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Accounting, also known as accountancy, is the
measurement Measurement is the quantification (science), quantification of variable and attribute (research), attributes of an object or event, which can be used to compare with other objects or events. In other words, measurement is a process of determi ...
, processing, and
communication Communication (from la, communicare, meaning "to share" or "to be in relation with") is usually defined as the transmission of information. The term may also refer to the message communicated through such transmissions or the field of inquir ...
of financial and non financial information about economic entities such as
business Business is the practice of making one's living or making money by producing or Trade, buying and selling Product (business), products (such as goods and Service (economics), services). It is also "any activity or enterprise entered into for pr ...
es and
corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal ...
s. Accounting, which has been called the "language of business", measures the results of an organization's economic activities and conveys this information to a variety of stakeholders, including investors, creditors,
management Management (or managing) is the administration of an organization, whether it is a business, a nonprofit organization, or a government body. It is the art and science of managing resources of the business. Management includes the activities ...
, and regulators. Practitioners of accounting are known as accountants. The terms "accounting" and " financial reporting" are often used as synonyms. Accounting can be divided into several fields including
financial accounting Financial accounting is the field of accounting concerned with the summary, analysis and reporting of financial transactions related to a business. This involves the preparation of Financial statement audit, financial statements available for p ...
, management accounting, tax accounting and cost accounting. Financial accounting focuses on the reporting of an organization's financial information, including the preparation of financial statements, to the external users of the information, such as investors, regulators and suppliers; and management accounting focuses on the measurement, analysis and reporting of information for internal use by management. The recording of financial transactions, so that summaries of the financials may be presented in financial reports, is known as bookkeeping, of which double-entry bookkeeping is the most common system. Accounting information systems are designed to support accounting functions and related activities. Accounting has existed in various forms and levels of sophistication throughout human history. The double-entry accounting system in use today was developed in medieval Europe, particularly in
Venice Venice ( ; it, Venezia ; vec, Venesia or ) is a city in northeastern Italy and the capital of the Veneto Regions of Italy, region. It is built on a group of 118 small islands that are separated by canals and linked by over 400  ...
, and is usually attributed to the Italian mathematician and Franciscan friar Luca Pacioli. Today, accounting is facilitated by accounting organizations such as standard-setters, accounting firms and professional bodies. Financial statements are usually audited by accounting firms, and are prepared in accordance with generally accepted accounting principles (GAAP). GAAP is set by various standard-setting organizations such as the Financial Accounting Standards Board (FASB) in the United States and the Financial Reporting Council in the
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the European mainland, continental mainland. It comprises England, Scotlan ...
. As of 2012, "all major economies" have plans to converge towards or adopt the
International Financial Reporting Standards International Financial Reporting Standards, commonly called IFRS, are accounting standards issued by the IFRS Foundation and the International Accounting Standards Board (IASB). They constitute a standardised way of describing the company's fina ...
(IFRS).


