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BATANGAS
In Partial Fulfillment
Of the Requirements for the Degree
Bachelor of Science in Accountancy
Submitted by:
Ethics in all the gap of instability on jobs is always challenged. Not everything will come
and go as good as it is, but rather, arrives on its most uncertain and most challenging forms that
will measure the level of morality you put on your own profession. According to Lou Carlozo, on
his journal (published in the online Accountancy Journal) entitled Fraud and Fraudsters: A quick
guide for CPAs, a proliferator, hoaxer has three common pursuits in their minds that draw them
to the pulling pit of temptation: opportunity, pressure and rationalization.
In the Origin of Fraud Analysis Using Debits and Credits, a discussion of a very
beneficial method and analysis of fraudulent activities has been explained. Carmichael refers to
the book of Harvey Cardwell in 1960 entitled Audit Surveillance explaining the role of debit and
credit entries as an alley of fraudsters to patch and mislead books. Credit became their
preferred tool as it decreases accounts of assets or can setup an account into an outflow or
payable in the accounting equation. Debits generate dispute on their concealment because a
value received must be equal to the value parted with on the general accounting equation, once
they use credit to decrease cash or accounts payable, they have to set-up a fake debit entry as
well to make an equal effect to the records. Thus, manipulation of the basic elements of
financial information can be played overstated or understated in the hands of falsified
individuals. Nonstandard Journal entries on the other hand, are the entries that are suspiciously
used beyond consistency, nonrecurring and nonstandard that opens an alarming concern to the
international accounting and auditing standard setting bodies, Auditing Standards Board (ASB),
Public Oversight Board (POB), SEC and other countries auditing board. Bruce H. Nearon, CPA
and J. H. Cohn LLP presented recommendations on audit procedures that could help improve
the analysis of financial misstatements practices in their study through the published Auditing
Journal on the CPA archives (online journal). This include: determining the nature and risk of
management incentive to manipulate earnings or financial ratios through misstatements,
conducting a brainstorming session with audit engagement team including IT editors,
determining why management could use nonrecurring or nonstandard entries, what kind of
unusual debits or credits should the auditor must look for, what kind of entries are not likely to
be detected, expanding auditor’s understanding of controls over nonstandard and nonrecurring
entries, detecting entries made by unusual users, blank or nonsensical user names, senior
management or the IT staff, filtering recurring transactions in order to identify the nonrecurring
one, analyzing debit and credit combinations and many more suggested ways that were results
of dissertation.
“The identification of this corporate malfeasance leads to a present global recession and
Occupy Wall Street Movement,” featured in the 10 Worst Accounting Scandals of all time listing
the top 10 largest corporate frauds. This includes: (a) Waste Management Scandal who
reported $1.7 billion fake earnings by allegedly increasing the depreciation time length of their
fixed assets; (b) Enron Scandal; (c) Worldcom Scandal that was also presented in Carmichael’s
Journal, inflated assets by as much as $11 billion dollars, underreporting line costs as
capitalizing instead of expensing and inflating revenues with fake accounting entries; (d) Tyco
Scandal where the CEO and CFO stole $150 million fund from unapproved loans and stock
sales, inflated company’s earning up to $500 million; (e) Health south scandal, increased
earnings up to $1.4 billion to make up with their stockholders and investors by telling their
subordinates to draw numbers; (f) Freddie Mac Scandal, intentionally misstated $5 billion of
earnings; (g) American Insurance Group Scandal, massive accounting fraud to the tune of $3.4
billion, bid rigging and stock price manipulation; (h) Lehman Brothers Scandals, hid $50 billion
of loans as sales, (i) Bernie Madoff Scandal, investors were paid out of their own moneys rather
than profits, tricked investors of $64.8 billion dollars largest Ponzi scheme; (j) Saytam Scandal,
boosted revenue up to $ 1.5 billion dollars.
Application
The collative evidence of persons and instances of fraud above without doubt, were
disagreeable, immorally upright and injustice. The satire of power and money can’t be translucid
enough to do schemes and deceptions even to the common philosophy of fraudsters that they
do a victimless crimes.
The basic and fundamentals of accounting, Double entry system that been taught in the
journal article will be beneficial to us- the sprouting bud of the accounting profession. It’s good to
be founded by the forewarnings of what are the possibilities ahead that may challenge us.
Most of the largest frauds recorded in the history were fashioned and set up by high
intellect individual(s) behind ethical despair. I was caught by an open letter sent by the
International Federation of Accountants (IFAC) President, Olivia F. Kirtley, CPA, CGMA, in
response to Pope Francis calls for ‘positive force in the fight against fraud and corruption:’
“There is a stronger temptation to defend one’s interest without concern for the common good,
without paying much heed to justice and legality. For this reason everyone, especially those
who practice a profession which deals with the proper functioning of a country’s economic life, is
asked to play a positive, constructive role in performing their daily work.”
-Pope Francis
Now, honestly, I am more triggered and directed to the profession I am traversing. The
bitter truth is that the stereotyped concept of people was accountants are inside banks and
insurance companies. And even we denied it or not, we were affected once we came along on
this type of people who don’t know the real thing on being an accountant. Now, I value my
dreamed profession better than that common notion.
Rule I Section 4 Scopes of Practice, of the Implementing Rules and Regulations of the
Philippine Accountancy Act of 2004 or the Republic Act no. 9298 states that:
The practice of Accountancy shall include, but not limited to the following:
a. Practice of Public Accountancy
b. Practice in Commerce and Industry
c. Practice in Education and
d. Academe and Practice in Government
At any scope of practice of being an accountant, time will come that prudence will be
attested and even any other jobs existing in this world; we are always tested to do the right thing
even how vague and how hard it may take. Thus, this line that was already remarked on my
mind, “those who practice a profession which deals with the proper functioning of a
country’s economic life”, will be my looked up view on the accounting profession. And I say: I
will be a person who observes the proper functioning of a country’s economic life.
I believe that the orthodox of intelligence is not just the IQ, but also must be balance to the
emotional quotient and moral aspect of a person.
References:
The 10 Worst Corporate Accounting Scandals of All Time. Retrieved from http://www.accounting-
degree.org/scandals/
Total Score