Assignment 1: Review of accounting ethics
Assignment 1: Review of Accounting Ethics By February 1, 2013
ACC 557: Financial Accounting Oleksii Morgun Strayer University at Arlington Campus School of Business Administration (M.S. Accounting Program)
Abstract This research writing is to describe the following: 1. Given the corporate ethical breaches in recent times, assess
whether or not you believe that the current business and regulatory environment is more conductive to ethical behavior. 2. Based on research, describe organization, ...view middle of the document...
S. population). The ethics of reporting has become a vital problem of the financial sector. This is the case not only in the USA where the “earthquake” of this crisis of confidence broke out, but also in Europe and indeed worldwide. It would be naive to assume that this problem could be fixed by tough punishment of CEOs and CFOs alone or by only sharpening the regulatory framework and strengthening its enforcement. At stake is a much more complex problem that calls for a more comprehensive and sophisticated approach. (Brenkert, G., 2004) Despite all the attempts of the U.S. Government and international Financial and Auditing Organizations to prevent any accounting ethics breaches, problems will continue exist as long as it is related to wealthmaximization of such economic units as firms and corporations. This research is based on a corporate accounting scandal that involved the largest publicly listed healthcare company in the United States HealthSouth Corporation. At its highest peak of development in 2003, company recorded nearly $4.5 billion in revenue, provided jobs for more than 60,000 people at 2,000 facilities at every state of the United States and its abroad facilities in the United Kingdom, Canada, Australia, Puerto Rico and Saudi Arabia. Based on its
revenue, HealthSouth was number three largest publicly listed healthcare company in the United States. The U.S. Securities and Exchange Commission (SEC) accused HealthSouth of an accounting scandal where the company's earnings were falsely inflated by $1.4 billion. In 1996, the company's senior officers and accountants were allegedly instructed by the CEO Richard M. Scrushy to falsify company earnings reports in order to have the control over the price of company’s stock and to meet investor expectations. In certain fiscal years, the company's income was overstated by as much as 4700%. The $1.4 billion represents more than 10% of the company's total assets. HealthSouth was nearly driven into bankruptcy after the Securities and Exchange Commission filed suit alleging a massive fraud in March 2003, the company finished reconstructing its financial statements only by the end of 2005. HealthSouth stock, which traded for nearly $20 a share right before the scandal, had been selling for around $5 a share for almost two years in over-the-counter trading. The company lost trust as of its investors, as of employees, it was right on the edge of “a cliff to bankruptcy”. It had to face a long, hard process of rehabilitation and recovery. (Freudenheim M. 2003) On February 6, 2003, the Federal Bureau of Investigation (FBI) announced that it had begun a criminal investigation relating to the "trading of shares of the HealthSouth Corporation" and possible securities law violations. A criminal complaint was filed by the FBI against HealthSouth's Chief Financial...