Ethical Obligations and Decision-Making in Accounting 2nd Edition by Steven Mintz, Roselyn Morris

Exercise 13

SAS No. 99 points to three conditions that enable fraud to occur. Briefly describe the conditions. Do you think material misstatements in the financial statements of a company might be completely eliminated if a company were to establish an effective control environment that prevents each of the three factors from influencing the judgment of employees and management?

Step 1 of 3

Ethics:

Ethics is the set of some moral values and principal that differentiate right and wrong morally.

Audit:

The audit is the process of checking the financial statements of a company `to ensure that it is 100% authentic and free from any kind of bias or fraud.

Fraud:

Fraud means the willingly wrong representation of something, to hide some material facts from outsiders or mislead them about some facts.

Rest’s four stages of moral development:

• Moral sensitivity: Mr. C handles the situation morally. He carried full investigation to detect the fraud,

• Moral judgment: Mr. C interprets the whole situation and then takes the action. In taking action he takes care of the consequences,

• Moral motivation: Mr. C performs his job very efficiently. When a person is motivated he performs with full honesty and objectivity,

• Moral character: Mr. C handles the situation very well because of his character. A person with good character takes the decision that positively affects most of the people.