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Acc 557 Assignment1

In: Business and Management

Submitted By gwgremlin
Words 1644
Pages 7
Ethical Breeches and the Current Corporate Environment
Gretchen Tyler
Dr. Alfred C. Greenfield, Jr.
Strayer University
ACC 557 Financial Accounting
July 20, 2013

In recent years, there have been many ethical accounting breeches in large corporations that ended up costing investors and employees of the corporations a lot of money. Enron was a major player in many breeches, and ultimately was one of the key players for the SEC creating new guidelines and punishments for fraudulent behavior, the Sarbanes-Oxley Act. As of today, with the SOX act put in place for almost 11 years, there are still corporate breeches, Chesapeake Energy, Wal-Mart, Green Mountain Coffee, and Groupon are among the most recent (Rogers, 2012). I believe the SOX act helped prevent a lot of accounting illegalities and helped to protect the shareholders, but ultimately the act is not strong enough or covers enough to prevent it all. While more accountability is definitely held with the CFO, and CEO of corporations, as well as with outside accounting teams, the SEC is not going forward with investigations regarding independent CPAs or accounting firms (Benston & Hartgraves, 2002). Chesapeake Energy is a clear example; the CEO had taken out $1.1 billion in loans funded by Chesapeake in return for stake in the company (Driver & Grow, 2012; McKenna, 2012). The SEC has rules against taking out loans for stocks, but because it does not mention any areas related to stake in the company, it falls in a grey area that cannot be prevented by the SOX act or SEC (Driver & Grow, 2012). In section 402 of the SOX act, it states that companies are unable to give personal loans to any director or executive officer, but with grey areas not being defined more, it leaves it open to interpretation and thus for additional fraud. According to Jennings, there are certain factors in corporations that lead...

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