History

Accounting is thousands of years old and can be traced to
ancient Ancient history is a time period from the History of writing, beginning of writing and recorded human history to as far as late antiquity. The span of recorded history is roughly 5,000 years, beginning with the Sumerian language, Sumerian c ...
civilization A civilization (or civilisation) is any complex society characterized by the development of a state, social stratification, urbanization Urbanization (or urbanisation) refers to the population shift from Rural area, rural to urban are ...
s.Robson, Keith. 1992. "Accounting Numbers as 'inscription': Action at a Distance and the Development of Accounting." ''Accounting, Organizations and Society'' 17 (7): 685–708. The early development of accounting dates back to ancient
Mesopotamia Mesopotamia ''Mesopotamíā''; ar, بِلَاد ٱلرَّافِدَيْن or ; syc, ܐܪܡ ܢܗܪ̈ܝܢ, or , ) is a historical region of Western Asia situated within the Tigris–Euphrates river system, in the northern part of the F ...
, and is closely related to developments in
writing Writing is a medium of human communication which involves the representation of a language through a system of physically Epigraphy, inscribed, Printing press, mechanically transferred, or Word processor, digitally represented Symbols (semiot ...
, counting and
money Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are as ...
; there is also evidence of early forms of bookkeeping in ancient
Iran Iran, officially the Islamic Republic of Iran, and also called Persia, is a country located in Western Asia. It is bordered by Iraq and Turkey to the west, by Azerbaijan and Armenia to the northwest, by the Caspian Sea and Turkmeni ...
,Oldroyd, David & Dobie, Alisdair: ''Themes in the history of bookkeeping'', The Routledge Companion to Accounting History, London, July 2008, , Chapter 5, p. 96 and early auditing systems by the ancient
Egyptians Egyptians ( arz, المَصرِيُون, translit=al-Maṣriyyūn, ; arz, المَصرِيِين, translit=al-Maṣriyyīn, ; cop, ⲣⲉⲙⲛ̀ⲭⲏⲙⲓ, remenkhēmi) are an ethnic group native to the Nile Valley in Egypt. Egyptian ident ...
and Babylonians. By the time of Emperor
Augustus Caesar Augustus (born Gaius Octavius; 23 September 63 BC – 19 August AD 14), also known as Octavian, was the first Roman emperor; he reigned from 27 BC until his death in AD 14. He is known for being the founder of the Roman Pri ...
, the Roman government had access to detailed financial information. Double-entry bookkeeping was pioneered in the Jewish community of the early-medieval Middle East and was further refined in
medieval Europe In the history of Europe, the Middle Ages or medieval period lasted approximately from the late 5th to the late 15th centuries, similar to the Post-classical, post-classical period of World history (field), global history. It began with t ...
. With the development of joint-stock companies, accounting split into
financial accounting Financial accounting is the field of accounting concerned with the summary, analysis and reporting of financial transactions related to a business. This involves the preparation of Financial statement audit, financial statements available for p ...
and management accounting. The first published work on a double-entry bookkeeping system was the '' Summa de arithmetica'', published in
Italy Italy ( it, Italia ), officially the Italian Republic, ) or the Republic of Italy, is a country in Southern Europe. It is located in the middle of the Mediterranean Sea, and its territory largely coincides with the Italy (geographical region) ...
in 1494 by Luca Pacioli (the "Father of Accounting"). Accounting began to transition into an organized profession in the nineteenth century, with local professional bodies in England merging to form the Institute of Chartered Accountants in England and Wales in 1880.


Etymology

Both the words accounting and accountancy were in use in
Great Britain Great Britain is an island in the North Atlantic Ocean off the northwest coast of continental Europe. With an area of , it is the largest of the British Isles, the List of European islands by area, largest European island and the List of is ...
by the mid-1800s, and are derived from the words ''accompting'' and ''accountantship'' used in the 18th century.Labardin, Pierre, and Marc Nikitin. 2009. "Accounting and the Words to Tell It: An Historical Perspective." ''Accounting, Business & Financial History'' 19 (2): 149–166. In
Middle English Middle English (abbreviated to ME) is a form of the English language that was spoken after the Norman conquest of England, Norman conquest of 1066, until the late 15th century. The English language underwent distinct variations and developments ...
(used roughly between the 12th and the late 15th century) the verb "to account" had the form ''accounten'', which was derived from the Old French word ''aconter'',Baladouni, Vahé. 1984. "Etymological Observations on Some Accounting Terms." ''The Accounting Historians Journal'' 11 (2): 101–109. which is in turn related to the
Vulgar Latin Vulgar Latin, also known as Popular or Colloquial Latin, is the range of non-formal registers of Latin Latin (, or , ) is a classical language belonging to the Italic languages, Italic branch of the Indo-European languages. Latin was ori ...
word ''computare'', meaning "to reckon". The base of ''computare'' is ''putare'', which "variously meant to prune, to purify, to correct an account, hence, to count or calculate, as well as to think". The word " accountant" is derived from the French word , which is also derived from the Italian and
Latin Latin (, or , ) is a classical language belonging to the Italic languages, Italic branch of the Indo-European languages. Latin was originally a dialect spoken in the lower Tiber area (then known as Latium) around present-day Rome, but through ...
word . The word was formerly written in English as "accomptant", but in process of time the word, which was always pronounced by dropping the "p", became gradually changed both in pronunciation and in
orthography An orthography is a set of convention (norm), conventions for writing a language, including norms of spelling, hyphenation, capitalization, word, word breaks, Emphasis (typography), emphasis, and punctuation. Most transnational languages in the ...
to its present form.


