Question

what do you believe is an ethical concern or potential for fraud related to foreign currency transactions and/or the translation of foreign currency financial statements. Provide a detailed description of the ethical concern or potential for fraud that you have chosen and provide justification/reasoning for your selection. Remember to use logic and the accounting principles that you have learned to develop your argument.

Answer 1

I think method of converting one currency to another is an ethical concern or potential for fraud related to foreign currency transactions and/or the translation of foreign currency financial statements.

As all of you might be aware that as per accounting principles, we need to translate our foreign currency transactions at spot rate or reinstate foreign currency liabilties and assets as on balance sheet date i.e. All the liabilties or assets which are fixed under a contract and due in foreign currency and should be assets or liabilties have to be reinstated at the rate which is prevailing as on balance sheet date.

Option to select conversion rate lies with the organisation. Conversion rate gets changed in every minute of time. So by fluctuation the conversion rate, one can over report or under report its income, expense, assets and liabilities. Based on this phenomina, I think this is an ethical or potential for fraud related to foreign currency transactions.