Page 428 - Introduction to Business

402 PART 4 Accounting

Summary

LEARNING OBJECTIVE 1 patibility of domestic and international accounting
Explain the function of the accounting information requirements.
system. International standards on auditing are issued by
the International Auditing and Assurance Standards
Accounting is the language of business. It is the
Board, a committee of the International Federation of
recording, summarizing, and reporting of the eco-
Accountants. International Standards on Auditing con-
nomic activities and events of an organization.
tain basic principles and essential procedures for audit-
Accounting generates information used by persons
ing, along with related guidance in the form of explana-
within the firm and external to the firm in their deci-
tory and other material.
sion making. The accounting information system
(AIS), like all systems, has specific objectives, inputs, LEARNING OBJECTIVE 4
processes, outputs, and controls. A typical AIS’s objec-
Discuss the importance of ethical accounting
tives are to provide all the financial information
practices.
needed internally by management for business deci-
sion making and to provide financial information to Ethical accounting practices are essential to countless
various external users concerned with the financial people, including investors, lenders, employees, suppli-
activities of the organization. ers, and customers. In the history of the world, the
United States is unique. Compared to people in other
LEARNING OBJECTIVE 2 countries, Americans enjoy more freedom, more wealth
Describe how the AIS fits within the management that is more evenly distributed, and more opportunity.
information system. The accounting profession has played a key role in the
United States’ success story. The accounting profession
The management information system (MIS) provides
has made essential contributions to efficient operations
all the information, financial and nonfinancial, needed
of business firms, to the functioning of the capital market
by management for decision making. The MIS can be
system, and to the growth of the economy in general. All
thought of as a collection of all the organization’s infor-
this depends on accountants doing their jobs according
mation sources, including the AIS and systems related
to the highest standards of ethics and personal integrity.
to marketing, human resources, production, data pro-
Most companies have an ethics code to guide
cessing, and so on.
their employees in how they conduct business. Like-
wise, business and accounting organizations provide
LEARNING OBJECTIVE 3
ethical guidelines to their members. Both accounting
Briefly recount accounting issues associated with educators and professional organizations can help
international business, such as the importance of guide future and current accountants in the proper
International Accounting Standards and Interna- ways to conduct business.
tional Standards on Auditing.
For as long as international trade has occurred, LEARNING OBJECTIVE 5
accounting has been necessary to record and report the List a few examples of computer crime.
results. International operations are increasingly
The increased use of computers to maintain financial
important to all types of business firms. Many multina-
records has led to more opportunities for computer
tional firms are either expanding international opera-
crimes, which are estimated to cost several billions of
tions or becoming part of other multinational firms via
dollars annually. Computer crimes can include such
mergers or acquisitions. As a result, more firms than
things as creating false records, misusing account num-
ever before are providing products and services to cus-
bers and passwords, altering shipping and purchasing
tomers around the globe.
documents to create fraudulent sales or for purposes of
The International Accounting Standards Board
theft, modifying criminal records, and modifying
issues International Accounting Standards (IASs). The
school grades.
objectives of IASs include increasing harmonization
of accounting standards and disclosures to meet the
LEARNING OBJECTIVE 6
needs of the global market, providing an accounting
Explain the importance of internal controls.
basis for underdeveloped or newly industrialized
countries to follow as the accounting profession The success of any organization depends on an effec-
emerges in those countries, and increasing the com- tive control structure. Internal control structures
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