Effects of Unethical Behavior

Topics: Business, Small business, Corporation Pages: 1 (363 words) Published: July 15, 2012
Effects of Unethical Behavior Article Analysis

Prior to 2002 there were no regulations enforcing lawful ethical accounting practices. There were also no internal accounting controls which led to the large corporations to commit fraud by altering the books to make them look more profitable. By providing false information and significant omissions in there financial statements investors were enticed into forking up large amounts of money into these corporations. The effect of these actions will cause investors to invest in the company that ere not as profitable as the reports states. Some of these corporations include WorldCom, Enron, and Tyco. Once the investor realized that these businesses were not profitable and the numbers were drastically inflated, it was too late and millions were lost in the process. This ultimately led to government introducing the Sarbanes-Oxley Act of 2002. This Act enforces the ethical reporting accounting practices and ensures that these practices will not happen again. Ever since the interception strict regulations on balance reporting have led to relatively conservation earnings figures, naturally depressing stock value. Sarbanes-Oxley is good for the investors and bad for the struggling unethical corporation. This law holds the CEO’s and CFO’s more accountable for their actions as they are the ones signing these documents for accuracy and validity. The consequences can be harsh with up to 20 years in prison if found guilty of fraud and unethical behavior. The only drawback to this new law is that small businesses struggle to put this in place because of the high cost associated with it. In conclusion the Sarbanes-Oxley Act of 2002 was a law that came in to place to protect the investor from fraudulent companies enticing them to invest in a broken down company. This law works very well for big companies with lots of capital, but it does hurt the small business owner who is just trying to get by. Since this is the case...
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