Accounting Ethical and Legal Obligations Pape

Introduction:

Ethics is first of all, the quest for, and the understanding of, the good life living well, a life worth living. It is largely a matter of perspective: puffing every activity and goal in its place knowing what is worth doing and what is not worth doing, knowing what is worth wanting and having and knowing what is not worth wanting and having.

The purpose of ethics in business is to direct business man and women to abide by a code of conduct that facilitates, if not encourages, public confidence in their products and services. In the public minds the work of an accountant must be faultless in execution and principle. "Throughout its history, accounting has been a moral discourse partially reflecting the moral order of the world in which it was practiced" (Verschoor 2002, 28).

Relationship among the FASB, SEC, and PCAOB:

The financial health and economic welfare of global corporations is at stake when it comes to accurate financial reporting. Investors won't stand for a repeat of Enron, Tyco or recent allegations in reporting improprieties by Fannie Mae. In order to establish regulations and statutory liability for accountants Government established or sponsored several regulatory body in early 1900s such as,

1. Institute of Accountants and Bookkeepers (IAB)

2. American association of Public Accountants

3. SEC established in 1930s

4. Committee on Accounting Procedures (CAP) in 1939

5. Accounting Principles Board in 1959

6. Financial Accounting Standard Board (FASB)

7. Public Company Accounting Oversight Board (PCAOB)

Presently following three regulatory bodies control and regulate ethics, principles, and rules. They collectively work together to regulate those policies.

SEC mission is to protect investors and maintain the integrity of the Securities markets. It requires public companies to disclose meaningful financial and other information to the public, which provides a common pool of knowledge for all investors to use to judge for themselves if a company's securities are a good investment.

FASB mission is to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and users of financial information. It was created in 1973, replacing the Accounting Principles Board and the Committee on Accounting Procedure of the American Institute of Certified Public Accountants before it.

PCAOB is a private-sector non-profit Corporation, created by the Sarbanes-Oxley Act of 2002, to oversee the auditors of Public companies in order to protect the interests of investors. The PCAOB is also charged with promulgating auditing and related attestation and ethics standards for audits and reviews of public companies.

PCAOB: (1) registers public accounting firms that prepare audit reports for public companies, (2) establishes auditing, quality control, ethics, independence, and other standards related to the preparation of audit reports for public companies, (3) conducts inspections of registered firms, and (4) conducts investigations and disciplinary proceedings concerning registered firms. The mission of the FASB is to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and users of financial information. Although there is no formal relationship between the FASB and PCAOB in the sense that neither Board reports to or is subject to oversight of the other, the two Boards share a common goal of contributing to the effective and efficient functioning of the capital markets. Representatives of the FASB and PCAOB participate on each Board's advisory bodies and meet regularly to keep each other informed of actions, plans, and findings. This coordination effort also includes participation by the SEC staff.

Some of the functions that are regulated by these three bodies are:

* The Company's system of internal controls1 and the Company's system of disclosure controls are followed at all times.

* The integrity of the accounting and financial reporting process depends on Senior Officers fulfilling their roles and responsibilities.

* Assist the Company's management in fulfilling its responsibilities as specified in the Accounting and Financial Reporting Code of Ethics.

* Federal securities are being observed

* Financial disclosures are completed as per GAAP

* Officers should bring promptly to the attention of the Company's General Counsel or chief executive officer any information he or she may have concerning: (1) significant deficiencies in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize and report financial information and 2) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls.

Accounting theories, assumptions, and principles:

Financial statements are necessary sources of information about companies for a wide variety of users. Those who use financial statement information include company management teams, investors, creditors, governmental oversight agencies and the Internal Revenue Service. Users of financial statement information do not necessarily need to know everything about accounting to use the information in basic statements. However, to effectively use financial statement information, it is helpful to know a few simple concepts and to be familiar with some of the fundamental characteristics of basic financial statements.

The term "generally accepted accounting principles" has a specific meaning for accountants and auditors. The AICPA Code of Professional Conduct prohibits members from expressing an opinion or stating affirmatively that financial statements or other financial data "present fairly... in conformity with generally accepted accounting principles," if such information contains any departures from accounting principles promulgated by a body designated by the AICPA Council to establish such principles.

The AICPA Council designated FASAB as the body that establishes accounting principles for federal entities. The AICPA's hierarchy of generally