...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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...Effects of Unethical Behavior ACC/291 One may describe accounting as a type of language or mechanism that provides information about the financial position of a company. The information provided in the financial statements of accounting is used by investors to determine whether or not to invest in an organization, and used by creditors to determine whether or not a loan should be granted. The mere fact that these financial statements are important and involves money opens doors for unethical practice and behavior. In the past years companies like Enron and WorldCom have been scandalize for its company’s unethical conduct in accounting. In the wake of numerous corporate scandals the Sarbanes-Oxley Act (SOX) of 2002 was created to protect investors by improving the reliability and accuracy of corporates disclosure made pursuant to the securities laws, and for other purposes. Although many companies run their business honestly, others turn out to be criminals, robbing their customers’ qualm, or dragging themselves into illegal practices slowly through good intentions or ignorance. Companies may be tempted to practice unethical behavior in accounting for different reasons such as greed, opportunity, disconnection, and ignorance. Unethical practices and behaviors also include: manipulation of financial, bribery, insider trade, misuse of funds, exaggerating the value of corporate assets, exaggerating revenue, securities fraud, purposely providing erroneous information relating...
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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 In accounting, there are or have been situations that might lead to unethical practices and behavior. Unethical corporate behavior is caused by a variety of factors. For example, pressure from management or a Board of Directors when accountants are to meet unrealistic business objectives or deadlines is a huge factor. In addition, other factors like furthering ones career, protecting ones livelihood, working with an immoral environment, and simply the lack of consequences can cause unethical practices. It is no wonder why there have been a number of cases where it comes to reporting financial statements in a company’s stability. For example, scandals like the most recent Enron, WorldCom and Tyco disasters are just to name a few. This is why in 2002 President George W. Bush brought in a law called the Sarbanes-Oxley Act. The ultimate focus of this act was to reduce chance of accounting errors, and report enduring ethical issues. The Sarbanes-Oxley Act of 2002 also changed the state of the accounting profession. It affects certified public accountants in the way they process, execute, and operate for publically traded companies. The act permitted a committee called the PCAOB to investigate, public companies and their auditors. The SEC, for rectitude of companies, would manage this committee. In addition, the committee, five members, included two CPA’s and three other people who are not to have ever been CPA’s now or in the future. Furthermore, each...
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...Effect of Unethical Behavior Article Analysis Damon Jones ACC/291 December 11 2013 Harri Eloranta Effect of Unethical Behavior Article Analysis The purpose of The Sarbanes-Oxley Act is to restore public confidence in both public accounting and publicly traded securities as well as promote better ethical business practices through greater executive awareness and accountability (Siegel, Franz, & O'Shaughnessy, 2010). In the 1990s, many big companies had misleading and outright fraudulent activity on their account financial statements. Essentially, multiple publicly traded companies jacked up their stock prices by “publishing false or deceptive financial statements” according to (Lasher, 2008). The word ethics has many different means to different individuals or groups; however, ethic is a moral principle or set of moral values held by an individual or group (Dictionary.reference, 2013). Unethical behavior forms from an individual’s personal gain or a business trying to make the business look more profitable than it is. One way that companies mislead investors, by using their own accountant doing the books. When an accountant that works for the company does their books without anyone outside of that company overseeing them, gives them a lot of room to move figures around. The Sarbanes Oxley Act of 2002 is an overseer and protector for investors. The Act has many effects of interest to financial service professionals. It increases the reliability...
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...Effect of Unethical Behavior Article Analysis University of Phoenix Principles of Accounting 2 ACC/291 May 27, 2012 Effect of Unethical Behavior Article Analysis In this paper I will identify situations that might lead to unethical practices and behavior in accounting. I will also examine the effects of the Sarbanes-Oxley Act of 2002 on financial statements. Since the Enron scandal at the end of 2001 there have been several reports of unethical practices as well as poor behavior. So what exactly leads someone to report false information? In most cases that I have seen it usually begins with minor accounting infractions. When companies don’t perform well financially, stock holders may lose millions of dollars on their investments. The person in charge may decide to falsify the figures when reporting them to insure their position within their company. I believe the feel they can correct the numbers before anyone would notice. On the other hand, some CEO’s and financial officers are make bonuses and profits when they show how well a company is doing. Their own personal greed is the only thing that concerns them no matter how well the company is doing. It might be several top executives involved to just a couple of individuals, however the people who pay for their unethical decisions are the stock holders, employees and the public. The Sarbanes-Oxley Act was enacted July 29, 2002 and was named after U. S. Senator Paul Sarbanes and U. S. Representative Michael...
