...Running head: IMPACT OF UNETHICAL BEHAVIOR Impact of Unethical Behavior Article Analysis IMPACT OF UNETHICAL BEHAVIOR Impact of Unethical Behavoir The impact of unethical behavior in accounting can be tremendous. When people think of unethical behavior in the workplace whether it be accounting or any other division people often think of using the company phone for personal phone calls, or using the work computer to look at something like facebook or even to shop or something along those lines. However, when you think of unethical behavior when it comes to accounting there are so many different things that can occur and so many problems that it can create. You really need to be able to trust the people working in any accounting department and be able to trust them well. A few examples of unethical behavior would be: exaggerating revenue, misuse of funds (allowing them to go one way when in fact they should be going toward something else), misleading financial reports, and the big one that is often publicized when it occurs is inside trading. “Sarbanes-Oxley was precipitated by a slew of corporate scandals, including those at Enron (otc: ENRNQ - news - people ), Arthur Andersen, Tyco (nyse: TYC - news - people ), Global Crossing (otc: GBLXQ - news - people ) and WorldCom (otc: WCOEQ - news - people ). But it was meant to address systemic flaws in the way corporations have been reporting their numbers for decades.” (www.forbes.com) The...
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...Effect of Unethical Behavior Article Analysis ACC/291 This paper will analysis different situations that might lead to unethical practices and behavior in accounting. This paper will also examine the effects of the Sarbanes-Oxley Act of 2002 on financial statements. Accounting could be described as a type of instrument or dialectal put in order to provide information with regards to the financial position of an organization or business. This type of information is very important to investors as it gives them important and detailed information that could turn out to be the determining factor as to their decisions to invest or not to invest in a specific organization. Consequently, it is not unusual to find unethical behavior in accounting as unethical practices come in different practices. Different situations that might lead to unethical practices in accounting could include misrepresentative financial analysis in order to obtain personal gains, mismanagement of funds, embellishing revenue, purposely providing wrong information in regards to expenses, embellishing the value of corporate assets, purposely providing wrong information in regards to liabilities, bribery, manipulation of financial markets, and lastly inside trading. According to Osanyin 2008 “Two well-known examples of unethical practices in accounting are those of the 2002 Enron / Andersen and the WorldCom scandal. Both of these companies were involved in unethical accounting practices.” Although Enron...
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...Effect of Unethical Behavior Article Analysis Effect of Unethical Behavior Article Analysis Many occupations have the potential for unethical behavior in the workplace. The accounting profession specifically can have an enormous impact on an organization. In many cases this impact can affect other companies and even the general public. Unethical behaviors in the accounting industry are often difficult to detect. Some of the more common items include understating or not reporting liabilities, exaggerating income or other revenue, understating operating or other expenses, and exaggerating assets. These behaviors also include kickbacks, insider trading, embezzlement, and bribery. With individuals, the most common items are misuse of funds and providing misleading information on financial reports for personal gain. Many of the issues we face with the current economy are blamed on the unethical behavior in the accounting industry. Two of the most famous companies that were eventually caught and prosecuted for unethical accounting behaviors were WorldCom and Enron. The falsification of financial statements and fraudulent activity in the stock market causes thousands of public investors to lose money. During these scandals, some of the people inside the companies were earning millions of dollars at the expense of others. The Sarbanes Oxley Act of 2002 or commonly referred to as Sox is named after Senator Paul Sarbanes and the Representative Michael Oxley. Sox was introduced...
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...Impact of Unethical Behavior Article Analysis ACC/291 Principles of Accounting II September 18, 2012 Thomas House Impact of Unethical Behavior Article Analysis Reporting financial statements within a business or company is more than a must; it is a necessity to keep ones business up and running. If one were to report false information on any kind of financial statements it then could be costly for the company or business. This is known as unethical behavior in accounting. The unethical behavior in accounting would be to mislead financial analysis for personal gain, misuse of funds, overstating revenue, overstating the value of corporate assets, or even underreporting the existence of liabilities. The purpose of the Sarbanes-Oxley act is to, “Protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes.” ("Sarbanes-Oxley Essential Information", 2003-2012). The Sarbanes-Oxley act was named after senator Paul Sarbanes and Representative Michael Oxley. Sarbanes and Oxley drafted the Sarbanes-Oxley act of 2002; both wanted to make sure that any business or corporation would be held accountable for wrongdoings. Enron would be sure to be held accountable. Enron Corporation Enron Corporation was an American energy company located in Houston, Texas. Enron employed nearly 21,000 people and was one of the world’s leading electricity, natural gas, pulp and paper...