Terminology

Accounting has variously been defined as the keeping or preparation of the financial records of transactions of the firm, the analysis, verification and reporting of such records and "the principles and procedures of accounting"; it also refers to the job of being an accountant. Accountancy refers to the occupation or
profession A profession is a field of work that has been successfully '' professionalized''. It can be defined as a disciplined group of individuals, '' professionals'', who adhere to ethical standards and who hold themselves out as, and are accepted b ...
of an accountant, particularly in
British English British English (BrE, en-GB, or BE) is, according to Oxford Dictionaries, " English as used in Great Britain, as distinct from that used elsewhere". More narrowly, it can refer specifically to the English language in England, or, more broa ...
.


Topics

Accounting has several subfields or subject areas, including
financial accounting Financial accounting is the field of accounting concerned with the summary, analysis and reporting of financial transactions related to a business. This involves the preparation of Financial statement audit, financial statements available for p ...
, management accounting, auditing, taxation and accounting information systems.Weber, Richard P., and W. C. Stevenson. 1981. "Evaluations of Accounting Journal and Department Quality." The Accounting Review 56 (3): 596–612.


Financial accounting

Financial accounting focuses on the reporting of an organization's financial information to external users of the information, such as investors, potential investors and creditors. It calculates and records business transactions and prepares financial statements for the external users in accordance with generally accepted accounting principles (GAAP). GAAP, in turn, arises from the wide agreement between accounting theory and practice, and change over time to meet the needs of decision-makers. Financial accounting produces past-oriented reports—for example financial statements are often published six to ten months after the end of the accounting period—on an annual or quarterly basis, generally about the organization as a whole.


Management accounting

Management accounting focuses on the measurement, analysis and reporting of information that can help managers in making decisions to fulfill the goals of an organization. In management accounting, internal measures and reports are based on cost-benefit analysis, and are not required to follow the generally accepted accounting principle (GAAP). In 2014 CIMA created th
Global Management Accounting Principles (GMAPs)
The result of research from across 20 countries in five continents, the principles aim to guide best practice in the discipline. Management accounting produces past-oriented reports with time spans that vary widely, but it also encompasses future-oriented reports such as budgets. Management accounting reports often include financial and non financial information, and may, for example, focus on specific products and departments.


Auditing

Auditing is the verification of assertions made by others regarding a payoff,Baiman, Stanley. 1979. "Discussion of Auditing: Incentives and Truthful Reporting." Journal of Accounting Research 17: 25–29. and in the context of accounting it is the " unbiased examination and evaluation of the financial statements of an organization". Audit is a professional service that is systematic and conventional. An audit of financial statements aims to express or disclaim an independent opinion on the financial statements. The auditor expresses an independent opinion on the fairness with which the financial statements presents the financial position, results of operations, and cash flows of an entity, in accordance with the generally accepted accounting principles (GAAP) and "in all material respects". An auditor is also required to identify circumstances in which the generally accepted accounting principles (GAAP) have not been consistently observed.


Information systems

An accounting information system is a part of an organization's information system used for processing accounting data. Many corporations use artificial intelligence-based information systems. The banking and finance industry uses AI in fraud detection. The retail industry uses AI for customer services. AI is also used in the cybersecurity industry. It involves computer hardware and software systems using statistics and modeling. Many accounting practices have been simplified with the help of accounting computer-based software. An enterprise resource planning (ERP) system is commonly used for a large organisation and it provides a comprehensive, centralized, integrated source of information that companies can use to manage all major business processes, from purchasing to manufacturing to human resources. These systems can be cloud based and available on demand via application or browser, or available as software installed on specific computers or local servers, often referred to as on-premise.