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...Effect of Unethical Behavior Article Analysis Prior to 2002, there were no major regulations that were enforced to maintain lawful ethical accounting practices. Since this was the case, there were no internal controls and thus was a leading cause that enable large corporation to commit fraud by altering books to show more profitability. Due to the overstating of profit in these large companies, investors were provided false information which made their want to invest in these corporations more. An example of a corporation that did this was Enron. Enron Corporation was an American energy company that was based in Houston, Texas. It was one of the world’s leaders in electricity, natural gas, pulp and paper, and communications. Enron reported financial conditions were sustained by systematic and planned accounting fraud. There were several reports that involved irregular accounting procedures which bordered on fraud. These reports were between Enron and their accounting firm, Arthur Andersen. Enron’s stock eventually plunged from $90 a share to $.30 a share. What was once considered a great stock was now a disastrous even in the financial world. All of this was brought to a head when Enron revealed that much of its profits were the result of deals with special purposes entities (Davis, Donna. 2011). Therefore the results were the any debts or losses that Enron suffered were not reported on financial statements. These unethical practices...
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...Effect of Unethical Behavior Article Analysis Chris May 6, 2013 Acc 291 Judith Vargas University of Phoenix I am going to explain in this paper some situations that might lead to unethical accounting and how we can identify some of the unethical practices in accounting. In an article that I read it talked about how when the economy is down that a lot of companies enforce ethics and make their ethical policies even better, but at the same time the article also states that when the economy is booming does it relax it ethical policies and let things pass. The Sarbanes-Oxley Act (SOX) has greatly helped to make company’s financial statements a lot better in making sure the companies are reporting all their earnings and expenses and so forth. The goal of SOX was to make companies and employees behave ethically; however, whether that has worked or not is questionable. Many argue that the implementation and ongoing requirements of Sarbanes Oxley and other laws are costly, time consuming, and as yet ineffective. Some say that SOX, “in many instances law has at best led to a culture of compliance rather than a culture of integrity. Even more disappointing is that too often the very activities Sarbanes Oxley were designed to prevent continue to slip past regulators until it is too late and the damage incurred (Hazels 2010)”. Some signs that I can think of, of a company being unethical is that they are struggling to pay back debts and these debts are not being...
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...Effect of Unethical Behavior Christina Canfield August 4, 2013 ACC/291 Vanessa J. McCall Effects of Unethical Behavior In 2002 the congress passed the Sarbanes-Oxley Act. The first thing is to understand what the Sarbanes-Oxley Act is and what it does. This paper will also view one article about the Sarbanes-Oxley Act. To see how the Sarbanes-Oxley Act effect companies this paper will discuss the environment of firms before the act was passed. The question this paper will address it how the Sarbanes-Oxley Act affects auditing firms. The Sarbanes-Oxley Act was created to keep accountants firms and businesses honest with accounting documents. According to Jelinek, K., & Jelinek, R. (2010) article there are six specific sections within the Sarbanes-Oxley Act that effect just the client’s role as a buyer and the audit firm’s role as a seller. The six specific sections are 201: Prohibited Auditor Activities, 203: Audit Partner Rotation, 204: Auditor Reports to Audit Committees, 206: Conflicts of Interest, 301 Public Company Audit Committees, and 407 Disclosure of Audit Committee Financial Expert. Each of these affects the auditor’s relationship with the company they are auditing and the other way around. Before the Sarbanes-Oxley act the accounting firm’s environment was configured to the firm’s perspectives on how best to approach the auditor-client exchange. The audit firms were also sale-oriented. Because the audit firms were sales-oriented the firms would reject...
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...Looking from different perspectives on how businesses can rise and fall from unethical accounting practices. When you look over businesses such as Enron and Washington Mutual bank you can see the hard lessons of what they had to endure and the end result of the chaos. Take a look for example Washington Mutual they were the one of the greatest banks in America their portfolio was one of the largest. But after acquiring so many mortgage loans it was way too much for the company to handle. Washington Mutual acquired so much liquidity it was over flowing and they could no longer meet the heavy demand. There were some speculations that the investors could have been on using some of the funds towards to downward spiral with faulty mortgage loans. Taking a look into the company Enron, there were so many infractions made within the company it was only a matter of time before they were found out. Between the embezzlement charges by the Enron executives which led into receiving funds unethically to fund their employees. From there it was investigated that money was being spent for personal reasons for the executives and the employees. The major concern to come into play was receiving large amounts of funds from an unknown investor. There was no ethical way that Enron could prove legally where they were receiving their funds and where exactly they were going. No matter what the issues are that arise in a company all actions and procedures must have some code of ethics in place to where...
