...Running Head: Is Ethics The Main Reason For Accounting Scandals? Is Ethics The Most Important Reason Behind Years of Accounting Scandals? Joshua A. Williams DeVry University Is Ethics The Main Reason For Accounting Scandals? Ethics: Is It The Most Important Reason Behind Years of Accounting Scandals? Ethics is a term that refers to a code or moral system that provides criteria for evaluating right and wrong (Spiceland, Spe, Tomassini, 2007). An ethical dilemma is a situation in which an individual or group is faced with a decision that tests this code. Many of these dilemmas are simple to recognize and resolve. For example, have you ever been tempted to call your professor and ask for an extension on the due date of an assignment by claiming a fictitious illness? Temptation like this will test your personal ethics. The direct issues when dealing with ethics is that it cannot be measured or quantified it is intangible almost to a fault. A person’s ethical background can be affected by all types of outside forces such as familial background, financial status, and educational backgrounds as well to name a few. Ethical codes are informative and helpful. However, the motivation to behave ethically must come from within oneself and not just from the fear of penalties for violating professional codes (Spiceland, Sepe, Tomassini, 2007). There is specific analytical model which gives a sequence of seven steps that provide a framework for analyzing ethical issues. These...
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...Abstract It is fairly easy for a top executive to reduce the price of his or her company's stock. Due to information asymmetry. The executive can accelerate accounting of expected expenses, delay accounting of expected revenue, engage in off balance sheet transactions to make the company's profitability appear temporarily poorer, or simply promote and report severely conservative estimates of future earnings. And this phenomenon of accounting scandal exist in contemporary society. The integrity of the accounting profession and the credibility of financial information provided by businesses have been undermined by scandals. Accounting and business education should pay more attention to the ethical to prevent accounting scandals. And they should not be focused on the teaching of accounting techniques. Neoliberal ideology is a political movement beginning in the 1960s that blends traditional liberal concerns for social justice with an emphasis on economic growth. And it is similar to globalization. Globalization includes three elements that are difficult decreasing, quick response to alterations, and multilateral trade liberalization. And accounting professional contains individual professional judgment and professional self-regulation. Globalisation brings many benefits but also a number of problems, for instance, low price labour used by multinationals that Increasing wages for highly-skilled workers and reducing wages for less-skilled workers obviously leads to greater inequality...
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...Ethical risks and threats in the accounting profession Accounting ethics is primarily the study of moral values and judgments as they apply to accountancy. Accounting ethics were first introduced by Luca Pacioli in 1494 in his book “Summa de arithmetica, geometria, proportioni, et proportinalita”, and later expanded by government bodies, professional organizations and independent companies (Humphrey 2005). Throughout 2001 and 2002, the financial scandals in in the USA and some other countries, such as Australia, dramatically demonstrated how the efficiency of financial markets is based on assumptions of trust and ethical behavior of corporate managers (McPhail 2001). The collapse of companies such as Enron, WorldCom and Global Crossing in the USA, HIH Insurance and OneTel in Australia, and Parmalat in Italy, has led to a loss of confidence by the investing public in the system of financial reporting and accountability. The globalization and diversification of accounting services, combined with market competition and high profile corporate collapses has drawn attention to the accounting profession and its perceived ethical standards. (Cooper 2007) Ethical values provide the foundation on which a civilized society exists. Without the foundation, civilization collapses. On a personal level, the answer to the question of the highest aspiration might be wealth, fame, knowledge, popularity, or integrity. But if integrity is secondary to any of the alternatives, it will be sacrificed...
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...responsibility to ensure that their duties are performed in conformity with the ethical values of honesty, integrity, objectivity, due care, confidentiality, and the commitment to the public interest. Luca Pacioli, the "Father of Accounting", wrote on accounting ethics in his first book Summa de arithmetica, geometria, proportioni, et proportionalita, published in 1494. Ethical standards have since then been developed through government groups, professional organizations, and independent companies. These various groups have led accountants to follow several codes of ethics to perform their duties in a professional work environment. However, accountants’ involvement with large corporate scandals in recent times reflects that they have not complied with the expected ethical standards. Thus, ethics has become a key area of concern in accounting at present owing to the series of corporate scandals that had taken place in the world questioning the credibility of the accounting profession. These scandals have placed in doubt the effectiveness of contemporary accounting, auditing and corporate governance practices, for which accounting profession is responsible for. Unethical Accounting Practices Accounting ethics has been deemed difficult to control as accountants and auditors must consider the interest of the public (which relies on the information gathered in audits) while ensuring that they remained employed by the company they are auditing. They must consider how to best...
