AGUNG NOPRANTO AI N H AJ AW I YA H L I N C TA R J I W O M AT H R I U L M AS I TAH

Schroeder

Systematically organized knowledge, applicable in a relatively wide variety of circumstances, a system of assumptions, accepted principles and rules of procedure to analyze, predict or otherwise explain the nature of behavior of a specified set of phenomena.

THE EARLY HISTORY OF ACCOUNTING

The Zenon Papyri The impact of the Renaissance Fra Luca Pacioli The evolution of joint ventures into ongoing businesses The impact of the industrial revolution and the progressive movement

The concept of capital maintenance

The accountant as a protector of business interests

ACCOUNTING IN THE UNITED STATES SINCE 1930 Meetings between NYSE

and AIA

AAA

Securities Act of 1933 Securities Exchange Act of 1934

Financial Accounting Standards Board

THE ACCOUNTING PRINCIPLES BOARD

Formation and structure Types of pronouncements APB Opinions

The flap over accounting for the investment tax Credit Rule 203 Criticism of the APB

THE FINANCIAL ACCOUNTING STANDARDS BOARD

The Wheat Committee The True blood Committee The FASB was established

FASB
Mission Types of pronouncements Emerging Issues Standards Overload Standard setting as a political process Economic Consequences

GAAP
Evolution of phrase:
Changed wording of auditors certificate brought about by meetings between NYSE and AIA The APBs definition The Auditing Standards Executive Committees definition

THE ROLE OF ETHICS IN ACCOUNTING

The public accountant as a watchdog Statement from Warren Burger

Accounting in Crisis The Events of the Early 2000s

Two major changes in the accounting profession have taken place in the wake of the accounting scandals: 1. Arthur Andersen 2. Sarbanes-Oxley Act

International Accounting Standards

The concept of harmonization The IASB The IASBs objectives: 41 Statements of Accounting Standards and 5 Statements of Financial Reporting Standards to date

ACCOUNTING ETHICS AND ITS IMPORTANT ROLE FOR REDUCTION OF ACCOUNTING FRAUD : AN EMPIRICAL STUDY IN HANOY By: VU HAI YEN (June 2010) Department of Business Studies, HELP University College

Research Background
>> The boundary between ethical and unethical is very ambiguous. >> Vietnams economy is increasingly integrated with worldwide.
Source of Data and Sample Selection
Research Background

Problem Statements

Research
Research Method Objectives of Research

Sphere of Research

Problem Statements
>> For an organization, Ethics plays an important role in curbing accounting fraud >> How to balance between private interests and public interests? How to avoid accounting fraud?
Source of Data and Sample Selection Research Background

Problem Statements

>> Vietnams goal by 2020 is comprehensive and equitable integration with countries in the field of accounting and auditing, including import and export accounting and auditing services of an organization.

Research
Research Method Objectives of Research

Sphere of Research

Objectives of Research
>> To determine applying the code of ethics for professional accountant in Vietnam. >> To define the factors that contribute to accounting fraud related to the state of Vietnam
Source of Data and Sample Selection Research Background

Problem Statements

>> To reflect reality from theoretical model to practical theory

>> To recommend some suggestions to investors, companies for the importance of ethics within an organization to curb accounting fraud
Research Method

Research
Objectives of Research

Sphere of Research

Sphere of Research
>> Place of conducting research: National Economics University, Hanoi capital, Vietnam >> Object of research: accountants, students who are major accountants >> Companies in research : public companies and private companies >> Time period of conducting research: from 31 may 2010 to 15 June 2010
Source of Data and Sample Selection Research Background

Problem Statements

Research
Research Method Objectives of Research

Sphere of Research

Research Method
>> The researcher conducts a survey among accountants who are working in public companies and private companies, as well as students studying master degree in accounting in Hanoi city, Vietnam.
Research Background

Source of Data and Sample Selection

Problem Statements

>> These questions mainly focus on the situations that reflect the character of accountant and the factors that contribute to accounting fraud.
>> Total of correspondent : 200

Research
Research Method Objectives of Research

Sphere of Research

Source of Data and Sample Selection

>> In this study, the researcher bases mostly on primary data. A tensimple questionnaire survey was conducted with 200 accountants from both public companies and private companies.
Research Background

Source of Data and Sample Selection

Problem Statements

>> Besides, the researcher also referred to secondary data which was collected from journals, books, sources from internet.