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...surgeries in the United States. Not only the largest provider of outpatient surgeries in the United States but also the largest diagnostic and rehabilitative health care service in the United States. This was until March 19, 2003, when the Securities and Exchange Commission charged the company and Richard Scrushy with fraudulent account reporting of company finances. Scrushy and other executives from the finance and accounting departments (15 total) were later indicted in November 4, 2003. Richard Scrushy became the first CEO of any Fortune 500 company to be tried under the Sarbanes-Oxley Act of 2002 for any accounting fraud. During court proceedings other practices involving HealthSouth were uncovered. Things such as unethical behavior and corporate governance involving the Board of Directors (banks and creditors were suspected to be involved but were not indicted, only civil suits). Richard Scrushy was charged with money laundering, conspiracy, securities fraud, overstating HealthSouth's earnings, and 81 more counts. "The Commission's complaint, which was filed in the federal district court in Birmingham, Ala., alleged that since 1999, at the insistence of Scrushy, HealthSouth systematically overstated its earnings by at least $1.4 billion dollars. This was because they needed to meet or exceed Wall Street earning expectations" (n/a, 2013). Prosecutors believed that Scrushy intentionally allowed his financers and accountants to commit this fraud in order...
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...One situation that may lead to unethical practices and behavior in accounting is a toxic corporate culture. Simply put a corporate culture defines the way we do things here. Some of the most important factors shaping a corporate culture are the behavior of leaders and the leadership style prominent in the company. If ethics and integrity are not actively practiced and not just words on a Code of Ethics, the company is very prone to unethical practices, including financial reporting. Integrity and ethics are delicate jewels. Building integrity in leaders and their organizations takes time, continual effort and can not be feigned. It must be felt in the gut, in the core beliefs that being honest and trustworthy is the right business practice. Accountability is the foundation for authentic business relationships. At least it forces the process of identifying and resolving issues. Authentic people take full and complete ownership for their lives, their choices, thoughts, feelings and actions, without blame or faultfinding. Take the classic example of Enron. They had a Code of Ethics that addressed its Vision and Values platform RICE (Respect, Integrity, Communication, and Excellence) values statement. At the time, some thought it was a model that other companies should follow. The problem was that this model code of ethics was repeatedly violated by executives. Enron's accounting problems and subsequent bankruptcy did not emerge out of the blue, nor was there any single identifiable...
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...Effect of Unethical Behavior Article Analysis Ethics: A consciousness of moral importance, a set of moral issues or aspects, the principles of conduct governing an individual or a group, a set of moral principles. To have ethical values is to have a deep sense of responsibility to self and to others (Webster’s Dictionary). When employees practice unethical behavior in the workplace, they are in a sense, displaying a lack of respect not only for themselves, but showing a great deal of disrespect for the company the employee work for. This can further be complicated when dealing with the funds of a company. The repercussions not only affect the company, but also clients, and employees. No greater case has proven this like the Enron Scandal. Enron was an energy trading and communications company based in Houston, Texas. Enron employed 21,000 people by June 2001. Enron was accused of misrepresenting the earning reports. Enron lied about its profits as well as rumors of a number of shady dealings. Enron was also accused of concealing debts so that these debts did not show up on the company's accounts records. There were also rumors of embezzlement of funds from the executives. Shares from Enron dropped from over $90 in the United States to $0.30. This was kept from all investors as well as potential investors who invested in Enron because the inflated financial gain the company was reporting. Due to these unethical accounting practices, it cost both trustees and employees...
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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 Travis Murphy ACC/291 August 17 2013 Professor Kelly Bair A very common example of an unethical accounting practice is the misrepresentation or false recording of figures. Accountants will do this to cover up situations and complications that have hampered the company. Accountants believe that the occurrence or occurrences will soon improve so that falsifies the numbers to put a band aid on the wound until it hopefully heals. What occurs sometimes though is if the numbers were recorded accurately and were communicated through management, the company would most likely recover sooner. If the band aid is put on the issue for an extended period of time there might be no recovery from the issue and the accountant could be fired, or worse, the company could go under. Another situation for misrepresentation of figures could be from hiding money, which is fraud, in relations to taxes or personal gain. The consequences for this are of course a hefty fine and imprisonment. Companies do this very frequently but not all get caught. Companies and accountants will do this to try and squeeze every dollar into their budget and in to their pocket at the end of the year. But thanks to the Sarbanes-Oxley Act of 2002 accountants and company have no choice but to be more accountable for their actions. “Since its enactment in the summer of 2002, the Act has effected dramatic change across corporate America and beyond, and is helping to...
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