Financial Reporting and Ethics - The Institute of Chartered ...

FINANCIAL REPORTING AND ETHICS(e)The board of directors should determine how the company can:! Better meet its duty of social responsibility; and! Use the audit to implement a programme to correct anydeficiencies it finds.Corporations that conduct social audits will be more apt to preventunethical and illegal conduct by managers, employees, and agents12.4 SOCIAL AND ENVIRONMENTAL AL ACCOUNTING ISSUESEnvironmental accounting is an inclusive field of accounting which turns outreports for internal use, supplying environmental information to assist inmanagement decisions on pricing, controlling overhead and capital budgeting.Moreover, it generates environmental information of considerable interest tothe public and the financial community. The impact of business activities onthe environment is felt in several forms, such as in the air, water, undergroundpollution, endangered, and threatened animals.The array of pollutants which includes toxic, hazardous and ‘warming’ isaccountable to the business of companies. In order to analyse critically andmeasure the effects of environmental impacts, multiple disciplines are needed,for integration into management decisions and accounting reporting. Nonaccountingtools and approaches needed include management policies andcontrol systems, environment science, finance and risk management andenvironmental law and regulations. Such multi-disciplinary approach is usefulin isolating and recording all the environmental costs which include energy,material usage, waste disposal, insurance, fines and penalties. A companymay determine the environmental impact by using techniques which include:(a)(b)(c)Full Cost AccountingThe cost of production is aggregated with the amount expended onenvironmental management and divided into the number of unitsmanufactured, to obtain the cost per unit.‘Eco-Accounting’This is also referred to a “Total Cost Assessment.” All costs relating toenvironment impact are assembled and divided into the units producedor service rendered. The smaller the cost per unit, the more ‘eco efficient’is the effort of the company’s management in handling environmentalimpact.Life Cycle CostingIt is an approach which seeks to optimise the use of cost. The techniqueidentifies and sums up all costs, including environmental managementexpenses and the acquisition costs of production assets. Estimated livesof fixed assets to be purchased and the cost of capital are determined.254