This website uses cookies to ensure you have the best experience. Learn more

Review Of Accounting Ethics

1445 words - 6 pages

Review of Accounting Ethics
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 ...view middle of the document...

Through off shoring of losses, and recording of the assets either inflated prices or the non-existing assets the company portrayed a healthy financial situation. The company did not have appropriate audits or checks and balances. Because of this, when it was discovered that the company had no liquid assets besides the fact that books showed huge figures, the management was left with few alternatives (Emerson, 2006).
In 2001, Enron started on its project of online selling under its brand name. However, the control over its assets couldn’t be established by the management. Thus it had to file bankruptcy by December, 2001 (Emerson, 2006). Firms in the past, such as Enron created a special purpose entity (SPE) as highlighted by Levitin and Bratton (2012) in order to accumulate losses. The purpose of this wa to transfer the profits to the mother company or the firm in which the top management thinks it would be appropriate to and transfer the losses to these SPEs. Same was the case of Enron with losses accumulating in an offshore company they maintained a healthy financial statement.
Furthermore, as the company’s reward system was designed in such a way that whether the company incurred losses or profits it had no impact on the reimbursements of the top management. They received annual pay raises and bonuses as before even after the company started incurring losses. This resulted in them taking exaggerated risks thus exposing the firm to heavy losses. Management was not concerned with the outcome of their decisions as they were receiving more than appropriate financial and other benefits. They did not think about the other stakeholders. Decisions were made at the top without dissemination of the negative impacts they might have on the shareholders.
The reason management failed to see the impact of their decisions was the flawed reward system and lack of internal checks and balances. The authority figures made the decisions without realizing the impact of their decisions on the staff or the shareholders.
In order to counter for SPEs formed there have been policy formations with regards to tracking equity ownership. These have lessened the impact of such accounting defences that the companies formulate but further policy formation and legal boundaries need to be formed and implemented to resist such behavior in the future.

3.0 Organizational ethical issues and the Management Failure
Management of the company must have processes in place to deal with ethical concerns; otherwise it will affect the trust of the consumer on the company (Conroy, 2006). The reason for the collapse of Enron was the failure of its lower management to address the issues which they were aware of. Furthermore, Andersen’s which was one of the Big Five accounting firm failed to stand up to the management of Enron with regards to its accounting practices (Cullinan, 2004). For the best public interest an auditor should be aware of the misrepresentation, recognizing a...

Other Papers Like Review of Accounting Ethics

Importance of Ethics in Accounting Essay

1086 words - 5 pages Running head: IMPORTANCE OF ETHICS IN ACCOUNTING Importance of Ethics in Accounting Everest University Importance of Ethics in Accounting Accounting fraud is common but is not as trivial as the common cold; a typical organization loses annual revenues of nearly 5 percent to fraud. In addition, almost one-quarter of reported fraud is exceeding $1 million dollars. The accounting industry is constantly growing and changing

A Review of the Literature: Plea Bargaining and Ethics in the Criminal Justice System

1939 words - 8 pages | A Review of the Literature: Plea Bargaining and Ethics in the Criminal Justice System | | | Plea bargaining is a significant portion of today’s criminal justice system. As Chief Justice Burger stated, “The disposition of criminal charges by agreement between the prosecutor and the accused, sometimes loosely called ‘plea bargaining,’ is an essential component of the administration of justice. Properly administered, it is to be

Of Mice And Men Essay - Overall Book Review Accounting Characters, Attitudes And Depression

1999 words - 8 pages Of Mice and Men is a novella written by John Steinbeck. I feel that the whole story revolves around Lennie Small and what he does.The novella is about two workers in California during the Great Depression - George Milton, small, intelligent, assertive but caring and Lennie Small, a huge, but child-like man - that come into a ranch in California to 'work up a stake'. They are running from their previous job in weed. George and Lennie run out of

Ethic in Accounting

1428 words - 6 pages Ethics in Accounting Linh Pham University of Mount Olive Author Note This research paper was prepared for ACC483, taught by Professor Henry Singletary. Ethics in Accounting Ethics in Accounting has recently attracted a lot of attention in the field of business. Based on my knowledge, ethics in accounting are the behavior or actions that doesn’t allow for intentionally inaccurate and false in accounting practices. This is quite complex


