ACC/291 Principle of Accounting II
Effect of Unethical Behavior Article Analysis
The Sarbanes Oxley Act was passed in 2002 as a result of plenty of corporate scandals. The purpose of this act was not only to defend investors and provide them with accurate and reliable information but also make companies and employees behave ethically and with integrity. After the law was passed the financial statement have been impacted and corporate managers are more involved but is the law 100% effective? Many business argue that the implementation and ongoing requirements of Sarbanes Oxley Act are costly, time consuming, and as yet ineffective. In many instances law has at best led to a culture of compliance rather than a culture of integrity. Brooke Corporation is one example where these laws have seemingly failed. Brooke Corporation was once one of the largest franchisors of property and casualty insurance in the United States. Its main focus was selling insurance and other products through its franchisee locations. According to Beth Hazel (Journal of Business Case Studies, 2010) the laws as they exist today create a corporate environment focused on compliance instead of integrity. In Brooke Corporation the senior management was in charge to set the example of the organization culture. His main focus was on making money and not, apparently, behaving with integrity. Brooke’s business model required that all insurance companies pay commissions to Brooke directly and not to the agent. Brooke then withheld any expenses owed by the agent and paid the balance to the agent. However, franchisee agents have complained for several years that Brooke would not send them commission reports from the insurance companies showing the total commissions earned ("ReportBrooke Franchise," 2007). In addition, there were claims that while payments for rent and utilities were withheld from commission’s...