Research
Research Method Objectives of Research

Sphere of Research

HYPOTHESIS RESULTS
>> Through the result of 102 questionnaire collected H1>> accountants who have less experiences work more objectively than the one who have more experiences. (H0) H2>> accountants who have more experiences apply the code of professional competence and due care better than the one who have less experience. (H0) H3>> accountants who have more experiences have more possibility to break the money culture than the one who have less experience. (H0) H4>> accountants who have less experience have more possibility to break legalistic culture than the one who have more experiences. (Ha)

GENERAL DISCUSSION
Ethical conflicts commonly arise in the organization's relationship with customers, employees, suppliers, and other individuals, and also as a result of these acts as courtesy gifts, kickbacks and discriminatory pricing. ethical issues arise due to conflicts between moral philosophy and ethical standards of personal ethical standards.

CONCLUSION
Accountants today are facing pressures such as competition, advertising, and introverted environment.

Although the researcher has described a number of relationships and situations that create ethical problems, but it's hard to recognize the specific ethical issues in practice.

RECOMMENDATION
To the government To universities and training institutions, To the organizations, To accountants

LIMITATION OF STUDY
still a student the small sample size language problem

SUGGESTION FOR FUTURE RESEARCH

that the sphere of future research should be bigger which can be conducted in more cities, even over Vietnam. that it should be conducted more extensively

A Tentative Statement of Accounting Principles Affecting Corporate Report

A Statement of Accounting Principles

Early Authoritative and Semi-authoritative Organizational Attempts to Develop the Conceptual Framework of Accounting

An Introduction to Corporate Accounting Standards

ARSs No. 1 and No. 3

The Trueblood Committee

Committee report specified the following four information needs of users:

1. 2. 3. 4.

Making decisions concerning the use of limited resources Effectively directing and controlling organizations Maintaining and reporting on the custodianship of resources Facilitating social functions and controls

Objectives of financial reporting

Statement on Accounting Theory and Theory Acceptance

Rationale for the committees approach The approaches to accounting theory were condensed into
1. Classical 2. Decision Usefulness 3. Information Economics.

Criticisms of the approaches to theory

The FASBs Conceptual Framework Project

The objectives identify the goals and purposes of financial accounting; whereas, the fundamentals are the underlying concepts that help achieve those objectives. These concepts are designed to provide guidance in:
1. 2. 3. Selecting the transactions, events and circumstances to be accounted for Determining how the selected transactions, events, and transactions should be measured Determining how to summarize and report the results of events, transactions and circumstances.

SFAC No. 1

SFAC No. 7

SFAC No. 2

SFAC
SFAC No. 6 SFAC No. 5

SFAC No. 1 Objectives of Financial Reporting By Business Enterprises

1. 2. 3. 4. 5.

6.
7.

Assess cash flow prospects Report on enterprise resources, claims against resources and changes in them Report economic resources, obligations and owners equity Report enterprise performance and earnings Evaluate liquidity, solvency, and flow of funds Evaluate management stewardship and performance Explain and interpret financial information

No. 2 Qualitative Characteristics of Accounting Information

Addresses the question: What makes accounting information useful? Develops a Hierarchy of Accounting Qualities

A Hierarchy of Accounting Qualities

Users of Accounting Information
Decision makers and their characteristics (for example, understanding of prior knowledge)
Benefits > Costs

Pervasive Constraint

Understandability

User-specific qualities
Decision Usefulness

Primary Decision-specific qualities

Relevance

Reliability

Timeliness

Verifiability

Ingredients of primary qualities

Representational Faithfulness

Predictive value

Feedback value Comparability and Consistency

Neutrality

Threshold for recognition

Materiality

No. 5 Recognition and Measurement in Financial Statements of Business Enterprises

Sets forth recognition criteria and guidance on what information should be incorporated into financial statements and when this information should be reported Defined comprehensive income as:

Revenues Less: Expenses Plus: Gains Less: Losses = Earnings

Earnings Plus or minus cumulative accounting adjustments Plus or minus other non-owner changes in equity = Comprehensive Income

No. 5 Recognition and Measurement in Financial Statements of Business Enterprises

1.

Measurement Issues
Definitions.
The item meets the definition of an element contained in SFAC No. 6.

2.

Measurability.
It has a relevant attribute measurable with sufficient reliability.

3.

Relevance.
The information about the item is capable of making a difference in user decisions.

4.

Reliability.
The information is representationally faithful, verifiable, and neutral.

