Unethical Practices

Topics: Enron, Financial statements, Finance Pages: 2 (503 words) Published: December 20, 2012
Unethical Practices and Behavior in Accounting
There are many situations that may lead to unethical accounting practices. Accounting is basically a system put in place to provide financial information on a business or organization. This information is used by investors to determine whether they want to invest their money in a business or organization or not take the risk at all. Unethical practices, such as that of Enron and WorldCom are what led the government to create the Sarbanes-Oxley Act of 2002.

Some unethical practices may include the misuse of funds, bribery, inside trading, and misleading financial analysis to obtain personal gain. By passing the Sarbanes-Oxley Act of 2002, the government has put in to practice strict auditing rules for accounting. In order for accountants to properly report and prepare an organizations financial statement, they must first understand the importance of the profession and also be able to make good judgments.

According to (Weygandt, Kimmel, & Kieso, 2010), under the Sarbanes-Oxley Act, all publically traded U.S. corporations are required to maintain an adequate system of internal control. These controls include all related methods and measures implemented by an organization to protect its assets. The Sarbanes- Oxley Act requires an internal control report on all financial reports. This is to show not only that the data entered is accurate, but also the company has confidence in the financial statements because if the controls that were set in place.

Since the enactment of the Sarbanes-Oxley Act of 2002, publically traded companies have been drastically making efforts to meet the new standards set forth by the Act (Abdullah, Al-Jafari, & Kourabi, 2011). With this new law in effect the upper management must certify that what is included in their financial statement is in fact correct. They assume total responsibility if there is anything that may be questionable. Before this Act took place, CEOs could have...

References: Weygandt, J.J., Kimmel, P.D., & Kieso, D.E. (2010). Financial accounting (7th ed.). Hoboken, NJ: John Wiley & Sons.
Abdullah, K., Al-Jafari, M., & Kourabi, F. (2011). The Effect of Sarbanes- Oxley Act (SOX) on Corporate Value and Performance. European Journal of Economics, Finance & Administrative Sciences, (33), 42-55.
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