Ethics in accounting dissertation

EthicsinAccounting Assessing the Role of Ethicsin, plus the Impact of Recent Issues on, the Practice of Accounting:

An Analysis of Unethical and Illegal Procedures Leading to the Downfall of Corporations and Companies

By simply:

Oct 12, 2016

BAF3M

Device 19 & 20 (Accounting Careers and Ethics)

Mrs. Hruska

An Analysis of Unethical and Illegal Practices Leading to the Downfall of Corporations and Companies

The 2 main careers of an curator are to classify and record financial data and to offer useful monetary information to support in decision-making. This information is used by persons around the world making decisions that affect both the firm the accountant works to get and the person who makes the decisions in the first place. Throughout the accounting program, it is possible to get an accountant or company to purposely alter or fake information that could lead to a profit for the organization. This practice is the two illegal and unethical. In past times 20 years, many corporations and companies had been caught by simply auditors, more often than not leading to the bankruptcy of said corporation/company. I will examine the activities of ENRON, Adelphia Communications, andWorldCom that, in the end, induced significant deficits or individual bankruptcy. Finally, I will discuss feasible solutions for the problems, tiny steps businesses can take in order to avoid repeating the mistakes with the past.

Enron was a north american energy company founded in 1985. It was one of the biggest energy companies ever, claiming to have over 95 billion dollars of revenue. In 2001 it registered for individual bankruptcy. What went wrong? Very well it turns out that Enron was actually hiding immeasureable dollars in debt in off-the-balance-sheet accounts, accounts that never need to be displayed on the balance sheet. The professionals at Enron cooked the books, employing loopholes in accounting and poor economic records which in turn eventually result in the public seeing. In your five months Enrons stock fell from $90 to $1 and soon after Enron was bankrupt. This kind of caused thousands of people their jobs. The government discovered from this and new laws were put in place to make a second Enron scandal more difficult.

Adelphia Marketing communications was a cable tv company in Pennsylvania. Founded by JohnRigasin 1952, this quickly became the fifth largest cable connection company in every of the United States. OvertimeRigas family started out other businesses such as the Family-Owned farm, an inside design shop, and a personal car dealership. In 2002, JohnRigaswas sentenced to 15 yearsinjail at the age of 78 intended for multiple accounts of fraudulence including breach of the POTENTADO act, waste materials of corporate assets, infringement of agreement, conversion of corporate possessions, among others. Right after, Adelphia proceeded to go bankrupt. Rigastransferred 2 . three or more billion dollars in cash from the company to him self. These were produced through record entries that gave Adelphia more debts and theRigasesmillions of dollars of cash or other assets at no cost whatsoever. By exploit the literature to meet anticipations of auditors, analysts and investors he was also capable to inflate the stock price or the company. Revenues from Adelphia had been taken from the organization and utilized for the familys personal bills. Rigasalso utilized the earlier mentioned other companies to generate fake orders to his smaller companies that would in that case go straight to his personal account. For example , Rigasused his car dealership to lease vehicles to Adelphia atan inflated cost, most of the time Adelphia wouldnt even receive the cars. On a balance sheet or incomestatement, the transaction would lookfine, perfectly legal and moral. However , this kind of transactionwas justa method to transfer money from your company to theRigasfamily and steer clear of detection coming from auditors. Actually after all this, Rigasstill wished more money and so he would journalizetransactions with fake companies. Thus keeping the accounts in stability, taking the cash going to the artificial companies pertaining to himself.

During the 1980s, if the telecommunications sector was increasing, WorldCom was founded and the corporation steadily elevated in size, for the reason that of the require. However , in 2000, WorldCom (and the stock) suffered great losses when their proposed combination with Short was denied. To stop further losses CEO Bernard Ebbers decided to enhance the truth and increase WorldComs revenue so the stock wouldnt go down. This individual inflated the revenues by having bogus accounting entries in order that it would appear like the company is definitely making enormous profits. Yet another way Ebbers obtained his aim would be arranging standard expenditures as capital expenditures (allowing them to essentially be remedied as small expenses over time). It is predicted that this quickly accumulated to 11 billion dollars dollars in inflated assets. After being found out, Ebbers was sentenced to quarter of a century in prison for fraud, conspiracy, and filing phony documents. 35 000 careers were misplaced and a total of $180 billion was lost via investors.

Following theabovescandals, congress passed the Sarbanes-Oxley act, (a. k. a. Corporate and Auditing Accountability and Responsibility Act)introducing theexpanded set of laws governing accounting and the linked proper methods while likewise adding a criminal charges making it easier to prosecute people in cases such as the ones recently discussed. This has also not directly affected the accounting programs. An accounting student might find that they need to write essays just like the one you are currently studying on ethical practice in accounting in order to prevent future accounting scams by educating students about the topic.

Finally, it is necessary for a modern-day business to be familiar with ways to steer clear of accounting scam, as well as accounting students and accountants so that they dont (knowingly or accidently) cause their very own company to visit down in history as the next WorldCom. Firstly, a company will need to hire impartial experts to examine their records (like qualified fraud examiners). Secondly, firms should have ananonymous reporting mechanismto report worker fraud. Lastly, it is imperative to follow internal control types of procedures and have a powerful control system. A parting of duties allows accountants to essentially check each others function, making it tough for any problems to be overlooked and scam would be found quickly.

Sources:

The Worst Accounting Scandal ever. Accounting-Degree. org, http://www.accounting-degree.org/scandals/.

Investopedia. Enron Scandal: The Fall of a Wall Street Darling. Investopedia, July 2016, http://www.investopedia.com/updates/enron-scandal-summary/.

Nisen, Greatest extent. Watching To get Fraud Red Flags Can Really Boost Collection Returns. Organization Insider, Business Insider, Inc, 2013, http://www.businessinsider.com/corporate-fraud-red-flags-2013-6.

Cfo. Adelphia, RigasFamily Settle Fraudulence Case -. CFO, 2006, http://ww2.cfo.com/accounting-tax/2005/04/adelphia-rigas-family-settle-fraud-case/.

Tran, Indicate. WorldCom Accounting Scandal. The Guardian, Guardian News and Media, Sept. 2002, https://www.theguardian.com/business/2002/aug/09/corporatefraud.worldcom2.

CGMA, Stephen Reed CPA PSA. Six Techniques for Fraud Elimination in Your Business. Six Approaches for Fraud Reduction in Your Organization, http://www.cgteam.com/blog/six-strategies-for-fraud-prevention-in-your-business.