3380 words - 14 pages , as well as displaying moral integrity (Matis, Vladu and Negrea, 2009). METHODOLOGY The last chapter has offered a review of literature concerning the topical issues being explored by the research. The literature review has provided an overview of the accounting ethics. This chapter mainly covers the research approaches, research philosophy, research design, as well as ethical issues in business research. At the same time, the chapter offers

Managerial Accounting

536 words - 3 pages monitor sales management. The internal accounting system helps the managers to identify, measure, and manage risks related to business (M.U.S.E., 2012). The Managerial Accountant’s Role in Upholding the Code of Ethics Managerial accountants help business gain competitive advantage. The managerial accountants improve integrity, honesty, and sincerity for the firm (Wild & Shaw, 2012). The managerial accountant maintains competence by development of

Cost Accounting or Cost-Volume-Profit Accounting

990 words - 4 pages the organizations management team can consider one or more, “best usage” options. With reasonably accurate calculations, management can use the data to plan production or forecast sales for the period in question. In review, each accounting method was developed with a different application in mind. Generally Accepted Accounting Principles, was developed as a standard for third parties to be able to review the financial health of an organization

Enron Case

882 words - 4 pages governmental agency to review the audit process. SUMMARY: There should be a healthy corporate culture in a company. In Enron’s case, its corporate culture played an important role of its collapse. Seniors executives in times of failures and losses in company performance tried to cover up their losses in order to protect their reputation instead of trying to do something to make it correct. U.S. Security and Exchange Commission allowed them to use “mark the market” accounting method. The ignorance of drawbacks of these accounting methods by SEC also caused the final scandal. Business ethics is the most important point people doing business should focus on.

Enron Corporation Case Study

2652 words - 11 pages accounting also violated the very notion of professional auditing standards. Moreover, in economic sense, the large lump sum amount charged by Andersen's for its professional dispatch also did not translate into effectiveness in auditing process and procedures, which again violated the professional standards and business ethics is all essence. Moreover, auditing from the end of Andersen also did not take into account to review the disclosure from


1214 words - 5 pages professional ethics. Accounting Principles Accounting principles, known as Generally Accepted Accounting Practices (GAAP) guidelines, which are the procedures and rules that companies must follow when reporting financial data (Cusumano, 2003). Accounting is known as the language of business, which information about an enterprise is communicated. To be successful in a business, accounting is the language that we must speak and understand. Once

Ethics and Why They Are Important in Using Accounting Software

565 words - 3 pages Ethics and why they are important in using Accounting Software By Kevin Alexander Computerized Accounting acc231-f2014-ol-u-91502.001 Introduction Accounting is an honorable profession. Accountants must adhere to a set of standards that many other professionals do not have to be subject to. The ethical aspect for an accountant working in the public or private sector comes down to them being vigilant in making sure there are no outside

Related Essays

Review Of Accounting Ethics

1666 words - 7 pages | Assignment 1: Review of Accounting Ethics | | | | Assignment 1: Review of Accounting Ethics | | | Doing the right thing matters. Every day, workers make decisions that are vital to a company’s success. How those decisions are made is just as important as the decisions themselves. In every company there are shareholders, consumers, business partners, and employees who have placed their trust in workers to act

Assignment 1: Review Of Accounting Ethics

1711 words - 7 pages Assignment 1: Review of accounting ethics 1 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) Assignment  1:  Review  of  Accounting  Ethics                            2     Abstract This research writing is to

Assignment 1: Review Of Accounting Ethics

1098 words - 5 pages Introduction 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

Accounting Code Of Ethics Essay

1255 words - 6 pages aCCOUNTING cODE of eTHICS LaToya Wallace AC504 APril 10, 2012 Accounting Code of Ethics Introduction The accounting system is ever changing and constantly evolving. Therefore, it is extremely that accountants adhere to very high ethical standards. The code of ethics for accountants “guides those in the profession to behave in a respectful, controlled and moral way. Clients need to have confidence in the business practices of