Review of Accounting Ethics
ACC-557 Winter 2013
Dr. Jacob Angima
Review of Accounting Ethics
In the wake of recent, enormous corporate scandals and financial market upheavals, is the current business and regulatory environment more conducive to ethical behavior, or not? The answer is not that easy to arrive at, but there is evidence to say yes. Certainly, there has been an increase in awareness, vigilance, and disclosure. New laws, rules, and regulations have been established, such as, the Sarbanes-Oxley Act, which requires more disclosure among other things. However, “despite this expansive federal legislation, the executive suite has not rid itself of internal corruption. Although revised accounting practices will likely prevent [corruption]…. new corporate scandals have already begun to emerge, demonstrating the need for forward-looking ethical reforms rather than reactionary regulations” (Bishara, 2009, p. 766). Consequently, ethics education has been implemented into business, accounting, and finance course curriculums, as well as, those curriculums used for organizational training. Ghoshal wrote (as cited in Pendse, 2012, p. 266), “The corporate scandals in the United States have stimulated a frenzy of activities in business schools around the world. Deans are extolling how much their curricula focus on business ethics,” which “should not only focus on techniques” (Bishara, 2009, p. 31), but also “pay more attention to the improvement of professional ethics of accountants” (p. 31). Nonetheless, with increasing automation and complexity in accounting systems, along with the accelerated development of globalization, and yet the slower paced acceptance of unified standards, it can be difficult, to say the least, to monitor and keep abreast of all accounting practices and procedures that auditors and other professionals are assigned to examine. “Along with the accelerating process of integration of world economy, the closer trade between countries, the more popular trans-national investment, and the more frequent information exchange, the accounting rules tends to be closer to the international accounting code. As a result, the credibility crisis of accounting and the distortion of accounting information would be the serious problems in front of all countries” (Cheng, 2012, p.28). Nonetheless, the trend overall seems to be toward more oversight, international cooperation in regards to unified standards, and ethical emphasis placed on accounting and business education and practice. Let’s examine a case in which Xerox Corporation had an extensive ethical breach in accounting and business practice, how the breach occurred, what transpired, what the impact was, and how the breach could have been prevented. Xerox and Its Ethical Crisis
Xerox Corporation, begun in 1906 and incorporated in New York, competes in the document management technology and services industry offering leading technology in digital systems including color, black and white printing, publishing systems, digital presses, copiers, and fax machines (Jessup & Nance, 2011, p. 155). September 19, 1959, Xerox introduced the first plain paper photocopier, called the model 914 (pp. 155-156). Because of the revolutionary development, the company’s revenues increased into the millions during the 1960’s, and investors greatly benefitted (p. 156).
During the ‘90s, Xerox started having trouble sustaining revenue growth (Jessup & Nance, 2011, p. 155). High competition increased in the market, and Wall Street threatened to decrease Xerox’s stock value if certain goals were not met (p. 156). With such intensified demands, Xerox officials bowed to pressure and began using “fraudulent and manipulative reporting practices to conceal the true financial performance [of the company]” from 1997- 2000 (p. 156). The Ethical Breach
According to SEC Immediate Release...
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