No. 6 The Elements of Financial Statements

Defines the ten elements of financial statements that are used to measure the performance and position of economic entities These elements are discussed in more depth in Chapters 6 and 7.

SFAC No. 7 Using Cash Flow Information and Present Value in Accounting Measurements

Accounting measurement is a very broad topic. Consequently, the FASB focused on a series of questions relevant to measurement and amortization conventions that employ present value techniques. Among these questions are:

What are the objectives of using present value in the initial recognition of assets and liabilities? And, do these objectives differ in subsequent fresh-start measurements of assets and liabilities? Does the measurement of liabilities at present value differ from the measurement of assets? How should the estimates of cash flows and interest rates be developed? What are the objectives of present value when used in conjunction with the amortization of assets and liabilities? How should present value amortizations be used when the estimates of cash flows change?

SFAC No. 7 Using Cash Flow Information and Present Value in Accounting Measurements

Present value measurements that fully captures the economic differences between assets should include the following elements:
1.
2. 3.

An estimate of the future cash flows

Expectations about variations in the timing of those cash flows The time value of money represented by the riskfree rate of interest

4.
5.

The price for bearing the uncertainty

Other, sometimes unidentifiable, factors including illiquidity and market imperfections

SFAC No. 7 Using Cash Flow Information and Present Value in Accounting Measurements

Approaches to present value

1. Traditional 2. Expected cash flow

Incorporating probabilities
The objective is to estimate the value of the assets required currently to settle the liability with the holder or transfer the liability to an entity with a comparable credit standing

Use of the interest method

Rules Based and Principles Based Accounting Standards and Earnings Management.
Ferdy van Beest 2009 Netherland: Nijmegen Center for Economics (NiCE) Institute for Management Research.

Rules Based and Principles Based Accounting Standards and Earnings Management
IFRS more principles based than GAAP (rule based) Problems Phenomeno Reporting standards affect earnings management n How this IFRS principle based affect earnings management?

Research Motivation

Limited evidence in answering how and to what extent standards affect earnings management. (prior study remain inconclusive)

Rules Based and Principles Based Accounting Standards and Earnings Management
Whether manager, in rule based setting, engage in earnings management through transaction decision rather than accounting decision Whether in Principle based area managers take accounting decisions more often for the purpose of earnings management than transaction decision. Whether the discretionary room in accountings standards has an effect on the level and nature of earnings management.

Problems

Objectives

Examine the effects of discretionary room in accounting standard on level and nature of earnings management decision

Rules Based and Principles Based Accounting Standards and Earnings Management
Earnings Management: purposeful intervention in financial reporting process to obtain private gain Accounting decision: choices among equally acceptable rules and/or judgment and estimates required to implement GAAP Transaction decision: choices of structuring transaction and contracts or adjust real production and investment activities that are aimed at engaging in earnings management

Theoretical Review

Hypothesis

H1a: Principle based setting induces earnings management through accounting decisions. H1b: Rule based setting induces managers to engage in earnings management through transaction decisions, H2: the degree of earnings management does not differ between a rules-based and principles-based setting

Rules Based and Principles Based Accounting Standards and Earnings Management
Population and Sampling Population: Financial Manager Samples: 175 financial managers

Data Sources& Data Collection Method

Experiment 175 financial manager decided on both available-forsale security to sell and an impairment loss decision to consider, an opportunity to take an accounting decision and transaction decision to engage in earnings management. IAS 32 and IAS 36 were manipulated for representing the rules-based and principles-based setting, and manipulated analysts expectation creating 2x2 between subject design.

Rules Based and Principles Based Accounting Standards and Earnings Management
Analysis Method

Compare the number of accounting decision taken between rule based and principle based. ANOVA test to confirm whether this hypothesis is statistically confirmed.

Transaction decision in rule based setting Analysis Accounting decision in principle based setting Outcome Do not differ significantly in level of earnings management.

Rules Based and Principles Based Accounting Standards and Earnings Management
Neither rule based nor principle based accounting standard are able to eliminate earnings management decision. managers tend to adjust their decisions based on the latitude given in the accounting standards. When standards are precisely specified, managers tend to search for transaction opportunities to meet the pre-specified expectations. On the other hand, when standards are imprecisely specified, managers use accounting decisions, such as an impairment loss decision, to meet their incentives given. the extent of discretion in the standards is found to have a small, statistically insignificant impact on the average amount of earnings management managers include in their financial report.

Conclusions