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...Impact of Unethical Behavior Article ACC 291 Impact of Unethical Behavior Article Potential acts leading to unethical practices and behavioral in accounting is evident. These acts are in violation of the Sarbares Oxley Act of 2002 (SOX). A recent article on the student website is reviewed to identify potential factors leading to unethical practices and behavior. The article analyzed is called “Becoming a More Relational Firm in the Post-Sarbans-Oxley Era”. As expressed by the article, the effects of SOX has been considered by companies in which use auditing services as their main source of business (Jelinek, Jelinek, 2010). SOX has caused agencies to have a strong battle obtaining clientele. The SOX act has changed provisions in which disallow an agency to sale services directly to company personnel (Jelinek, Jelinek, 2010). This has resulted in agencies having to go an outside committee to sale services or products (Jelinek, Jelinek, 2010). The act also requires the auditor agencies to resale from services after 5 years and disallows them to seek employment with a previous client within of a year of last audit (Jelinek, Jelinek, 2010). These new rules have caused the agencies to have very strict rules of operation procedures. With the information obtained in the article, is has been relevant that auditing agencies are having difficulty rendering services. So if auditing agencies are not doing auditing then companies are use internal auditors...
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...ethical issues arise in accounting and how can these be dealt with? For the last several decades, it is generally realized that ethical issues in accounting have become more and more crucial. Ethical issues influence accounting judgment and give a significant impact of the whole company. Currently, unethical behavior that occurs in accounting sector is very common. Ethical issues in accounting focus on accountants who work in public or private organizations. They must be following the ethical guidelines when review a company or individual’s financial records for reporting purposes, especially reporting balance sheets and financial statements. The ethical issues for these accountants should report the information of company assets, liabilities and profits honestly without giving in to the pressure placed on them by management or corporate officers. Unethical accountants could easily alter company financial records and give false information of company successes. This may lead to short-term prosperity, but the altered financial records will ultimately discovered by auditors as a fraud. There are many reasons that might cause accountants behave unethically. Many discussions on them to analyze the reasons why accountants have unethical behavior. These reasons include ethical values of themselves, the relationship between accountants and the organizations they audit, the financial environment and the incentive structure which might motivate their behavior (Ann E, 2007). Ethical issues...
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...Behavioral Aspect of Accounting: The Need to Emphasize on Ethics ------------------------------------------------- Ahmad Zubair Chedi ------------------------------------------------- Abstract Accounting plays a vital role in providing information that permit economic decision, therefore the information has influence on its users. The financial statements that serve the basis for the economic decision are drawn up, not by the users, but by the enterprise’s accountants under the authority and control of the enterprise’s management. Ideally the preparers should take as their objective the fulfillment, (to the best of their ability) of the users’ needs. However the preparers have their own objectives, which often are quite different from those of the users. The financial statements can play a very important role in helping the enterprise’s management to achieve its objective. If the accounts show that the enterprise is doing well, the shareholders will be happy also the market price of the company’s shares will remain high. Since the accounts are prepared under the direction of the management there is a temptation for the management not to present the full truth about the enterprise in the financial statements, particularly when the company is doing badly. The paper examines the behavioral aspect of accounting with emphasis on the need of ethics; the methodology used is purely content analysis, using secondary data. The study reveals that unethical behavior is less prevalence...