Tax accounting

Tax accounting in the United States concentrates on the preparation, analysis and presentation of tax payments and tax returns. The U.S. tax system requires the use of specialised accounting principles for tax purposes which can differ from the generally accepted accounting principles (GAAP) for financial reporting. U.S. tax law covers four basic forms of business ownership:
sole proprietorship A sole proprietorship, also known as a sole tradership, individual entrepreneurship or proprietorship, is a type of enterprise owned and run by one person and in which there is no legal distinction between the owner and the Types of business entity ...
,
partnership A partnership is an arrangement where parties, known as business partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, business entity, businesses, interest-based organizations, schoo ...
,
corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal ...
, and
limited liability company A limited liability company (LLC for short) is the United States of America, US-specific form of a private limited company. It is a business structure that can combine the Flow-through entity, pass-through taxation of a partnership or sole p ...
. Corporate and personal income are taxed at different rates, both varying according to income levels and including varying marginal rates (taxed on each additional dollar of income) and average rates (set as a percentage of overall income).


Forensic accounting

Forensic accounting is a specialty practice area of accounting that describes engagements that result from actual or anticipated disputes or
litigation - A lawsuit is a proceeding by a party or parties against another in the Civil law (common law), civil court of law. The archaic term "suit in law" is found in only a small number of laws still in effect today. The term "lawsuit" is used in re ...
. " Forensic" means "suitable for use in a court of law", and it is to that standard and potential outcome that forensic accountants generally have to work.


Political campaign accounting

Political campaign accounting deals with the development and implementation of financial systems and the accounting of financial transactions in compliance with laws governing political campaign operations. This branch of accounting was first formally introduced in the March 1976 issue of ''The Journal of Accountancy''.


Organizations


Professional bodies

Professional accounting bodies include the American Institute of Certified Public Accountants (AICPA) and the other 179 members of the International Federation of Accountants (IFAC), including Institute of Chartered Accountants of Scotland (ICAS), Institute of Chartered Accountants of Pakistan (ICAP), CPA Australia, Institute of Chartered Accountants of India, Association of Chartered Certified Accountants (ACCA) and Institute of Chartered Accountants in England and Wales (ICAEW). Some countries have a single professional accounting body (e.g. Brazil) and, in some other countries, professional bodies for subfields of the accounting professions also exist, for example the Chartered Institute of Management Accountants (CIMA) in the UK and Institute of management accountants in the United States. Many of these professional bodies offer education and training including qualification and administration for various accounting designations, such as certified public accountant ( AICPA) and chartered accountant.


Firms

Depending on its size, a company may be legally required to have their financial statements audited by a qualified auditor, and audits are usually carried out by accounting firms. Accounting firms grew in the United States and Europe in the late nineteenth and early twentieth century, and through several mergers there were large international accounting firms by the mid-twentieth century. Further large mergers in the late twentieth century led to the dominance of the auditing market by the "Big Five" accounting firms: Arthur Andersen,
Deloitte Deloitte Touche Tohmatsu Limited (), commonly referred to as Deloitte, is an international professional services network headquartered in London, England. Deloitte is the largest professional services network by revenue and number of profession ...
, Ernst & Young, KPMG and PricewaterhouseCoopers. The demise of Arthur Andersen following the Enron scandal reduced the Big Five to the Big Four.


Standard-setters

Generally accepted accounting principles (GAAP) are accounting standards issued by national regulatory bodies. In addition, the International Accounting Standards Board (IASB) issues the
International Financial Reporting Standards International Financial Reporting Standards, commonly called IFRS, are accounting standards issued by the IFRS Foundation and the International Accounting Standards Board (IASB). They constitute a standardised way of describing the company's fina ...
(IFRS) implemented by 147 countries. Standards for international audit and assurance, ethics, education, and public sector accounting are all set by independent standard settings boards supported by IFAC. The International Auditing and Assurance Standards Board sets international standards for auditing, assurance, and quality control; the International Ethics Standards Board for Accountants (IESBA) sets the internationally appropriate principles-based ''Code of Ethics for Professional Accountants''; the International Accounting Education Standards Board (IAESB) sets professional accounting education standards; and International Public Sector Accounting Standards Board (IPSASB) sets accrual-based international public sector accounting standards. Organizations in individual countries may issue accounting standards unique to the countries. For example, in Australia, the Australian Accounting Standards Board manages the issuance of the accounting standards in line with IFRS. In the
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...
the Financial Accounting Standards Board (FASB) issues the Statements of Financial Accounting Standards, which form the basis of US GAAP, and in the
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the European mainland, continental mainland. It comprises England, Scotlan ...
the Financial Reporting Council (FRC) sets accounting standards. However, as of 2012 "all major economies" have plans to converge towards or adopt the IFRS.


