Managerial and Financial Accounting Report
The regulatory and oversight framework imposed on corporate America was substantial in
the 1990s, but disastrous. It took the market collapse of year 2000 and the scandals that
followed to reveal the extent to the problems associated with poor governance. From an
earnings magic perspective of major corporations, the environment for abuse starts at the
top, board of directors. Members of the board and the existing corporate governance
structure are significant signals of the potential for earnings manipulation and
opportunistic behavior.
Accounting problems at Enron, WorldCom, and other companies have raised important
questions about the audits of corporate financial statements. Independent accountants, who
were certified public accountants, performed these audits. While auditors are regulated by
both governmental agencies and professional organizations, many question whether this
oversight has been adequate. (Lyke, 2003) Thanks to beefed-up regulations the current
governance structure is more likely to limit further abuses.
As a result, in recent years the CPA Code of Professional Conduct has recently extended
these standards to all CPA, not just those in public accounting. Individuals in managerial
and financial accounting have a unique set of circumstances relating to their employment.
To help them assess their situation, the Institute of Management Accountants has
developed standards of ethical conduct for managerial and financial accountants.
Accountants code of ethics require accountants adhere to four fundamental principles, 1)
integrity, 2) objectivity, 3) professional competence, and 4) confidentiality. (IMA, 2005)
When considering accounting, ethics and professional conduct is considered to be the part
of philosophy that deals with the practical application of those actions we have control. As
