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

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Standards by which actions are judged as right or
wrong, honest or dishonest, fair or not fair.
Steps in analyzing ethics cases
1.
2.
3.
Recognize an ethical situation and the ethical issues
involved.
Identify and analyze the principal elements in the
situation.
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
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Honesty/Integrity
Responsibility
Fairness
Respect
Compassion
Seven principles of Public Life

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

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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
Professional ethics of accountants

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
Professional ethics of accountants

Independence

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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
Corporate Governance

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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 nonexecutive directors, and it should be
raise the limit to one-third of the board
Sarbanes-Oxley Act of 2002
The newly released publication by HKICPA:
Corporate Governance for Public Bodies - A
Basic Framework (2004)
New Topics:
Corporate Governance
Corporate Governance
Understand
the concept and
importance of
corporate
governance.

Corporate Governance
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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
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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

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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

company’s underlying economic performance

and/or
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influence stakeholders’ perceptions about the
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
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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
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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