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...Analysis of Ethical Corporate Culture between 2013 and 2015 Group 6: Michelle Delgado Lok Sum Lydia Fung Chau Nguyen ACCT 415 Dr. James Gong 5/14/2015 Executive Summary In business, leaders, managers, and employees face conflicting incentives, messages and pressures from multiple stakeholders. Conflict of interest is said to occur when a professional’s self interest offers an incentive that mitigates his or her judgment against the best interest of the corporation or its customers. In turn, most professionals are unaware of their unethical progression because they are blindsided by internal motivation and expectations. It has been proclaimed that the most important job of the board of directors is hiring the right CEO, causing most boards to fail to notice unethical behavior in someone they do not wish or expect to find it. In fact, research suggests that it is usually difficult to report wrongdoing in an organization because most employees believe the same and fear retaliation, rejection, or disbelief from corporate leaders. Ethical principles will often offer advice for procedures and norms that can reinstate ethical concerns before unforeseen behavior damages an enterprises culture or reputation. In general, ethical systems are designed to improve the ethical behavior within an organization. To do so requires examining the interaction of many factors and forces in a working environment - which were investigated (analyzed) in this report. Executives...
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...Ethics in Accounting | Managerial Accounting Q1 | | | Instructor: Nikolaos Kourkoumelis, Ph.D. | Student: Marija Lukic | 11/14/2012 | | Table of Contents The Ethics in Accounting case and the plan…………………………………………….4Incidentals of Authorization and Submittal…….………………………………………………………………..4Objective………………………………………………………………………………………………………………………..4 Use of Observational Techniques…………………………………………………………………………………….4 An overview of the Report……………………………………...……………………………………………………….4Introduction………………………………………………...…………………………………………5The importance of Ethics in Accounting…….……………………………………………………………………..6 Creative Accounting…………………………………………………………………………….…7 Accounting Scandals..……………………………………………………………………………………………………10 The Enron Scandal……………………………………………………………………………………..10 The WorldCom Scandal………………………………………………………………….…………..12The consequences of Creative Accounting……………………..…………………………………13Measures of Prevention……………………………………………………………………………………15Conclusion……………………………………………………………………….…………………..17Bibliography……………………………………………………………...…………………………18 | Table of Figures Figure1. A proposed framework for understanding accounting manipulation practices…….……...9 The Ethics in Accounting case and the plan Incidentals of Authorization and Submittal This report is submitted to Dr. Nikolaos Kourkoumelis , professor of “Managerial Accounting” , on November 14th 2012, as authorized on the second Week of Q1 classes, 2012. The research and report...
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...Introduction The purpose of this case assignment centers on the examination of the how the Adelphia Communications’ executives violated the trust of the company’s shareholders and the trust of the community through the analytical view of deontological ethics. This analysis will be achieved by defining deontological ethics and Immanuel Kant’s Categorical Imperative. A review of the Adelphia Communications Scandal will be conducted with a general assessment of what ethical issues were present based on deontological ethics and Immanuel Kant’s Categorical Imperative. The Adelphia Communications Scandal The Adelphia Communications Corporation was the sixth largest provider of cable services in the United States prior to filing bankruptcy in 2002 due to a major accounting scandal. Adelphia’s management intentionally misled investors by falsifying financial statements to give the appearance the organization was financially solid and performing well above normal, by excluding billions of dollars of debt from financial statements. The auditors fail to find any fraudulent action in the financial statements. John Rigas was the original founder of the corporation and later joined with his brother and sons. The Adelphia Communications Corporation (investors) provided over $2.3 billion worth of personal loans to the Rigas family. The Rigas family received assets via fund transfers from the Adelphia Communications Corporation through journal entries to purchase...
