Accounting Professional Ethics
Accounting Professional Ethics
Accounting Professional Ethics
KEYPOINTS
i. The accounting cycle is a process designed to make financial accounting of business activities
easier for business owners.
ii. The first step in the eight-step accounting cycle is to record transactions using journal entries,
ending with the eighth step of closing the books after preparing financial statements.
iii. The accounting cycle generally comprises a year or other accounting period.
iv. Accounting software today mostly automates the accounting cycle.
The accounting cycle is a methodical set of rules to ensure the accuracy and conformity of financial
statements. Computerized accounting systems and the uniform process of the accounting cycle have
helped to reduce mathematical errors. Today, most software fully automates the accounting cycle,
which results in less human effort and errors associated with manual processing.
Careers in Accounting
Examples of accounting and bookkeeping jobs include the following: bookkeeper, accounting clerk,
staff/senior accountant, accounting manager, cost accountant, staff/senior auditor, audit
manager/senior manager, audit partner/senior partner, tax staff/senior/manager/senior
manager/partner/senior partner, junior/senior internal auditor, internal audit manager, treasurer,
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controller, vice president of finance, chief financial officer (CFO), government accountant, forensic
accountant, nonprofit director, etc.
As a professional body in Nigeria it is internationally recognized as the leading and regulatory body
for account practices in Nigeria.
It is a member of the International Accounting Standards Committee and the International Financial
Reporting Standards.
Professional Ethics
Professional ethics are principles that govern the behaviour of a person or group in a business
environment. Like values, professional ethics provide rules on how a person should act towards other
people and institutions in such an environment.
In June 2005, the International Ethics Standards Board for Accountants IESBA (formerly the Ethics
Committee) issued a revised Code of Ethics for Professional Accountants. The revised Code
establishes a conceptual framework for all professional accountants to ensure compliance with the five
fundamental principles of ethics:
1. Integrity - A professional accountant should be straightforward and honest in all professional and
business relationships
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2. Objectivity - A professional accountant should not allow bias, conflict of interest or undue
influence of others.
3. Professional Competence and Due Care - A professional accountant has a continuing duty to
maintain professional knowledge and skill at the level required to ensure that a client or employer
receives competent professional services based on current developments in practice, legislation
and techniques. A professional accountant should act diligently and in accordance with applicable
technical and professional standards when providing professional services
4. Confidentiality - A professional accountant should respect the confidentiality of information
acquired as a result of professional and business relationships and should not disclose any such
information to third parties without proper and specific authority unless there is a legal or
professional right or duty to disclose. Confidential information acquired as a result of professional
and business relationships should not be used for the personal advantage of the professional
accountant or third parties.
5. Professional Behaviour - A professional accountant should comply with the relevant laws and
regulations and should avoid any action that discredits the profession.
Accounting Conventions
Accounting Conventions are the practices adopted by an enterprise over a period of time, that rely on
the general agreement between the accounting bodies and helps in assisting the accountant at the time
of preparation of financial statement of the company, for the purpose of improving quality of financial
information, the accountancy bodies of the world may modify or change any accounting convention.
Given below are the basic accounting conventions:
1. Consistency: Financial statements can be compared only when the accounting policies are
followed consistently by the firm over the period. However, changes can be made only in special
circumstances.
2. Disclosure: This principle state that the financial statement should be prepared in such a way that
it fairly discloses all the material information to the users, so as to help them in taking a rational
decision.
3. Conservatism: This convention states that the firm should not anticipate incomes and gains, but
provide for all expenses and losses.
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4. Materiality: This concept is an exception to the full disclosure convention which states that only
those items to be disclosed in the financial statement which has a significant economic effect.