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...Effects of Unethical Behavior Article Analysis ACC/291 Principles of Accounting II (AXIA) November 12, 2012 Effects of Unethical Behavior Article Analysis The impact of unethical accounting behavior can be devastating, often leading a company to closure or bankruptcy. Some examples of internal unethical accounting practices include under and overstatement of expenses, revenue, liabilities, and corporate assets, misuse of capital (possibly for personal gain), etc. Examples of external unethical practices would include fraud regarding trade and investment, bribery, and kickbacks, and manipulation of financial market regulations. Enron Corporation is one of several companies who have committed unethical and illegal accounting actions. Enron started in the 1990s in Houston, Texas. This American company concentrated on the energy sector. In the highlights of Enron’s success, it has about 21,000 employees and considered the leading supplier of electricity, natural gas, communication, and paper. Enron’s perceived success was a mask for the cast schemed fraud called the “Enron Scandal” (Kadlee et. al. 2002). Enron Corporation not only committed financial fraud but also may have been brining people for contracts on South America. Later, this accumulated, and reports started to appear regarding the fishy accounting structure of Enron and its partner in crime, Arthur Anderson (accounting firm). Consequently, Enron resulted in bankruptcy. This bankruptcy would be the world’s...
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...Effect of Unethical Behavior Article Analysis Beatrice Arnold ACC/291 February 4, 2013 James Covert Unethical Practices and Behavior The business environment can be a cause for unethical practices and behavior in accounting. An example of this can be management instructing an employee to record a transaction in an incorrect manner. It can be as simple as a company whose clients sign a contract on December 1, 2012 for the year. Then reporting the revenue for the whole year in December instead of just reporting the month of December as would be the requirement of accounting principles (Kendra, 2013). Another cause for unethical practices or behaviors can be greed. Some people will do anything, including breaking the law to get extra money. An accountant has an opportunity to “cook the books” (Xaxx, 2013) that can allow they to take a little or a lot. This is very tempting as no one seems to get hurt in the process. At times ignorance of the tax law or regulations about insider trading can be easily misunderstood by inexperienced accountants, which could cause unethical behavior without even realizing it. The role of an accountant is to use information the company provides to gather useful information about the company’s economic affairs. This can be difficult if there is a conflict of interests. If the accounting firm hired to perform a profit and loss audit finds that the information it has to report will be damaging to their client the accounting firm’s responsibility...
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...Effects of Unethical Behavior ACC291 Effects of Unethical Behavior Accounting is used as a kind of language to communicate and report information about the financial position of an organization in a way that is understood by its intended users. The information reported is vital to investors and creditors of that organization as it gives them an insight of the business. This information is used as a determining factor in the decisions they will make regarding investing or extending credit in a particular organization. As a result of this, it is not uncommon to encounter individuals and organizations that utilize unethical behaviors and practices to make the books look more appealing to outsiders. Corporate scandals can be very public affairs that cost companies not only money but their reputation in the public eye. The pubic often question the reason why some individuals are willing to run their companies honestly and others turn to unethical and illegal activities. The causes of unethical practices in business are diverse and complex. There are different situations that could lead to unethical practices. Some executives and managers get themselves involved in things like misusing company funds, bribery, misleading financial analysis, exaggerating revenues, or purposely providing incorrect information. Two well known examples of unethical practices are the Enron and WorlsdCom scandals. Both companies were involved in fraudulent and unethical accounting reporting...
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...Effect of Unethical Behavior ACC/291 September 2, 2012 Effect of Unethical Behavior A quote from Ray Beier, a partner of PricewaterhouseCoopers, puts the idea of ethical behavior and its effect on financial statements into perspective. He states, “From the corporate scandals, we now realize that accounting was too rules-based, where it needs to be more principles-or objectives-based” (Bisoux, 2005, p. 24). Corporations had been so concerned with financial gain that the idea that there was a need for better internal controls did not exist. As long as the corporation was providing financial statements that presented the picture of a company continuing to grow and make money, it was assumed that the company ran smoothly. As a result, it was far too easy for corporations to overstate the value of assets or understate liabilities causing the true value of a corporation to be undiscovered. Some unethical behavior on an individual level, would be insider trading, kickbacks fraud and, as seen far too many times, the manipulation of the financial markets. The Enron Corporation was the perfect example of this unethical behavior and its discovery led to the implementation of Sarbanes-Oxley Act of 2002. The company used systematic and planned accounting fraud to misrepresent the corporation’s financial standing and, as a result, led to its shocking downfall. The company’s stock fell so sharply and quickly that many stockholders were caught off guard and lost millions of dollars...
