A G U N G N O P R A N T O

A I N H A J A W I Y A H

L I N C T A R J I W O M A T H R I U L

M A S I T A H

CHAPTER 1THE DEVELOPMENT

OF ACCOUNTING THEORY

Schroeder

WEBSTER DEFINE :“Systematically organized knowledge, applicable in a relatively wide variety of circumstances, a system of assumptions, accepted principles and rules of procedure to analyze, predict or otherwise explain the nature of behavior of a specified set of phenomena.”

THE EARLY HISTORY OF ACCOUNTINGThe Zenon Papyri

The evolution of joint ventures into ongoing businesses

The concept of capital maintenance

The impact of the Renaissance

Fra Luca Pacioli

The impact of the industrial revolution and the progressive movement

The accountant as a protector of business interests

ACCOUNTING IN THE UNITED STATES SINCE 1930

Meetings between NYSE and AIA

Securities Act of 1933Securities Exchange Act of 1934

AAA

Committee on Accounting Procedure

Accounting Principles

Board

Financial Accounting Standards Board

THE ACCOUNTING PRINCIPLES BOARD

The flap over accounting for the investment tax Credit

Rule 203

Criticism of the APB

Formation and structureTypes of pronouncements

APB Opinions

THE FINANCIAL ACCOUNTING STANDARDS BOARD

• The Wheat Committee• The True blood Committee• The FASB was established

FASB• Mission• Types of pronouncements• Emerging Issues• Standards Overload• Standard setting as a political process • Economic Consequences

GAAP

• Evolution of phrase:• Changed wording of auditor’s certificate brought about by

meetings between NYSE and AIA• The APB’s definition• The Auditing Standards Executive Committee’s definition

THE ROLE OF ETHICS IN ACCOUNTING

• The public accountant as a watchdog• Statement from Warren Burger

Accounting in Crisis – The Events of the Early 2000s• Two major changes in the accounting

profession have taken place in the wake of the accounting scandals:

1. Arthur Andersen2. Sarbanes-Oxley Act

International Accounting Standards• The concept of harmonization• The IASB• The IASB’s objectives:• 41 Statements of Accounting Standards and 5 Statements of

Financial Reporting Standards to date

PEMBAHASAN JURNAL

ACCOUNTING ETHICS AND ITS IMPORTANT ROLE FOR REDUCTION OF ACCOUNTING FRAUD : AN EMPIRICAL STUDY IN HANOY

By: VU HAI YEN (June 2010)

Department of Business Studies, HELP University College

Research Background

>> The boundary between “ethical” and “unethical” is very ambiguous.

>> Vietnam’s economy is increasingly integrated with worldwide.

Research

Research Backgrou

nd

Problem Statemen

ts

Objectives of

Research

Sphere of Research

Research Method

Source of Data and Sample

Selection

Problem Statements

>> For an organization, Ethics plays an important role in curbing accounting fraud

>> How to balance between private interests and public interests? How to avoid accounting fraud?

>> Vietnam’s goal by 2020 is comprehensive and equitable integration with countries in the field of accounting and auditing, including import and export accounting and auditing services of an organization.

Research

Research Backgroun

d

Problem Statement

s

Objectives of

Research

Sphere of Research

Research Method

Source of Data and Sample

Selection

Objectives of Research

>> To determine applying the code of ethics for professional accountant in Vietnam.

>> To define the factors that contribute to accounting fraud related to the state of Vietnam

>> To reflect reality from theoretical model to practical theory

>> To recommend some suggestions to investors, companies for the importance of ethics within an organization to curb accounting fraud

Research

Research Backgroun

d

Problem Statement

s

Objectives of

Research

Sphere of Research

Research Method

Source of Data and Sample

Selection

Sphere of Research

>> Place of conducting research: National Economics University, Hanoi capital, Vietnam

>> Object of research: accountants, students who are major accountants

>> Companies in research : public companies and private companies

>> Time period of conducting research: from 31 may 2010 to 15 June 2010

Research

Research Backgroun

d

Problem Statement

s

Objectives of

Research

Sphere of Research

Research Method

Source of Data and Sample

Selection

Research Method

>> The researcher conducts a survey among accountants who are working in public companies and private companies, as well as students studying master degree in accounting in Hanoi city, Vietnam.

>> These questions mainly focus on the situations that reflect the character of accountant and the factors that contribute to accounting fraud.

>> Total of correspondent : 200

Research

Research Backgroun

d

Problem Statement

s

Objectives of

Research

Sphere of Research

Research Method

Source of Data and Sample

Selection

Source of Data and Sample Selection>> In this study, the researcher bases mostly on primary data. A ten-simple questionnaire survey was conducted with 200 accountants from both public companies and private companies.

