ETHICS IN FINANCE

INTRODUCTION
Great damage can happen to a Business or Organization when unethical Financial practices occur.

An awareness of the different forms of unethical financial practices including financial frauds that are
possible in Accounting and Financial Management of Businesses would help:

Executives avoid such Unethical Practices in their Businesses or Organizations

and

Ensure that their Business or Organization does not become a victim of such unethical practices
by others.
 ACCOUNTING
Refers the Accounting Practices and Reporting through Financial Statements of
Public Limited Companies
Corporate Accounting and Finance can be broadly divided into 2 categories:
Accounting
Financial Management
Accounting can be classified into two: Financial Accounting, Management Accounting
 ACCOUNTING
Accounting is The Language of Business
What is it? It is the systematic recording, reporting and analysis of financial transactions
of a business.
What does it do?: It measures, translates and sums up the impact of all business
transactions into financial terms.
How does it do that? through various statements: Balance Sheet, Income and Expenditure
Statement, Cash Flow
These statements help to analyze and evaluate whether the business is profitable and
worth continuing
 FINANCIAL ACCOUNTING
It is the reporting of the financial position and performance of a business through financial
statements issued to external users on a periodic
basis.
Main characteristics are:
Meant for external users
Should be prepared in accordance with the
Generally Accepted Accounting Principles (GAAP), Changing to IFRS
Must be accurate and timely
Must portray the Company’s past performance
Should provide a picture of the business as a whole
The Statements should stand by themselves.
 MANAGEMENT ACCOUNTING
Management Accounting is the process of identifying, measuring, analyzing, interpreting and
communicating information to its internal users for the pursuit of an organization's goals. Its main
characteristics are:

Only for internal users, for example for the CEO or for the BoD

Not subject to GAAP regulations.

The relevance and flexibility of the data is determined by the users of the data.

It should enable the Management to look at future profitability and make decisions based on existing
data.

Draws heavily on finance, economics and quantitative methods for decision making and analysis.
 FINANCIAL MANAGEMENT
Financial management encompasses
Resource Management and Finance Operations.
Resource management is the efficient and effective deployment of an
organization's resources such as financial resources, inventory, human
skills, production resources, or information technology when needed.
Financial operations is providing financial advice and guidance,
support of the
procurement process, providing pay support, and providing disbursing
support
General ethical norms encompass truthfulness, honesty, integrity, respect for others,
fairness, and justice. ... They relate to all aspects of life, including business and
finance. Financial ethics is, therefore, a subset of general ethics.ng Your
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The role of ethics in financial management is to balance, protect and preserve
stakeholders' interests. Eli Lilly and Company, for example, says its code of ethics in
finance covers obligations to management, fellow employees, business partners, the
public and shareholders. Typical standards found in a code of ethics in finance
include: