Margaret Poon - 5 FB Core Values - FB2100 Examples3

FB2100
How Core Values are

integrated in FB2100
Accounting
Jointly Presented by FB2100 Team

Week 1 Introduction
Teach students how to analysis
ethics cases
Ethics – A Fundamental Business
Concept
 Standards by which actions are judged as
right or wrong, honest or dishonest, fair or
not fair.
 Steps in analyzing ethics cases
1. Recognize an ethical situation and the ethical
issues involved.
2. Identify and analyze the principal elements in
the situation.
3. Identify the alternatives, and weigh the impact
of each alternatives on various stakeholders.
Week 1 Introduction
Show relevance of FB core values
with Qualities of Public Life and
Professional Ethics of Accountants
Faculty of Business
Five Core Values
 Honesty/Integrity
 Responsibility
 Fairness
 Respect
 Compassion
Seven principles of Public
Life

Integrity

Honesty

Selfishlessness

Objectivity

Accountability

Openness

Leadership
 Nolan Committee (May 1995)
Core Ethic Values in Profession
Professional ethics of accountants
personal qualities for

good accounting
HKSA Members' Handbook
 Confidentiality
 Information acquired should be kept
confidentially and not be disclosed
except where consent has been
obtained from client, or where there
is public interest to disclose, or
where there is legal or professional
duty to disclose
 Independence

Should avoid conflicts of interest and
ensure independence in each assurance
engagements

US Securities and Exchange Commission
banned Ernst & Young from signing new
clients for half year because it could not
maintain independence in auditing one of
its clients, PeopleSoft, the software maker
 Objectivity

Should perform the professional work
objectively and ethically
New Topics:
Corporate Governance
 Many listed companies in Hong
Kong are family owned
 Need to respect and protect the
rights of minority shareholders
 Enron Case - Arthur Andersen
closed its business after its
conviction for obstructing a federal
investigation
Corporate Governance (Example)
 In order to ensure the
independence of the boards, it is
required to have a minimum of
three independent non-executive
directors, and it should be raise
the limit to one-third
Sarbanes-Oxley Act of 2002 of the board
The newly released publication by HKICPA: C

orporate Governance for Public Bodies - A B
asic Framework (2004)
New Topics:
Understand
the concept
and
importance of
corporate
governance.
 Processes, and the related organisational
structures, by which organisations are
directed, controlled and held to account.
 “Involves a set of relationships between
management, its board, its shareholders
and other stakeholders
 CG provides the structure through which
the objectives of the organisation are set,
and the means of attaining those
objectives and monitoring performance
are determined”
OECD’s Principles of Corporate Governance
Fundamental Principles
of CG
 Openness
 Integrity
 Accountability
Cadbury Report
(report of the committee on the Financial
Aspects of Corporate Governance (UK, 1992)
New Topics:
Earnings Management
Earnings Management
Understand
the concept of
earnings
management
and why it
occurs.
Earnings Management
 Management can influence and manipulate
earnings because accounting earnings is a
function of management’s estimates and
assumptions.
 It occurs when judgment is used to alter financial
reports to
 influence stakeholders’ perceptions about the
 company’s underlying economic performance
and/or
 influence outcomes that depend on reported
accounting numbers.

Four Reasons to Manage
Earnings
• Meet Internal
Targets
• Meet External
Expectations
$
$
• Income
Smoothing
• Window
Dressing for an
IPO or a Loan
Earnings Management
 The practice of earnings management
may potentially affect the
transparency of the underlying
economic reality of a company’s
financial performance or position to
such an extent that decisions with
respect to the allocation of resources
may change in the absence of such a
practice.
Week 8
Accounting Information Systems:
Internal Control
Internal Control
 Internal control would be used to provide
reasonable assurance about the
achievements of entity’s objectives with
regard to effectiveness and efficiency of
operations and compliance with applicable
laws and regulations.
 Proper procedure for authorization and
adequate segregation of duties would reduce
the opportunity of manipulation
 The quality of internal control should be
reviewed and monitored regularly
 Example: DBS: Destruction of Safe Boxes
Week 9 Accounting Principles
Financial Reporting
Financial Reporting
 Should give a true and fair view in
preparing the financial statements
 Integrity: Avoid manipulation of reported
earnings/Discretionary accruals
 Openness: Voluntary disclosure; Should
refrain from hiding any information that
is useful to the users in decision making
 Fairness and Respect: Should be
responsible for all users of the financial
statements, not only the management
or the shareholders (fairness)
The End

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FB2100

How Core Values are

Jointly Presented by FB2100 Team

personal qualities for

The newly released publication by HKICPA: C

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