Managerial and Financial Accounting Report
The regulatory and oversight framework imposed on corporate America was substantial in the 1990s, but disastrous. It took the market collapse of year 2000 and the scandals that followed to reveal the extent to the problems associated with poor governance. From an earnings magic perspective of major corporations, the environment for abuse starts at the top, board of directors. Members of the board and the existing corporate governance structure are significant signals of the potential for earnings manipulation and opportunistic behavior.
Accounting problems at Enron, WorldCom, and other companies have raised important questions about the audits of corporate financial statements. Independent accountants, who were certified public accountants, performed these audits. While auditors are regulated by both governmental agencies and professional organizations, many question whether this oversight has been adequate. (Lyke, 2003) Thanks to beefed-up regulations the current governance structure is more likely to limit further abuses.
As a result, in recent years the CPA Code of Professional Conduct has recently extended these standards to all CPA's, not just those in public accounting. Individuals in managerial and financial accounting have a unique set of circumstances relating to their employment. To help them assess their situation, the Institute of Management Accountants has developed standards of ethical conduct for managerial and financial accountants. Accountants code of ethics require accountants adhere to four fundamental principles, 1) integrity, 2) objectivity, 3) professional competence, and 4) confidentiality. (IMA, 2005)
When considering accounting, ethics and professional ...