>> Besides, the researcher also referred to secondary data which was collected from journals, books, sources from internet.

Research

Research Backgroun

d

Problem Statement

s

Objectives of

Research

Sphere of Research

Research Method

Source of Data and Sample

Selection

HYPOTHESIS RESULTS

>> Through the result of 102 questionnaire collected

H1>> accountants who have less experiences work more objectively than the one who have more experiences. (H0)

H2>> accountants who have more experiences apply the code of professional competence and due care better than the one who have less experience. (H0)

H3>> accountants who have more experiences have more possibility to break the money culture than the one who have less experience. (H0)

H4>> accountants who have less experience have more possibility to break legalistic culture than the one who have more experiences. (Ha)

GENERAL DISCUSSION

• Ethical conflicts commonly arise in the organization's relationship with customers, employees, suppliers, and other individuals, and also as a result of these acts as courtesy gifts, kickbacks and discriminatory pricing.

• ethical issues arise due to conflicts between moral philosophy and ethical standards of personal ethical standards.

CONCLUSION

• Accountants today are facing pressures such as competition, advertising, and introverted environment.

• Although the researcher has described a number of relationships and situations that create ethical problems, but it's hard to recognize the specific ethical issues in practice.

RECOMMENDATION

• To the government • To universities and training institutions, • To the organizations, • To accountants

LIMITATION OF STUDY

• still a student • the small sample size • language problem

SUGGESTION FOR FUTURE RESEARCH

• that the sphere of future research should be bigger which can be conducted in more cities, even over Vietnam. • that it should be conducted more extensively

THE PURSUIT OF THE CONCEPTUAL FRAMEWORK

CHAPTER 2

What is the conceptual framework?

Paton Cannng Scott

A Tentative Statement of Accounting Principles Affecting Corporate

Report

A Statement of Accounting Principles

An Introduction to Corporate Accounting

Standards

ARSs No. 1 and No. 3

Early Authoritative and Semi-authoritative

Organizational Attempts to Develop the Conceptual

Framework of Accounting

The Trueblood Committee

Committee report specified the following four information needs of users:

1. Making decisions concerning the use of limited resources

2. Effectively directing and controlling organizations3. Maintaining and reporting on the custodianship of

resources4. Facilitating social functions and controls

Objectives of financial reporting

Statement on Accounting Theory and Theory Acceptance

Rationale for the committee’s approach

The approaches to accounting theory were condensed into

1. Classical2. Decision Usefulness3. Information Economics.

Criticisms of the approaches to theory

The FASB’s Conceptual Framework Project

The objectives identify the goals and purposes of financial accounting; whereas, the fundamentals are the underlying concepts that help achieve those objectives.

These concepts are designed to provide guidance in:

1. Selecting the transactions, events and circumstances to be accounted for

2. Determining how the selected transactions, events, and transactions should be measured

3. Determining how to summarize and report the results of events, transactions and circumstances.

SFAC

SFAC

No. 1

SFAC

No. 2

SFAC

No. 5

SFAC

No. 6

SFAC

No. 7

SFAC No. 1 “Objectives of Financial Reporting By Business Enterprises”

1. Assess cash flow prospects2. Report on enterprise resources,

claims against resources and changes in them3. Report economic resources, obligations and

owners equity4. Report enterprise performance and earnings 5. Evaluate liquidity, solvency, and flow of funds6. Evaluate management stewardship and

performance7. Explain and interpret financial information

No. 2 “Qualitative Characteristics of Accounting Information

Addresses the question: What makes accounting information useful?

Develops a Hierarchy of Accounting Qualities

Decision makers and their characteristics(for example, understanding of prior knowledge)

A Hierarchy of Accounting Qualities

Users of Accounting Information

Pervasive Constraint

User-specific qualities

Primary Decision-specificqualities

Ingredients of primary qualities

Threshold for recognition

Understandability

Decision Usefulness

Feedback value

Benefits > Costs

Relevance Reliability

RepresentationalFaithfulness

VerifiabilityTimeliness

Neutrality

Comparability and Consistency

Materiality

Predictive value

No. 5 “Recognition and Measurement in Financial Statements of Business Enterprises”

Sets forth recognition criteria and guidance on what information should be incorporated into financial statements and when this information should be reported

Defined comprehensive income as:

Revenues EarningsLess: Expenses Plus or minus cumulative

accounting adjustmentsPlus: Gains Plus or minus other

non-owner changes in equityLess: Losses= Earnings = Comprehensive Income

No. 5 “Recognition and Measurement in Financial Statements of Business Enterprises”

Measurement Issues1. Definitions.

The item meets the definition of an element contained in SFAC No. 6.

2. Measurability. It has a relevant attribute measurable with sufficient

reliability.

3. Relevance. The information about the item is capable of making a

difference in user decisions.