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...Ethics in Accounting By Pace University – New York Accounting for Decision Making, MBA 640 Fall 2011 Required Research Paper Page 1 of 11 Table of Contents Number Content Page Number 1 Introduction 3 2 Ethics in Accounting 4 3 Enron Scandal 6 4 Satyam Scandal 8 5 Conclusion 10 6 References 11 Page 2 of 11 Introduction • What is “Ethics”? Ethics, also known as moral philosophy, is a branch of philosophy that addresses questions about morality—that is, concepts such as good and evil, right and wrong, virtue and vice, justice and crime, etc. Source: http://en.wikipedia.org/wiki/Ethics • What is “Accounting”? Accounting is basically maintaining and providing records of transfer of funds for an individual or business. All the data collected from these records are then summarized in form of reports and statements, which are used by outside parties and the company itself for various uses and analysis. Source: http://www.investopedia.com/terms/a/accounting.asp#axzz1fbCBL2q0 Page 3 of 11 Ethics in Accounting With many scandals and scams coming out regarding the unethical behavior of firms in terms of Business and accounting, higher authorities in governments across the globe are worried. These scams are disturbing and damaging the economy at large. When the economy is already sliding down, governments have started taking extra care and strict rules are being applied to control the damage...
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...Ethics and Accounting In the professional field of accounting there are vast opportunities that accountants are faced with every day in regards to ethics. Accountants are given the position to maintain the financial status of businesses as well as individuals. Businesses hire accountants to keep accurate financial records so that the business has the opportunity to provide goods and services to consumer. These financial records are important to promote healthy business decisions. If a company is not able to maintain proper financial records of income and expenditures the company has little chance of surviving. This is the purpose behind accounting. Accounting as defined is the system of recording and summarizing business and financial transactions and analyzing, verifying, and reporting the results (Merriam-Webster, 2013). This amount of control opens the door for opportunities of producing financial records that can be fraudulent and unethical. Since the turn of the century, into the 2000’s, there have been numerous scandals that have rocked the finance world. Most notably the Enron scandal has been the most widely publicized accounting scandal. Enron was a multi-billion dollar corporation supplying energy sources in the United States. Fraud, false reporting of revenues, and poor accounting eventually caused the collapse of this powerful corporation and the loss of thousands of jobs (Raver, 2006). The collapse of this energy giant prompted Congress to pass the...
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...the highly publicized scandals of companies such as Enron and Worldcom. The “goal of SOX [is] to ensure the accuracy and reliability of financial information of companies trading on public markets” (Parles, 2007). While this act was written quickly in response to a crisis and is only 66 pages its effect on companies in the United States is lasting (10 YEARS AFTER, 2012). Some of the provisions of the Sabanes-Oxley Act include: certification by CEOs and CFOs of company financial reports, prohibition of any form of personal loans to executives...
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...Accounting Ethics Dr. ACC 557: Financial Accounting May 22, 2013 Table of Contents 1.0 Corporate ethical breaches in recent times. 3 2.0 Accounting ethical breaches and their impacts 3 2.1 The Scandal of Enron 3 3.0 Organizational ethical issues and the management failure 5 4.0 Breach of the accounting practices and its impacts 5 5.0 Recommendations by the CFO 6 6.0 References 8 1.0 Corporate ethical breaches in recent times. Ethics is an important aspect of business in today’s enironment. Sometimes management ignores or leaves to state laws to govern the code of ethics within a company. Companies have faced a lot of issues regarding ethical situations in modern times. According to Baker (2012) contrary to the popular belief of the recent global financial crisis resulting from failures of accounting ethics, he argues that there is not enough evidence to support this connection. 2.0 Accounting ethical breaches and its impacts Breaches of the accounting ethical policies have become a source of concern for the firms today. The proper application of IFRS and GAAP standards is vital for each firm. In recent years as more scandals have come into the spotlight firms have taken more and more internal measures in addition to the policy making at the governmental level to ensure breach of consumers’ trust and laws does not take place in the future. There has been a tremendous increase in the interest in accounting ethics (Cowton, 2013). 2.1 The Scandal of Enron The scandal of Enron...
