Importance Of Ethics In Financial Reporting

722 Words3 Pages
Ethics in Financial Reporting The definition of ethics is how to tell apart the wrong from right. Although ethics may have a slightly different meaning in financial reporting the foundation of it is the same. Furthermore, ethics just doesn’t apply to reporting alone, it applies to almost every aspect of our lives, in our working area, in schools etc. ethics is present everywhere, but to choose to follow it is a different question. Because of its definition, ethics was present thousands of years ago, although it could have been called differently it was still the same back then and will continue to be the same in the coming years as well. Ethics doesn’t apply to just adults it applies to children also, the moment the child can distinguish from good and bad, he applied some sort of ethical practise. Ethics in financial reporting is mainly concerned on how to make moral choices in reporting transactions to their appropriate ledgers, presentation and disclosure of the financial information. Before the famous scandal of energy giant Enron that lead people to question the company’s financial reporting, back in the day there was no suspicious of how the company represented their activities to the public. In 2001 Arthur Andersen an American holding company was found…show more content…
While intentionally recording transactions in a manner that is not in accordance with generally accepted accounting principles is considered fraudulent financial reporting, the failure to disclose information to investors that could change their decisions about investing in the company could be considered fraudulent financial reporting, as well. Company executives must walk a fine line; it is important for management to protect the company's proprietary information. However, if this information relates to a significant event, it may not be ethical to keep this information from the investors (Freedman,

More about Importance Of Ethics In Financial Reporting

Open Document