Ethics_Paper

Running head: REPORTING AND ETHICS PAPER Michelle Baker Reporting and Ethics Paper HCS 405 July 7, 2010 Introduction The goal of any accounting system is to make sure to record all data and transactions. Many systems in place for accounting will change when the organization needs change. In order for management to set up these changes, they will require financial reports they can prepare accurately and timely. This report will include a summary of the four elements of financial management, a summary of generally acceptable accounting practices, and general financial ethical standards. * Elements of Financial Management * Generally Accepted Accounting Principles (GAAP) is the guideline that creates financial statements for many organizations. These set of rules set the standards for listing the way they record transactions and the way financial statements are ready for agencies or organizations to review. This paper will discuss the four elements of financial management, which include” planning, organizing, organizing and directing and decision making; general accepted accounting practices and the ethics necessary to complete the job. To satisfy stakeholders and properly prepare the reports necessary for decision making, the financial manager has to look at what it would take to meet organizational objectives. Planning will help management forecast, anticipating, and assessing organizational needs and looking at the objectives necessary to create the steps to reach the objectives. Another part of the planning process includes budgeting, establishing procedures, and developing policies. The next step is to gain control of the financial situation, looking at reports from past quarters and comparing them to the current quarter. This comparison allows a manager to see which areas are doing well and which ones need attention according to the financial plan. The function of controlling includes establishing performance standards, monitoring performance, doing performance evaluations and making sure corrective actions are in place, if needed, to improve performance. According to Karen Sandrik of Healthcare Financial Management, “The purpose of controlling is to ensure that plans are being followed” (Sandrik, 1993, p. 1). * The third element of financial management includes organizing and directing. The function of organizing includes defining and grouping certain activities and finding a way to correlate them to each other. It includes delegating authority and establishing relationships, developing the structure of the organization as well as identifying and grouping the tasks for the different areas of the agency. Financial managers need to make sure circumstances are in place for collaboration among the different areas and ensure proper use of its resources. The final element is decision making. Managers have to look at what is currently happening and make essential changes to ensure thing are in place as they should be. Generally Accepted Accounting Principles (GAAP). During the course of the day, accountants record the financial transactions for the agency they oversee. They make judgments about how to record these transactions rely heavily on standards, based on the Generally Accepted Accounting Principles (GAAP). GAAP consists of accounting rules for financial accounting in the preparation of financial statements. In theUnited States, the American Institute of Certified Public Accountants (AICPA), The Financial Accounting Standards Board (FASB) and the Securities and Exchange Commission (SEC) also provide guidance, and assistance to help navigate the system processes. * GAAP provide a level of consistency of the financial instruments necessary for organizations to fully analyze what they have financially and areas they may need some additional assistance to arrive on track. “GAAP covers things like revenue recognition, balance sheet item classification and outstanding share measurements. Companies are expected to follow GAAP rules when reporting their financial data via financial statements” (Harper, n/d, p. 3). * General Financial Ethical Standards In our personal lives, most people try to make sure they make the right choices. When people think about ethics, they only think about their personal existence and not the business side. Ethics are something that people relate to privately and not when they think about the business side of their lives. “Ethics are about making choices that may not always feel good or seem like they benefit you but are the right choices to make. They are the choices that are examples of model citizens and examples of the golden rules. We've all heard the golden rules: Don't hurt, don't steal, don't lie, or one of the most famous: Do unto others as you would have done to you. These are not just catchy phrases; these are words of wisdom that any productive member of society should strive to live by” (Harvey, 2004, p. 1). In the last few years, many accounting scandals have taken place all over the world. Investors and shareholders lost billions during this period. An example of ethics in business would be Countrywide. Possessing 3.5% of the United States lending market, Countrywide financed 20% of all mortgages made in the United States. Ethically, salespeople knew they made a deal that families could not handle, but chose to make the deal anyway. “Countrywide had no qualms in following through despite it knowing those families would likely fail to make monthly payments: these loans would be sold to investors shortly after any way. Employees were given scripts as a sales aid when talking to customers about taking out loans” (Huffington Post, 2010, p.1). “Had ethics been considered in the first place by the leaders of the company, there would have been no scandal. If ethics were used on a daily basis in every company, there would never be scandals” (Hald, n/d, p.1). Other examples include: “A hospital CFO, convicted by a state court jury of stealing $1.6 million by diverting interest from the hospital's investments in certificates of deposit and other instruments to his own account and by submitting fraudulent invoices to the hospital from fictitious companies; A director of third-party reimbursement, indicted on 11 criminal counts of Medicare fraud; A hospital CFO and other top executives, investigated by a Federal grand jury for alleged fraudulent billing for services never provided to the hospital; and A vice president of finance and the directors of patient accounts at two hospitals, sentenced to prison, for collectively stealing $3.6 million from one of the facilities” (Sandrick, 1993, p. 3). Companies have a responsibility to the stakeholders to give reliable financial information. If ethical accounting would have been in place, they could have been responsible for better stability in the financial market. * Conclusion * The way we look at financial information helps us to decide the way we view our organization’s health. Leaderships major issues will always be financial integrity and ethical issues that could arise from people working for the company. Those who make their living as accountants will earn respect for their honesty, integrity and competence. Failure of financial managers to control and protect the assets of the organization will see the organization end up a memory. References: Hald, Tim, (n/d) Accounting Ethics - The Importance of Ethical Practices in Business and Personal Finance, Retrieved on July 6, 2010 from http://EzineArticles.com/'expert=Tim_H._Hald Harper, D. (n/d) Financial Statements, Retrieved on July 5, 2010 from * http://www.investopedia.com/university/financialstatements/financialstatements10.asp Harvey, C. (2004) GAAP, Retrieved on July 3, 2010 from http://financial-dictionary.thefreedictionary.com/GAAP * Sandrik, K. (1993) Healthcare Financial Management, Retrieved on July 5, 2010 from http://www.highbeam.com/doc/1G1-14122725.html