Ethical behaviour of accountants

Several accounting organizations have formulated codes of ethics that govern the behaviour of their members. «Code of Professional Conduct» adopted by the American Institute of Certified Public Accountants reads:

«Membership in the American Institute of Certified Public Accountants is voluntary. By accepting membership, a certified public accountant assumes an obligation of self-discipline above and beyond the requirements of laws and regulations...»

In carrying out their responsibilities as professionals, members should exercise sensitive professional and moral judgments in all their activities.

Members should accept the obligation to act in a way that will serve the public interest, honour the public trust, and demonstrate commitment to professionalism.

A member should observe the profession’s technical and ethical standards, strive continually to improve competence and the quality of services, and discharge professional responsibility to the best of the member’s ability.

To maintain and broaden public confidence, members should perform all professional responsibilities with the highest sense of integrity.

A member should maintain objectivity and be free of conflicts of interest in discharging professional responsibilities. A member in public practice should be independent in fact and appearance when providing auditing and other attestation services.»

Some business firms have also developed codes of ethics for their employees to follow. But there is something more than merely making sure you are not violating a code of ethics. Most of us sense what is right and wrong. An accountant’s most valuable asset is his or her reputation.

Questions:

1. What other professions can use the same principles?

Exercises:

Ex. 1. Translate the following sentences into Ukrainian. Pay special attention to the words in bold. They are your professional vocabulary.

1. The money that a business spends in order to produce goods or services is its costs.

2. Fixed costs do not vary in relation to the output level of goods or services; variable costs do.

3. Direct costs are directly related to the things produced. In manufacturing, for example, direct costs include raw materials and wages and indirect costs may include things like social security charges on top of the wages.

4. Overhead costs or overheads are used to mean different things, but usually cover all the regular non-production costs of running a business, such as salaries and telephone bills, and can be extended, for example, to include the cost of marketing and R&D activities.

5. A company's financial performance for a period is its results, which it reports in the form of a profit and loss account, indicating whether it has made a profit or a loss.

6. The equivalent document in the US is the income statement. A pre-tax profit or loss is one calculated before tax is taken into account.

7. The accuracy of accounts such as the balance sheet and the profit and loss account is checked and supposedly guaranteed by auditors, outside accountants who specialize in this.

8. When a company's accounts are presented in a way that makes performance look better than it really is, the company may be accused of window dressing or creative accounting.

9.The bottom line is an informal way of talking about the results of a company: the so-called bottom line of the profit and loss account. The bottom line also means the final result or the most important aspect of something.

10. Assets and liabilities are normally shown on a firm's balance sheet: a "photograph" taken, normally once a year, of its financial situation at that time. Firms in a good situation are said to have a strong balance sheet and those that are not, a weak one.

11.Things that are not shown in the balance sheet but in a footnote, for example, are off-balance sheet.

12.A company's balance sheet may include provisions for potential losses, such as bad debts, debts that may never be paid.

13.If it looks almost certain that a debt will not be paid, it is considered a write-off and written off.

14.A company supplying goods or services to another company does not, of course, usually expect to be paid immediately, but after an agreed period. This is trade credit.

15.Amounts that a business is waiting to be paid by its customers are accounts receivable or receivables. Customers owing money in this way are debtors.

16.Money that a business owes to its suppliers are accounts payable or payables. Suppliers waiting to be paid are creditors.

17.The cash flow of a business is the actual movement of money into and out of it, independently of how much it owes and is owed.

18. Cash flow is also used to refer exclusively to cash flowing into a company from sales.

19.When sales reach a level where revenues match costs, a company or product breaks even. 20.This is break even or the break even point, a crucial figure when calculating the return on investment (ROI) for a given business or product.

Ex. 2. Match each word in column A with its definition in column B.

A B

1. on account a. unimportant

2. account for b. on one’s behalf

3. by all accounts c serve as or provide an explanation for

4. call to account d. because of

5. of no account e. require an explanation from

6. of some account f. important

7. on one’s account g. in everyone’s opinion

8.on account of h. consider

9.on no account i. under no circumstances

10.take into account. j. use smth fully and profitably

11.put (take) smth to good account k.to be paid for later

Use the words from column A to fill in the blanks

1. She told me not to run … … … my illness.

2. … … … she was a very clever young lady.

3. You can have it … ….

4. If you buy something … …, you take it away with you and pay for it at a later date.

5. How do you … … losing such a large sum of money?

6. In this new job she can … her talents … … ….

7. Their reactions were … … … to me.

8. … … … must strangers be let in.

9. We’ll certainly … your feelings.. ….

10. I was … … … for my conduct by the headmaster.

Ex. 3. Write down a synonym for each of the words on the left. Choose from the ones on the right.