4. Reliability. The information is representationally faithful, verifiable,

and neutral.

No. 6 “The Elements of Financial Statements”

Defines the ten elements of financial statements that are used to measure the performance and position of economic entities

These elements are discussed in more depth in Chapters 6 and 7.

How should present value amortizations be used when the estimates of cash flows change?

How should the estimates of cash flows and interest rates be developed?

Does the measurement of liabilities at present value differ from the measurement of assets?

SFAC No. 7 “Using Cash Flow Information and Present Value in Accounting Measurements”

Accounting measurement is a very broad topic. Consequently, the FASB focused on a series of questions relevant to

measurement and amortization conventions that employ present value techniques. Among these questions are:

What are the objectives of using present value in the initial recognition of assets and liabilities? And, do these objectives differ in subsequent fresh-start measurements of assets and liabilities?

What are the objectives of present value when used in conjunction with the amortization of assets and liabilities?

Present value measurements that fully captures the economic differences between assets should include the following elements:

SFAC No. 7 “Using Cash Flow Information and Present Value in Accounting Measurements”

1. An estimate of the future cash flows

2. Expectations about variations in the timing of those cash flows3. The time value of money represented by the risk-free rate of interest

4. The price for bearing the uncertainty

5. Other, sometimes unidentifiable, factors including illiquidity and market imperfections

SFAC No. 7 “Using Cash Flow Information and Present Value in Accounting Measurements”

Approaches to present value1. Traditional2. Expected cash flow

Incorporating probabilities The objective is to estimate the value of

the assets required currently to settle the liability with the holder or transfer the liability to an entity with a comparable credit standing

Use of the interest method

PEMBAHASAN JURNAL

Rules Based and Principles Based Accounting Standards and Earnings Management.

Ferdy van Beest2009

Netherland: Nijmegen Center for Economics (NiCE) Institute for Management Research.

Rules Based and Principles Based Accounting Standards and Earnings Management

• IFRS more principles based than GAAP (rule based)

• Reporting standards affect earnings management

• How this IFRS principle based affect earnings management?

Problems Phenome

non

• Limited evidence in answering ‘how’ and ‘to what extent’ standards affect earnings management. (prior study remain inconclusive)

Research Motivati

on

• Whether manager, in rule based setting, engage in earnings management through transaction decision rather than accounting decision

• Whether in Principle based area managers take accounting decisions more often for the purpose of earnings management than transaction decision.

• Whether the discretionary room in accountings standards has an effect on the level and nature of earnings management.

Problems

• Examine the effects of discretionary room in accounting standard on level and nature of earnings management decision

Objectives

Rules Based and Principles Based Accounting Standards and Earnings Management

Rules Based and Principles Based Accounting Standards and Earnings Management

• Earnings Management: purposeful intervention in financial reporting process to obtain private gain

• Accounting decision: choices among equally acceptable rules and/or judgment and estimates required to implement GAAP

• Transaction decision: choices of structuring transaction and contracts or adjust real production and investment activities that are aimed at engaging in earnings management

Theoretical Review

• H1a: Principle based setting induces earnings management through accounting decisions.

• H1b: Rule based setting induces managers to engage in earnings management through transaction decisions,

• H2: the degree of earnings management does not differ between a rules-based and principles-based setting

Hypothesis

Rules Based and Principles Based Accounting Standards and Earnings Management

• Population: Financial Manager• Samples: 175 financial managers

Population and

Sampling

• Experiment • 175 financial manager decided on both

available-for-sale security to sell and an impairment loss decision to consider, an opportunity to take an accounting decision and transaction decision to engage in earnings management. IAS 32 and IAS 36 were manipulated for representing the rules-based and principles-based setting, and manipulated analysts’ expectation creating 2x2 between subject design.

Data Sources& Data

Collection

Method

Rules Based and Principles Based Accounting Standards and Earnings Management

• Compare the number of accounting decision taken between rule based and principle based.

• ANOVA test to confirm whether this hypothesis is statistically confirmed.

Analysis Method

• Transaction decision in rule based setting

• Accounting decision in principle based setting

• Do not differ significantly in level of earnings management.

Analysis

Outcome

Rules Based and Principles Based Accounting Standards and Earnings Management

• Neither rule based nor principle based accounting standard are able to eliminate earnings management decision.

• managers tend to adjust their decisions based on the latitude given in the accounting standards. When standards are precisely specified, managers tend to search for transaction opportunities to meet the pre-specified expectations. On the other hand, when standards are imprecisely specified, managers use accounting decisions, such as an impairment loss decision, to meet their incentives given.

• the extent of discretion in the standards is found to have a small, statistically insignificant impact on the average amount of earnings management managers include in their financial report.

Conclusions