【正文】 ncreasing ine and assets ? Stock options (give you the right to purchase a stock at a fixed price in some future period)—maximize share prices (believed to be related to reported ine). 21 Accruals and Earnings Management ? Amortization expense ? Increase in receivables ? Increase in inventory ? Decrease in accounts payable and accrual liabilities 22 What could be done? ? Better accounting standards and better disclosure. Less emphasis on historical cost and more emphasis on current market value of assets and liabilities on balance sheet. ? Fore example, record all stock options as an expense on ine statement, when issued. ? Restrictions on auditors . auditors not allowed to do consulting work for firm they audit ? Greater accountability of board of directors and more punishment for wrong doings. 23 Ethics and accounting ? Ethics ? Rules Of Professional Conduct ? Legal ? What is legal or meet the rules of professional conduct may not be considered ethical. 24 Some Principles to Evaluate One’s Actions 1 ? NonMaleficence: Am I causing harm by failing to do something or agreeing with it? ? Beneficence:Do my actions benefit other persons besides myself? ? Justice: Do I treat those for whom I am responsible equitably (fairly)? 25 Some Principles to Evaluate One’s Actions 2 ? Fidelity: Do I uphold my part of the relationship? ? Act Consciously: Do I know the assumptions on which I base my actions and are they valid? ? Utilitarianism ? Deontology 26 Consequences or Nature of Actions? ? Utilitarianism: [British Philosopher John Stuart Mill (18061873)]—Do my actions promote ―the Greatest Good for the Greatest Number of Individuals‖? ? Deontology: [German Philosopher Immanuel Kant (17241804)]– Examine the nature of actions rather than the outes achieved. Doing the right thing whatever the consequences. 27 An Ethical Dilemma (conflict in duties) ? Suppose you are the auditor of ABC auditing pany and yo