Education, training and qualifications


Degrees

At least a
bachelor's degree A bachelor's degree (from Middle Latin ''baccalaureus'') or baccalaureate (from New Latin, Modern Latin ''baccalaureatus'') is an Undergraduate degree, undergraduate academic degree awarded by colleges and universities upon completion of a course ...
in accounting or a related field is required for most accountant and
auditor An auditor is a person or a firm appointed by a company to execute an audit.Practical Auditing, Kul Narsingh Shrestha, 2012, Nabin Prakashan, Nepal To act as an auditor, a person should be certified by the regulatory agency, regulatory authority o ...
job positions, and some employers prefer applicants with a
master's degree A master's degree (from Latin Latin (, or , ) is a classical language belonging to the Italic languages, Italic branch of the Indo-European languages. Latin was originally a dialect spoken in the lower Tiber area (then known as Latium) arou ...
. A degree in accounting may also be required for, or may be used to fulfill the requirements for, membership to professional accounting bodies. For example, the education during an accounting degree can be used to fulfill the American Institute of CPA's (AICPA) 150 semester hour requirement, and associate membership with the Certified Public Accountants Association of the UK is available after gaining a degree in finance or accounting. A
doctorate A doctorate (from Latin Latin (, or , ) is a classical language belonging to the Italic languages, Italic branch of the Indo-European languages. Latin was originally a dialect spoken in the lower Tiber area (then known as Latium) around pr ...
is required in order to pursue a career in accounting
academia An academy (Attic Greek Attic Greek is the Greek language, Greek dialect of the regions of ancient Greece, ancient region of Attica, including the ''polis'' of classical Athens, Athens. Often called classical Greek, it was the prestige (socio ...
, for example, to work as a university
professor Professor (commonly abbreviated as Prof.) is an Academy, academic rank at university, universities and other post-secondary education and research institutions in most countries. Literally, ''professor'' derives from Latin as a "person who pr ...
in accounting. The
Doctor of Philosophy A Doctor of Philosophy (PhD, Ph.D., or DPhil; Latin: or ') is the most common Academic degree, degree at the highest academic level awarded following a course of study. PhDs are awarded for programs across the whole breadth of academic fields ...
(PhD) and the Doctor of Business Administration (DBA) are the most popular degrees. The PhD is the most common degree for those wishing to pursue a career in academia, while DBA programs generally focus on equipping business executives for business or public careers requiring research skills and qualifications.


Professional qualifications

Professional accounting qualifications include the Chartered Accountant designations and other qualifications including certificates and diplomas. In Scotland, chartered accountants of ICAS undergo Continuous Professional Development and abide by the ICAS code of ethics. In England and Wales, chartered accountants of the ICAEW undergo annual training, and are bound by the ICAEW's code of ethics and subject to its disciplinary procedures. In the
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...
, the requirements for joining the AICPA as a Certified Public Accountant are set by the Board of Accountancy of each state, and members agree to abide by the AICPA's Code of Professional Conduct and Bylaws. The ACCA is the largest global accountancy body with over 320,000 members, and the organisation provides an 'IFRS stream' and a 'UK stream'. Students must pass a total of 14 exams, which are arranged across three levels.


