Effect of Unethical Behavior in Accounting
When describing accounting, it can be defined, as a type of method used to provide information with regards to the financial position of a company or an organization. The information provided to investors is imperative because it provides the investor with valuable information that can lead to their determination as to whether they should decide to invest or not to invest in a specific organization. Consequently, because of unethical practices and behaviors in accounting it is unusual to find such unethical behaviors. Some unethical practices in accounting that can be found would be to have misleading financial analysis for personal gain, exaggeration of revenue, and providing erroneous information pertaining to the company’s expenses and liabilities, misuse of funds, or exaggerating the value of corporate assets. In addition, to these unethical behavior there are other unethical practices like insider trading, bribery, securities fraud, and manipulation of the financial markets. In the late 1990’s and early 2000’s both publicly traded companies, WorldCom and Enron added weighted truth to the credibility of accounting and business ethics. Both Companies were involved in scandals that engaged in misrepresentation in financial statements and fraud. Enron was one of the world’s leading American energy company’s and in October 2001 Enron Corporation filed bankruptcy, this was due to the unethical behavior that Enron executives had practice. Enron had used ambiguous accounting methods. They provided false financial reports to conceal the billions of dollars in debt they acquired from unsuccessful business projects. The fraudulent actions taken by the Enron executives deceived the board of directors, shareholders, who lost billions when the stock prices dropped, and the audit committee of Arthur Andersen who they had overlook the financial concerns of the company; this cause the collapse of Arthur Andersen...
References: Jelinek, R. & Jelinek, K. (2010), Becoming a more relational firm in the Post-Sarbanes-
Oxley era. The CPA Journal, 80(9), 64.
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