Accounting ethics is necessary people financial consultants, accountants or accounting executives are privy to confidential, private and sensitive information about people, companies and their clients. One trusts an accountant with information regarding their finances or business. That’s why it is so important for ethics in accounting and in financial reporting. It is important for ANY type of business to practice ethics and not breach them.
History and background of Adelphia Communications Corporation
Adelphia Communications Corporation or “ACC, was a small family-owned cable television company. It was established in a small Pennsylvania town. John Rigas started Adelphia ...view middle of the document...
Out the trial and case, Adelphia Communications Corporation and its subsidiary, Adelphia Business Solutions (“ABIZ”) filed for Chapter 11 bankruptcy. Also four members of the Rigas family (who founded the company) and two other managers resigned from the Board of Directors and the ACC and ABIZ. They were also arrested under a twenty-four-count indictment which included charges of conspiracy, securities fraud, wire fraud and bank fraud. (Mahony, 2005). Adelphia created fake transactions and false documents that indicated debts were paid back. The Rigas family who were the founders, used Adelphia funds to:
purchase stock for the Rigas family, timber rights, built a golf course, corporate jets were used for shopping trips, pay off margin loans for family members. (Giroux, 2008). Millions of dollars were invested in a financially strapped pro hockey team because one of the directors of Adelphia was a fan. According to the Securities and Exchange Commission, ACC’s collapse represents “one of the most extensive financial frauds ever to take place at a public company.” (Mahony, 2005).
The company is no longer trusted and went bankrupt. A lot of things went wrong for the company. Internal control was in shambles. The family was too involved in the process mixing business with pleasure. It is one thing to have a family business and see it through growth and development, but to have side businesses, unreported financial claims is unethical and was illegal. The SEC conducted an investigation and according to the SEC the complaint was that Adelphia, at the direction of the individual defendants:
(1) Fraudulently excluded billions of dollars in liabilities from its consolidated financial statements by hiding them on the books of off-balance sheet affiliates;
(2) Falsified operations statistics and inflated earnings to meet Wall Street's expectations;
and (3) concealed rampant self-dealing by the Riga’s Family, including the undisclosed use of corporate funds for Rigas Family stock purchases and the acquisition of luxury condominiums in New York. (www.SEC.gov) Out of the lawsuit, the Commission found that the defendants violated the antifraud, periodic reporting, record keeping, and internal controls provisions of the federal securities laws. The Director of...