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Subprime Crisis

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It is reasonable to say that the recent subprime mortgage crisis happened due to a complex combination of negligent practices by many of the multiple stakeholders directly involved in the real estate industry. That being said, the accounting profession, being the critical player that it was (and still is), played a critical role in the development of this economic crisis due to the practices that they used during the auditing process of key industry players in the market at that time.

As a foundation to this argument, chapter one of the text states that, accounting is the process of identifying, measuring and communicating economic information about an organization for the purpose of making decisions and informed judgments. (Marshall-McManus-Viele). It is the accountants responsibility to identify and offer the relevant financial data necessary to make appropriate business decisions. In reading about cases such as the infamous New Century “mishap”, one gets the impression that the accounting methods used, completely misrepresented the current financial situation of the company which needed to show a strong financial situation in order to maintain it’s solid market position and continue to see a steady influx in transactions. After further review combined with KPMG’s involvement, they found themselves with inconsistencies that led to a more than significant hole in their numbers ultimately leading them to bankruptcy (along with other economic factors).

Referring back to chapter one of our text, some of the key behaviors that accounting professionals must always follow are: to remain objective and independent. In my opinion, and admitting that my knowledge in this field is limited, this is a critical factor in order for proper and accurate accounting practices to take place. Allowing accounting professionals to get involved with stakeholders or other factors

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