WroldCom---Financial Accounting

Topics: Ethics, Business ethics, Accounting scandals Pages: 5 (1739 words) Published: June 12, 2014
WorldCom: A Culture of Dishonesty
Ethics is a term that refers to a code of moral system that provides criteria for evaluating right and wrong. An ethical dilemma is a situation in which an individual or group is faced with a decision that test this code. One of the elements that many believe distinguishes a profession from other occupations is acceptance by it members of a responsibility for the interest of those it serves. . Accounting ethics is a field of professional ethics which pertains specifically to accounting. For the public to rely on the information provided there must be a level of confidence in the knowledge and behavior of accountants. The nature of the accountants’ work puts them in a special position of trust in relation to their clients, employees, and people who rely on their professional judgment; ethics is viewed as necessary in the profession as it helps to minimize fraudulent activities. Ethics and standards in accounting were originally applied to protect the public from unscrupulous corporations and the accountants who hide or misrepresent information. However, following several large corporate scandals, the codes of conducts and standards for both public and private accountants have been revised. Given the corporate ethical breaches in recent times, assess whether or not you believe that the current business and regulatory environment is more conducive to ethical behavior. Provide a rationale to support your answer. In recent years, accounting ethical breaches has emerged as a major problem for most organizations and the business industry. Accounting ethical breaches can be defined as the misappropriation and misconduct of financial data by the auditors and accountants of an organization (Crutchley & Jensen, p.55). Every business entity has an accounting professional provide information at some point in the organization’s life cycle. Whether accountants work in the public or private practice, they are expected to adhere to ethical standards which are designed to ensure that accountants behave in a way which is ethical and consistent. The ethics of a business is currently a high profile issue due to the astonishing corporate scandals that has taken place in many countries causing extensive damages to the economy and society. With the increasing number of corporate ethical breaches, the role and importance of ethical behavior has increased within organizations. Since the scandal at both Enron and WorldCom there has been a movement towards a more heightened state of ethical awareness. Research shows this is resulting from the greater likelihood of punitive consequences imposed for unethical corporate behavior (Crutchley & Jensen, p.55). Organizations are becoming more supportive to ethical behavior in the current business environment, ensuring compliance and the minimization of risk. The SEC and government have also tried to increase and re-build the ethical behavior within American Corporations. Congress passed the Sarbanes-Oxley Act in 2002 in response to recent accounting scandals (Ball, p.279). The act was designed to protect investors by improving the accuracy and reliability of corporate disclosures and set new or enhance standards for all U.S. public company boards, management, and public accounting firms (Ball, p.79). Based on your research, describe the organization, the accounting ethical breach and the impact to the organization related to the breach. WorldCom was once the largest telecommunications company in the world. The company is now known as MCI, currently a subsidiary of Verizon Wireless. The company WorldCom was the result of a merger between Long Distance Discount Services and Advantage Companies. The company was thriving until 1998 and that’s when the telecommunications industry began to slow. In the midst of another major accounting scandal by Enron, WorldCom stunned industry insiders when they learned the corporation was falsely reporting financial statements. On June 25,...
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