Introduction To Accounting - Ethics, Fraud and Financial Risk Management Flashcards
Name 12 norms/values of a business community
Honesty Self-control Trustworthiness Concern for others Keeping promises Respect for Legitimate Authority Fairness Civility Discipline Morality Accountability Integrity
Explain the term “ethics”
The word “ethics” refers to a set of moral principles or values that are embraced by certain community. Written and unwritten laws, they direct the business to encourage public confidence
What is the purpose of ethics
To direct businessmen/women to abide by a code of conduct that facilitates and encourage public confidence in their products and services. Code of ethics is a crucial element in the forming of a professional person. It support the decision making process in a situation that involve ethical questions
When social value deteriorate
it becomes increasingly difficult to maintain high ethical standards in accounting and business.
Fraud is at present one of the major causes of
business failure
Name and shortly explain four elements of fraud
Unlawfulness: wrong actions in the eyes of the law & society
Misrepresentation: A false statement made by one person to another. Failure to disclose certain information when it is necessary.
Intent: The person making the misrepresentation must have intent or foreseen that the victim would be deceived.
Prejudice: The victims would have suffered prejudice by reason of altering their position (discrimination)
Fraud is a … crime
punishable
Name the areas where fraud can occur in a business
Asset misappropriation- cash/inventory suppliers + assets can be stolen + misuse of fixed assets
Fraudulent financial statements
Cheque Fraud
Computer Crime
Fraud can be combated by means of the following
- Good staff development programmes
- Sound mutual; inter & intra personel relationships between employees
- Regular stocktaking
- Internal & external audit
- Anti-corruption laws
- Solid presentation techniques & procedures
- Appropriate reaction planning
Describe the four-step approach to fraud prevention
STEP 1: Screen out fraudsters before hiring them
STEP 2: Reduce oppportunities for fraud
STEP 3: Create an “anti-fraud” environment
STEP 4: Prosecute all fraudsters
What is financial risk management
A business needs clear objectives, however with human beings around there will be unwanted activities like theft, dishonesty, fraud, corruption. It is important to know, anticipate and keep these risks to a minimum.
List the guidelines in how to manage financial risks:
Assess and analyse the system in use
Determine or forcast what might go wrong
Assess the recording of new assets bought
Minimise the risks by
* define the risks
* be pro-active (beat them at their own game)
* design systems, policies, rules and regulations
* all employees must understand and comply. Managers as well
* Rules and procedures must be transparent & objective
