Ethical Issues Related to Financial Reports

Ethical Issues Related to Financial Reports

  • Businesses have ethical and legal responsibilities in relation to financial management.
  • Financial management decisions must reflect the objectives of a business and the interests of owners and shareholders.
  • Laws relating to corporations include the responsibilities of directors and requirements for disclosure for corporations.


Directors and managers have a duty to:

      • Act in good faith
      • Exercise power for proper purpose in the name of the cooperation
      • Exercise discretion reasonably and properly
      • Avoid conflicts of interest


  • Professional associations require accountants to display integrity, objectivity, confidentiality and high professional and technical ability.
  • Audited accounts are a legal requirement of all public companies, clubs and associations annually. An audit is an independent check of the financial records of a business by a certified accountant to ensure financial reports represent a true and fair financial picture of the business.
  • The preparation of financial accounts is regulated by Australian accounting standards
    • Businesses are not able to alter the accounting period to manipulate financial records to make the business appear more profitable or more financially secure

The Australian securities and investments commission ensures all companies comply with company and financial services laws to protect consumers, investors and creditors.


Extract from Business Studies Stage 6 Syllabus. © 2010 Board of Studies NSW.