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...Impact of Unethical Behavior Analysis Name ACC/291 Date Instructor Name The unethical practices & behavior in today’s business accounting often goes unchecked, because the actions directly affect management or executives, since they usually control this accounting hence the results. If someone thinks their job might be in jeopardy they may falsify thinks for these members of management. As it seems obvious, falsifying or altering business documents such as sales receipts, or tampering with reports would be considered unethical practices. According to Anonymous Employee (n.d.), "Among the most common unethical business behaviors of employees are making long-distance calls on business lines, duplicating software for use at home, falsifying the number of hours worked, or much more serious and illegal practices, such as embezzling money from the business, or falsifying business records.” (para. 1). Among those situational examples which include embezzlement of funds by an accountant from their employers for financial gain also include accountants receiving corporate pressure from their client to report false information and having unrealistic objectives and deadlines. “An accountant may decide to work for a company even though a conflict of interest may exist. If the accountant is owed money or has a significant stake in a firm, he or she may not be the ideal individual to prepare certain companies' financial statements.” (Jacobsen, 2008, para. 10). The Sarbanes-Oxley...
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...Effect of Unethical Behavior Article Analysis ACC/291-Principles of Accounting II June 24, 2013 Dale Wilson Having the correct accounting information in a financial statement gives a business owner certain advantages, such as information on financial transactions. If a business owner has information on when the sales or expenses are increasing or decreasing, he can make decisions that can benefit the company’s bottom line. The same cannot be true if he does not have accurate, or reliable, accounting information. There are also times when having accurate accounting information can lead to unethical practices in accounting because the information in the financial statement may not be beneficial for the business or the shareholders. Such instances made it necessary for the government to enact legislation that makes such practices illegal. There are many situations that might lead to unethical practices and behavior in accounting. Misuse of funds, insider trading, bribery and providing misleading financial information for personal gain are all examples of how businesses participate in unethical practices and behavior in accounting, all of which can lead to the inclusion of incorrect information in a financial statement. Prior to 2002, investors had no protection against corporations that failed to fully disclose financial information. This led to some of the biggest corporate fraud cases, involving companies like Enron and WorldCom. In 2002, because of the unethical practices...
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...government’s outlook on controlling unethical and illegal behavior have varied. Although business ethics has been discussed for several decades, it has only come to the forefront in the past several years. This has been especially true over the past decade, with the enactment of the Sarbanes-Oxley Act of 2002 (SOX) to help protect employees and investors. CHAPTER 1: INTRODUCTION Over the past decade, Enron, WorldCom, and Arthur Anderson have been household names when discussing business ethics. Each of these companies, in its own specific way, made use of gray areas in accounting. These subjective areas were not tightly controlled by the Securities and Exchange Commission (SEC) and were used to misrepresent a company’s financial performance for the purpose of misleading the investment community (Carroll, 2004). Although ethics and compliance are two separate entities, they are fundamentally intertwined. Compliance involves laws and regulation, while ethics encompasses an individual’s beliefs and values. An individual’s ethical beliefs are based on the “ideals, to which employees aspire to act, when called upon to make a decision about what is right and where law is not clear” (National Business Ethics, 2005, p. 9). Problems arise in assessing ethical behavior because each person’s beliefs and values differ. This research effort addressed the ethical impact that the Sarbanes-Oxley (SOX) Act has had on upper management, whether that impact has varied by gender, and the financial...
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...Ethics in Accounting Tonya Thompson Carlene Wilson Immediate Accounting ACC305 November 17, 2010 What is Ethics? Business ethics are moral values and principles that determine our conduct in the business world. Commercial ethics standards activities are needed; whether you have a single client or several business organizations. Ethics Standards can be applied to all aspects of business, from generation of an idea the sell of the particular item. While the objective of all business is to make profits, ethics should contribute to the interest of the society by ensuring fair practices. Being ethical is a theoretical inquiry into the standards of right and wrong or good and bad. Ethics deals with morality insofar as it embodies a set of rules already accepted or formulated for potential acceptance. In studying morality Ethics primarily describes, analyzes and criticizes different moral codes as to their consistency, viability and legitimacy. But it also envisions better norms based on human ability to learn and get a better insight into the nature of our own conduct. Each type of business sectors have associations that has set some kind of ethical standards for them to follow. One association for CPA’s is Financial Executives International (FEI) they were founded in 1931 as the Controllers Institute of America. The expansion of responsibilities of financial executives into policy-making areas led us to change...
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