Research

Accounting research is
research Research is "creativity, creative and systematic work undertaken to increase the stock of knowledge". It involves the collection, organization and analysis of evidence to increase understanding of a topic, characterized by a particular att ...
in the effects of economic events on the process of accounting, the effects of reported information on economic events, and the roles of accounting in organizations and society. It encompasses a broad range of research areas including
financial accounting Financial accounting is the field of accounting concerned with the summary, analysis and reporting of financial transactions related to a business. This involves the preparation of Financial statement audit, financial statements available for p ...
, management accounting, auditing and taxation.Oler, Derek K., Mitchell J. Oler, and Christopher J. Skousen. 2010. "Characterizing Accounting Research." ''Accounting Horizons'' 24 (4): 635–670. Accounting research is carried out both by academic researchers and practicing accountants. Methodologies in academic accounting research include archival research, which examines "objective data collected from repositories"; experimental research, which examines data "the researcher gathered by administering treatments to subjects"; analytical research, which is "based on the act of formally modeling theories or substantiating ideas in mathematical terms"; interpretive research, which emphasizes the role of language, interpretation and understanding in accounting practice, "highlighting the symbolic structures and taken-for-granted themes which pattern the world in distinct ways"; critical research, which emphasizes the role of power and conflict in accounting practice; case studies;
computer simulation Computer simulation is the process of mathematical modelling, performed on a computer, which is designed to predict the behaviour of, or the outcome of, a real-world or physical system. The reliability of some mathematical models can be deter ...
; and field research.Coyne, Joshua G., Scott L. Summers, Brady Williams, and David a. Wood. 2010. "Accounting Program Research Rankings by Topical Area and Methodology." ''Issues in Accounting Education'' 25 (4) (November): 631–654. Empirical studies document that leading accounting journals publish in total fewer research articles than comparable journals in economics and other business disciplines, and consequently, accounting scholars are relatively less successful in academic publishing than their business school peers. Due to different publication rates between accounting and other business disciplines, a recent study based on academic author rankings concludes that the competitive value of a single publication in a top-ranked journal is highest in accounting and lowest in marketing.


Scandals

The year 2001 witnessed a series of financial information frauds involving Enron, auditing firm Arthur Andersen, the telecommunications company WorldCom, Qwest and Sunbeam, among other well-known corporations. These problems highlighted the need to review the effectiveness of accounting standards, auditing regulations and corporate governance principles. In some cases, management manipulated the figures shown in financial reports to indicate a better economic performance. In others, tax and regulatory incentives encouraged over-leveraging of companies and decisions to bear extraordinary and unjustified risk.Astrid Ayala and Giancarlo Ibárgüen Snr.: "A Market Proposal for Auditing the Financial Statements of Public Companies" (Journal of Management of Value, Universidad Francisco Marroquín, March 2006) p. 41
UFM.edu.gt
/ref> The Enron scandal deeply influenced the development of new
regulations Regulation is the management of complex systems according to a set of rules and trends. In systems theory, these types of rules exist in various fields of biology and society, but the term has slightly different meanings according to context. For ...
to improve the reliability of financial reporting, and increased public awareness about the importance of having accounting standards that show the financial reality of companies and the objectivity and independence of auditing firms. In addition to being the largest
bankruptcy Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debt ...
reorganization in American history, the Enron scandal undoubtedly is the biggest audit failure causing the dissolution of Arthur Andersen, which at the time was one of the five largest accounting firms in the world. After a series of revelations involving irregular accounting procedures conducted throughout the 1990s, Enron filed for Chapter 11 bankruptcy protection in December 2001. One consequence of these events was the passage of the Sarbanes–Oxley Act in the
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...
in 2002, as a result of the first admissions of fraudulent behavior made by Enron. The act significantly raises criminal penalties for securities fraud, for destroying, altering or fabricating records in federal investigations or any scheme or attempt to defraud shareholders.Aiyesha Dey, and Thomas Z. Lys: "Trends in Earnings Management and Informativeness of Earnings Announcements in the Pre- and Post-Sarbanes Oxley Periods ( Kellogg School of Management, Evanston, Illinois, February, 2005) p. 5


Fraud and error

Accounting fraud is an intentional misstatement or omission in the accounting records by management or employees which involves the use of deception. It is a criminal act and a breach of civil tort. It may involve collusion with third parties. An accounting error is an unintentional misstatement or omission in the accounting records, for example misinterpretation of facts, mistakes in processing data, or oversights leading to incorrect estimates. Acts leading to accounting errors are not criminal but may breach civil law, for example, the tort of negligence. The primary responsibility for the prevention and detection of fraud and errors rests with the entity's management.


See also

* Accounting information system * Accounting records


References


External links

*
Operations Research in Accounting
on the Institute for Operations Research and the Management Sciences website {{Authority control fi:Laskentatoimi