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...untrusting of company financial reporting. High-profile company scandals such as these beg the question of whether ethical practices were properly in place for public protection against such greed. After the infamous Enron scandal, the United States government felt it was time to enforce its authority and passed the Sarbanes-Oxley Act of 2002 in hopes of “combating fraud, improving the reliability of financial reporting, and restoring investor confidence” (Wagner and Dittmar, 2006, p. 1). The purpose of this paper is to highlight the benefits of the Sarbanes-Oxley Act of 2002 in terms of corporate accounting practices and provide analysis on how the Sunbeam scandal would have been affected by this act. Benefits of the Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley Act (SOX) was enacted on July 30, 2002. The most significant contribution was the initiation of the Public Company Accounting Oversight Board (PCAOB). Subject to the Securities and Exchange Commission (SEC) oversight, the PCAOB was created to “oversee the independent auditors of public companies, replacing a self-regulatory scheme and mandating true independence” (Maleske, 2012, p. 4). This encourages corporate transparency of financial reporting by implementing and sharing the results of audits and employing the independence of auditors. Another key element of the SOX is the enforcement of corporate codes of ethics. “SOX required companies to disclose whether their senior executives and financial officers followed...
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...their ability to perform their tasks. Recent historical events suggest that trust between employees and management has been negatively affected however, with the enactment of new laws and ethics policies has there been a strengthening of this trust relationship in recent years? This paper discusses the history effecting trust between employees and management and the related changes that have been implemented in attempts to improve this relationship. This examination suggests that although there has been improvement in the recognition of the importance of improving trust between the employee and management within many organizations, there has been little overall improvement in the trust of management by employees. However, this observation recognizes that many companies value building trust between employees and management more than other companies and that it will take additional time before this concept is globally accepted. Why the Topic is Important The topic of our research paper is the evolution of employee trust with corporate management. We will specifically discuss the history of management and employee trust relationships, give examples of scandals which led to distrust in management, and subsequent legislation and ethics policies that were created as a result of these scandals. Trust is invaluable in the organizational environment. Organizational behavior professors Steven McShane and Mary Ann Von Glinow define trust as “the positive expectations one person...
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...management corporate behaviour, ethical responsibilities, and internal controls due to the increasing number of corporate fiascos. The Arthur Andersen scandal was one of many conducted worldwide and an example of how things can go wrong in the public sector. This report will briefly describe the Arthur Andersen scandal, analyze the major failure elements that led to the scandal, and finally provide recommendations that could have been implemented to prevent these issues. Overview, Issues, and Recommendations: The Arthur Anderson Scandal was mainly related to Enron’s scandal and fallout. The accounting firm was responsible for completing the audited financial statements of the company and was convicted of obstructing justice, after it shredded documents relating to Enron’s Audit and scandal. Many fiascos led to Andersen’s fallout. This included unethical practices, poor internal controls, and dysfunctional behaviour of corporate managers. - Unethical practices: o Shredding Enron’s audit documents and files on hand. o The use of Special purposes entity (SPE) in Enron’s accounting for projects. (False profits, and hide losses and unfavourable information from Enron’s financials) - Poor internal controls: o No Segregation of duties and conflict of Interest The Manager responsible for making decisions regarding client’s financials is the same manager directly involved in the profitability of the client Arthur Anderson was given the role of a consultant and an auditor for...
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...Accounting ethics is primarily a field of applied ethics and is part ofbusiness ethics and human ethics, the study of moral values and judgments as they apply to accountancy. It is an example of professional ethics. Accounting introduced by Luca Pacioli, and later expanded by government groups, professional organizations, and independent companies. Ethics are taught in accounting courses at higher education institutions as well as by companies training accountants and auditors. Due to the diverse range of accounting services and recent corporate collapses, attention has been drawn to ethical standards accepted within the accounting profession.[2] These collapses have resulted in a widespread disregard for the reputation of the accounting profession.[3] To combat the criticism and prevent fraudulent accounting, various accounting organizations and governments have developed regulations and remedies for improved ethics among the accounting profession. ------------------------------------------------- Importance of ethics The nature of the work carried out by accountants and auditors requires a high level of ethics. Shareholders, potential shareholders, and other users of the financial statements rely heavily on the yearly financial statements of a company as they can use this information to make an informed decision about investment.[4] They rely on the opinion of the accountants who prepared the statements, as well as the auditors that verified it, to present a true and fair...
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