Accounting in Business:
Ethics, Fraud, and
Internal Control
By
Dina El Bassiouny
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Outline
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Accounting as Part of Everyday Life.
Importance of Ethics in Accounting.
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Facts and Figures.
Fraud.
Losses on the Way.
Motivating Forces for Unethical Behavior.
Effective Ethical Controls.
Effective internal controls.
Conclusion.
References.
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Accounting as Part of Everyday Life
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Is one discipline of study that all people regardless
of job position should have some knowledge of…
 How to read your bank statement?
 Know your financial gains and losses… Your income!
 What are your tax dues?
Its useful in people’s everyday lives.
Companies must have reliable financial statements
for both internal and external users.
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Importance of Ethics in Accounting
Facts & Figures
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In the U.S., according to the Association of Certified
Fraud Examiners (ACFE), losses from fraud and abuse
=> $600 billion…
In Egypt, …..???????
Classic Case of Deception and Double Interests:
“Enron”…
Arthur Andersen = Auditor + Internal Auditor + Management
consultant!!!!!!!!!!!!!!
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In Egypt: “NO regulation in place requiring
independence of auditors”
Those who violate rules should be disciplined or
suspended from practice…
(Gamal, 2002)
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Importance of Ethics in Accounting
Fraud
Fraud is an intentional deception,
misappropriation of a company’s assets, or
manipulation of its financial data to advantage
of perpetrator.
Symptoms can include:
•Key executives appearing to be living beyond their means.
•Key executives have close associations with suppliers.
•Company uses several different banks, none sees full financial picture.
•One or two individuals dominate the company.
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Importance of Ethics in Accounting
Losses on the Way
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Losses due to Unethical Behavior:
Costs of legal action taken against perpetrators.
 Costs of reduced productivity.
 Increased unemployment as companies are forced to
downsize or go out of business.
 Economic loss to organization, hence to society.
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Solution???
Investigate
Motives for
Unethical
Practice
Administer
Effective
Ethical and
Internal
Controls
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Motives for Unethical Behavior
High
High
Low
Unethical
(Hall, 2004)
Situational Pressures
Opportunities
Personal Characteristics (Integrity)
Low
Low
High
Ethical
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Effective Ethical Controls
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A code of conduct that applies to the
practice of a profession.
AICPA adopted codes of professional
conduct that must be followed by CPAs.
Integrity
Integrity
Integrity
Independence
Independence
Independence
Objectivity
Objectivity
Due
CareCare
Objectivity
Due Due
Care
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Effective Internal Control System
Control Environment:
Risk Assessment:
Monitoring:
Influence Control
Awareness of
Management and
Employees.
Identify, Analyze, and
Manage Risks Relevant
to Financial Reporting.
Entities’ Activities.
Information and
Communication:
Quality of Info Impacts
Reliability of Financial
Statements.
Control Activities:
Fulfill
Main
Objectives
Transaction Authorization –
Segregation of Duties – Supervision
– Accounting Records – Access
Control – Independent Verification
Safeguard Assets of the Firm Ensure Accuracy & Reliability of ACCT
Records & Info
Promote Efficiency in the Firm’s
Operations
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Conclusion
Effective Ethical Control
Situational
Pressure
Personal
Integrity
Effective Internal Controls
Opportunities
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References
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Gamal, Wael (2002). “Book-Fixing, Here and
There.” Al Ahram Weekly. 22-28 August.
Hall, James A (2004). Accounting Information
Systems. Thomson. South Western.
Needles, Belverd E., Jr.; Powers, Marian;
Crosson, Susan V. (2002). Principles of
Accounting. Houghton Mifflin Company.
Boston. New York.
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Thank You 
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