Matt Lyons and Shan Bryce

In this unit we look at some of the typically
unethical financial behaviours and consider
how they might be controlled. Perhaps the
most important thing you need to think about
is that ethical behaviour is an important value
that we should aspire to.

Auditing is a process designed to establish
the truth and fairness of the financial reports.
Audits are conducted by qualified
accountants who check representative
samples, chosen at random, to ensure the
overall accounts are accurate. Both public and
private businesses are required to have their
accounts audited.
There are two types of audits:


Internal audits are established by the business’s
management as a control mechanism to ensure
the accuracy of the accounts and to ensure there
has been no misuse of funds.
External audits are conducted by independent
accountants. They allow external users of the
information, such as investors and the Australian
Taxation Office, to be confident that the
financial reports are true and fair.

The financial reports of a business must be
prepared according to the conventions and
standardsing the accounting framework. This
enables all financial reports to be compared and
easily understood.
One important convention in the accounting
framework is that profits need to be matched
with the costs and revenues that generated that
profit. The problem is that, when the business
has to report regularly, a subjective judgement
must be made on the cut-off period.

The misuse of funds refers to a range of
dishonest practices. These practices generally
refer to stealing and they are very common.
Frequently these practices are linked to a
gambling debt or business debt where people are
desperate.
Dishonest practices are best dealt with by having
effective systems and procedures where all
financial transactions are carefully analysed by
different sections of the business and
discrepancies quickly investigated. It is very
unwise to rely on an employee’s honesty. The
system and procedure should prevent fraud.

It this is done dishonestly or incompetently
and the cut-off period is inappropriate, the
reports will give a false impression.
Ethics training, where accountants are trained
in the need to be transparent and
accountable, is the best management strategy
to deal with this problem.

The Australian Securities and Investments
Commission (ASIC) is the independent body
that is responsible for enforcing the
corporation laws in Australia. The role of the
organisation is to ensure transparency or
openness, honesty and fairness in Australia’s
financial markets


The old fashioned idea of a corporate raider
relates to an entrepreneur who purchases an
undervalued business, breaks it up, sacks the
employees and makes a great deal of money
selling off the assets.
The ethical position of the modern corporate
raider is not so black and white. When the raider
buys an underperforming business, replaces the
management and improves the value of the
business, there is no ethical problem. The ethical
aspects arise when employees are sacked and the
business is sold in parts because the value of the
parts is greater than the whole business.

http://www.youtube.com/watch?v=BGviXZqp
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