and auditing standards processes have been heavily criticized because of the collapse of Enron. Failures, fraud, unethical and deceptive communication problems from other companies such as Tyco, Worldcom, Global Crossing and stimulated widespread control of accounting. In July 2002, President Bush signed into law the most important legislation affecting the accounting profession, the Sarbanes-Oxley Act The act created a five member Public Company Accounting Oversight Board (PCAOB), which has the power to determine and enforce auditing, attestation, quality control and ethical standards for public companies. The PCAOB is also "the right to control the operation control of public accounting firms that companies public inspection, and disciplinary sanctions for violations of the rules of the board of directors, securities laws and professional auditing standards" ( Ng, 2004, p. 3).

Statement of basic accounting theories, principles and assumptions

Accounting theory is a set of basic concepts, assumptions, and its principles that explain and guide the actions of the accountant in identifying, measuring and communicating economic information. The main assumptions underlying accounting concepts, or are business entities, the continuity of substance over form of the series, and measurement money (units).

Business Entity -

data collected in an accounting system is assumed to refer to a specific business unit or entity. The concept of business entity requires that every company has a separate existence from its owners, creditors, employees, customers, other stakeholders, and other companies (www.ventureline.com).

Going Concern -

accountants record business transactions for an entity based on the assumption that a business will continue to operate indefinitely.

Substance over form standards -

emphasizes the economic substance of an event more if its legal form may suggest a different result.

The money measure (units) -

states that all business transactions must be expressed in terms of money (dollars). The concept that each accounting period has an economic activity associated with it and that the activity can be measured, reported, and accounted for.

Accounting principles

GAAP has four basic principles: the historical cost, the principle of recognition of revenue, the matching principle and the principle of Full Disclosure. The historical cost requires companies to account and report based on acquisition costs rather than market value for most assets and liabilities. The recognition principle Revenue requires revenue to record when revenue is realized and earned not when cash is received. Expenditure accruals should correspond with revenues. "The logic behind this principle is that every time someone uses the economic resources will want to know what has been achieved and at what cost" (Ng, 2004, p. 3). The Principle of Full Disclosure is information that is important enough to influence the decisions of an informed user of financial statement must be indicated. Furthermore, the information provided should be sufficient to render judgment keeping costs reasonable.

An assessment of the role of ethics in accounting

The company has great expectations for professional accountants. More than ever, need to book values ​​and ethics that allow them to operate successfully and with integrity in a changing world. "With so many people, both externally and internally based on financial statements for decision making, accounting above all others are obliged to behave in a manner consistent with the highest ethical standards" (Marshall, 2004, p. 14). Practitioners of accounting are required for the public, their profession, the organization they serve, and themselves to maintain the highest standards of ethical conduct. The AICPA issued the following statement: "Our profession has zero tolerance for CPAs who do not respect the rules" (Keim and Grant, 2003, p.1). Accounts has long been a rule-based profession. However, in the present context, is the master and comply with standards sufficient for the practice of accounting? Pincus (2000) said: "human decision makers tend to view as defining prescriptive rules, ie, they tend to treat as rules determining how a game is played, rather than as guidelines for proper conduct. They tend to become rule-bound rather than rule-driven. "

Conclusion

Accounting is an integral part of human society. It 's important to realize that accounting is not only a purely technical subject, amount is determined by the context in which it operates. In particular, the subject is history, the country, technology, nature and type of organization. To appreciate properly accounting practice, we need to understand the conceptual and regulatory frameworks in which it operates. In essence, the accounting understanding is a prerequisite for the understanding companies. I think the key is responsibility accounting, responsibility, integrity and trust .......