1. responsible a. buy

2. public b. influence

3. earnings c. costs

4. purchase d. information

5. impact e. provide with

6. acquire f. employ

7. expenses g. in charge of

8. supply h. obtain

9. hire i. state-owned

10. evidence j. income

Ex. 4. Join the halves.

1. Before making a loan, potential lenders…

2. Both profit and non-profit organizations…

3. Public accountants are those who…

4. Several accounting organizations have formulated…

5. To do an audit, there must be information in a …

6. It is important to obtain a sufficient…

7. The final stage in the audit process is…

8. Very often the general public…

9. The function of accounting is to provide certain types of…

10. Auditing is the process of recording, classifying and summarizing economic…

a. serve the general public and collect professional fees for their work

b. quality and volume of evidence to satisfy the audit objectives

c. the audit report

d. quantitative information that management can use to make decisions

e. verifiable form and some standards by which the auditor can evaluate the information

f. determine the borrower’s ability to meet scheduled payment.

g. confuses auditing with accounting.

h. codes of ethics that govern the behaviour of their members.

i. events in logical manner for the purpose of providing financial information for decision-making.

j. deal with budgets, payrolls, rent payments, and the like.

Ex. 5. Before you begin this exercise, be sure that you know the meaning of the words and word-combinations given below. From the list, choose a word or word combination that fits both grammatically and contextually in each blank. Use each word only once and add noun or verb endings if necessary.

direct costs, fixed costs, income statement, costs, indirect costs, assets and liabilities, earnings, balance sheet, timely information, revenue, entry, depreciation.

1. Substance should triumph are form in situations of window-dressing and off-… financing.

2. It is argued that …should be brought together on the balance sheet if this is necessary to give a true and fair view, whether or not the information involved is specifically required be legislation.

3. Firms locate their production and other operations internationally for reasons that are more complex then the simple minimization of ….

4. Mainly because of higher …, a German manufacturing worker costs almost twice as much per hour as a British one.

5. The … shows the amount that the company earned during the year.

6. After deducting the costs of goods sold and other expenses, the firm had total … before interest and taxes of S 10mln.

7. Lufhansa’s cost problem is illustrated in a comparison with British Airways, when personnel …amount to about 24 per cent of revenues against Lufhansa’s 33 per cent.

8. Any gain in market share fattens profit, because … are high and variable costs are low.

9. There remains, of course, the risk of capital …

10. The purpose of adjusting … is to bring the accounts to their proper balances before the financial statements are prepared.

11. This matching of expenses and … is necessary for the income statement to present an accurate picture of the profitability of a business.

12. Since those interested in the activities of a business need …, financial statements must be prepared periodically.

Ex. 6. Translate the following text into Ukrainian in written form.

Accounting is shaped by the environment in which it operates. Just as nations have different histories, values, and political systems, they also have different patterns of financial accounting development. In a number of countries accounting information is directed primarily toward the needs of investors and creditors, and «decision usefulness» is the overriding criterion for judging its quality. Financial accounting in the US and Great Britain has had such an orientation for many years. Moreover, these countries have large and developed stock exchanges and bond markets. As a result, a great deal of information is disclosed in companies’ financial reports; and determining profitability is an objective of financial accounting. However, in other countries, financial accounting has a different focus and performs other roles. For example, in some countries, financial accounting is designed primarily to ensure that the proper amount of income tax is collected by the national government. This is the case in most South American countries. In other countries, financial accounting is designed to help accomplish macroeconomic policies, such as achieving a predetermined rate of growth in the nation’s economy. Whether income tax and economic policy information is also useful to individual investors and creditors is somewhat beside the point. In such countries as Switzerland, Germany, and Japan the environment is characterized by a few, very large banks that satisfy most of the capital needs of business. Ownership also tends to be concentrated. The information needs are satisfied in a relatively straightforward way – through personal contacts and direct visits. Not surprisingly, the financial reports tend not to contain as much information as US companies’ reports. And since banks are the primary source of capital, financial accounting is oriented toward creditor protection. France and Sweden offer still another orientation of financial accounting. National government plays a strong role in managing the country’s resources. Governments also actively ensure that businesses have adequate capital and will lend or even invest in companies if necessary. Financial accounting is oriented toward decision making by government planners.

Test questions:

1. Differentiate between financial and managerial accounting.

2. Describe employment opportunities in accounting.

3. An anonymous adage reads, “An accountant is a man who is hired to explain that you didn’t make the money you did”. Your comments?

4. Explain, in your own words, the meaning of the fundamental accounting equation.

5. Drawing on the information provided in this Unit and referring to other professional sources, list the users of accounting information and define their interests in the business.

6. Summarize the information of the Unit to be ready to speak on Accounting. The first step to be done is to write the plan of your future report.