Difference between Accounting Concept and Convention
BASIS FOR
ACCOUNTING CONCEPT ACCOUNTING CONVENTION
COMPARISON
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REVIEW QUESTIONS
Section A: Multiple Choice Questions (MCQ)
1. Double entry bookkeeping means that?
A. Entry in two sets of accounting books
B. Entry at two dates
C. Entry for two aspects of transaction
D. All of above
2. Which one the following document is prepared for documentary evidence by business?
A. Invoice
B. Voucher
C. Receipt
D. All of above
3. The basic sequence in the accounting process can best be described as?
A. Transaction, journal entry, source document, ledger account, trial balance
B. Source document, transaction, ledger account, journal entry, trial balance
C. Transaction, source document, journal entry, ledger account, trial balance
D. Transaction, source document, journal entry, trial balance, ledger account
4. Revenue is generally recognized being earned at the point of time when?
A. Cash is received
B. Billed to customers
C. Production is completed
D. Goods are delivered
5. The accounting system, in which accounting entries are made on the basis of amount
having become due for payment or receipt, is known as?
A. Cash system of accounting
B. Current accounting period
C. Accrual system of accounting
D. None of the given options
6. Bookkeeping is mainly concerned with?
A. Recording the Economic Activities
B. Interpreting the data
C. Designing the systems for recording, classifying and summarizing
D. All of Above
7. Which one of the following system of recording transaction has a dual aspect concept
of accounting?
A. Cash system of accounting
B. Single entry system
C. Accrual system of accounting
D. Double entry system
8. The documents relating to purchase of asset must be authorized by?
A. Senior management
B. Middle management
C. Lower level management
D. None
9. Accrual-basis of accounting?
A. Result in higher income than Cash-basis of accounting ?
B. Is not acceptable under GAAP
C. Leads to the reporting of more complete information than does cash-basis
D. None of Above
10. A manufacturer is considering the point at which a transaction can be recognized
within its profit and loss account. At which of the following stages is this permitted?
A. Products accepted by customer
B. Product manufactured
C. Sample products requested by customer
D. Order placed for the goods
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11. Recording financial transaction is part of?
A. Accounting
B. Book Keeping
C. Data Entry
D. Journal
12. Identifying an economic transaction is which phase of accounting cycle?
A. First
B. Second
C. Third
D. Last
13. Which of the following describes the practical framework of bookkeeping?
A. Classifying, recording and summarizing
B .Reporting, analyzing and interpreting
C. Classifying, analyzing and interpreting
D. Recording, summarizing and reporting
14. Which of the following principles assumes that a business will continue for a long time?
A. Historical cost
B. Periodicity
C. Objectivity
D. Going concern
15. Accountants use Generally Accepted Accounting Principles (GAAP) to make the financial
information communicated … I. relevant II. reliable III. comparable IV profitable
A. I, II and III
B. I, II and IV
C. I, III and IV
D. II, III and IV
16. Which of the following highlights the correct order of the stages in the accounting cycle?
A. Journalizing, final accounts, posting to the ledger and trial balance
B. Journalizing, posting to the ledger, trial balance and final accounts
C. Posting to the ledger, trial balance, final accounts and journalizing
D. Posting to the ledger, journalizing, final accounts and trial balance
17. Which of the following concepts use the rules ‘every transaction affects two or more ledger
accounts?’
A. Going concern
B. Double entry book-keeping
C. Money measurement
D. Periodicity
18. When corporations seek to hide their true financial situation, the pressure to engage in …
bookkeeping techniques falls on their accountants.
A. transparent
B. unethical
C. illegal
D. both b and c
19. If an accounting firm certifies a company's financial statements, it should have … to make the
firm's financial situation look better than it is.
A. motivation
B. a financial incentive
C. no financial incentive
D. an ethical intention
20. According to critics of the professional accounting rules, conflict of interest is built into the an
accounting system because the accounting firm is working …
A. on behalf of the general public
B. on behalf of the state
C. for the company whose accounts it is auditing
D. independently of the company whose accounts it is auditing
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Section B: Theory Questions
1. What is an accounting cycle?
2. Highlight the steps involved in the accounting cycle
3. Enumerate aby 5 major careers in accounting
4. Name any 2 professional accounting bodies in Nigeria and state the functions of each of them
5. Explain professional ethics and state two consequences of breaching ethics in accounting practice
6. Differentiate between accounting concepts and conventions wit 2 examples of each of them
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