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Research Proposal on Ethics and Accounting

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Research Proposal on Ethics and Accounting

Scandals and deceit are obliterating the accounting profession.
Unethical practices by corporations are giving accountants a bad name
and dragging the economy into a recession. It seems every week there
is a new CEO on the chopping block, preparing to be reprimanded for
"cooking the books". Some of the most respected names in business
(WorldCom, Enron, Tyco, Adelphia) have been caught red-handed, and are
facing the wrath of the judicial system. In an attempt to identify the
culprits responsible, accountants are being labeled as unethical
criminals, even though the only crime they are guilty of, is trying to
please their boss so they can protect their job. It all boils down to
profit maximization. If your organization reports high profits,
investors will be enticed into buying company stock. Therefore, CEO's
place tremendous pressure on their staff to achieve high earnings, and
if numbers are not met, drastic measures must be taken. The accountant
is essentially "earnings messenger" of a corporation, and if the news
is bad, they must face the wrath of their employers. As a result, they
must come up with alternatives to please their bosses if the numbers
are not at desirable levels. Furthermore, management in these
organizations is living lavish lifestyles at the expense of
shareholders, and in order to compensate for these luxuries, companies
are forced to adjust their annual reports.

Research Objective

The main objective of this proposal is to gain insight into the
unethical accounting practices of major corporations (with a majority
of the focus on Enron, WorldCom, Tyco, and Adelphia) and ultimately
exposing the true perpetrators behind these scandals (the CEO's) in an
effort to restore credibility in the once revered accounting
profession. Many of the people responsible of these crimes are
enjoying retirement in lavish homes while receiving ludicrous pension
plans and company benefits at the expense of investors. If they are
not brought to justice, they will realize they can get away with this
sort of behavior, and the prevalence of unethical behavior will
continue to rise.

Research Question

Are the accountants truly responsible for the fraudulent claims
companies are making these days, or are they simply pressured by their
bosses to fabricate figures that enhance the image of the company's
profitability and fill the CEO's greedy pockets?

Literature Review

In the past 5 years, a plethora of articles and books have been
released, dealing with ethical business practices. Balancing the
books: The crooked E, is an article by Anita Peltonen,which examines
Enron's practice of kiting (Illegally benefiting from altering the
amount of money or time represented by checks that are in transit
between deposit and payment, or credit card purchases that are between
the purchase and the payment. For example by depositing and drawing
checks between accounts at two or more banks)their stock price and
hedging (Hedging a cash commodity using a different but related
futures contract, often done when there is no futures contract for the
cash commodity being hedged).

Another Enron article entitled, Jeff Skilling: Enron's Missing Man;
The CEO who created its in-your-face culture has been largely absent
from the inquiry, by Wendy Zellner, explores Skilling's (Ex CEO of
Enron) involvement in the Enron scandal. The following quote from sums
up the content of the article by providing damming testimony against
his character:

"He implicitly and explicitly pushed subordinates to break laws as a
heavily indebted Enron scrambled to hide years of bad investments to
keep its crucial credit rating." (Zellner, 2002)

In an article entitled The big Kozlowski; CEO's under fire, the lavish
lifestyles and irrefutable greed of today's CEO's are exposed. The
main target is Dennis Kozlowski, the former CEO of Tyco. The author of
the article states that Kozlowski will be remembered by Americans as:

"the bald guy with the $6,000 shower curtain. And, say, the $15,000
dog umbrella stand. Ditto for the now infamous $2.1 million birthday
bash that Kozlowski, the former CEO of Tyco, threw in Sardinia for his
wife's 40th birthday. It featured a giant cake with exploding breasts
and an ice sculpture of Michelangelo's "David" dispensing Stoli
through an appendage that in more modest times would've been covered
by a fig leaf." (Varchaver, 2002)

This article makes it clear that CEO's today are living lifestyles
normal people couldn't possibly fathom, and at whose expense? The
investors, and their employees. This pressure falls on the accountants
to make earnings acceptable so that they don't lose their jobs, and
their bosses can fund their ridiculous lifestyles.

An article in Business Week entitled, Enron: Let US Count the Culprits,
takes an in-depth look at the key individual responsible for the
illegal activities that transpired at Enron. Their primary target is
Jeff Skilling, and they emphasize that the blame for the scandal
belongs on his shoulders.

"Skilling, a former McKinsey & Co consultant and Harvard Business
School grad, tried to craft Enron as a new kind of virtual trading
giant, operating outside the scrutiny of investors and regulators.
Enron's numerous partnerships were shrouded in secrecy, tucked away
off the balance sheet. They were used to shift debt and assets off the
books while inflating earnings. The chief financial officer ran and
partly owned two partnerships, a clear conflict of interest. Enron
leveraged itself without a reality check by any outsider." (Business
Week, 2001)

In a Business Week article entitled, At Worldcom, It's Deja Vu All
Over Again, the Worldcom scandal is discussed and emphasis is placed
on the fault of management for causing the illegal activities. They
actually point out that the Deloitte & Touche, the accounting firm
dealing with Worldcom's financial figures, quit because they didn't
agree with the moral decisions Worldcom was making with regard to
their record keeping.

"The company's accountants, Deloitte & Touche, abruptly quit in 1994,
citing ``an inability to rely on management's representation'' of its
numbers--first-quarter earnings of $8.8 million that matched analysts'
forecasts." (Timmins, 2002)

A Newsweek article entitled The Mighty Fall, by Keith Naughton,
depicts today's CEO's as immoral, money starved crooks, that are
willing to take any measure necessary to fill their bank accounts with
investors' hard earned money.

"Gone are the days when CEOs were America's new Joe DiMaggios,
inspiring and enriching us with their heroic leadership of the booming
New Economy. These days, CEOs seem more akin to Allen Iverson. Now
they're the bad boys of the 21st century. The insatiable appetite for
CEO comeuppance is enough to give even honest bosses a crisis of
confidence. No CEO's reputation is intact." (2002, Naughton)

"Corporate boards are also taking a harder look at something investors
have been complaining about for years: CEOs' fat paychecks. CEO pay
has grown tenfold since 1990, and pay packages crammed with stock
options allowed the big boss's take-home pay to top $200 million in
some cases. But Congress is fast tracking legislation to rein in stock
options by forcing companies to account for them as an expense on the
books, rather than handing them out like free money." (2002, Naughton)

A Maclean's article was written on John Rigas, former CEO of Adelphia
Communications. The author, whom wishes to remain anonymous, states
that Rigas used the company as "his personal piggy bank". Rigas is
portrayed as an immoral, greedy leader, whose main concern was how
much money he could embezzle out of his company.

"The company issued more than $1.3 billion in stock and notes for the
benefit of the Rigas family. It paid off $241 million of the family
members, personal debt. Of that, $174 million was paid after
accounting problems were announced in March. The firm paid $26.5
million for timber rights on a Rigas property. It spent $12.8 million
of company funds to build a golf course and clubhouse which was
controlled by the Rigases. The family had the exclusive use of
Adelphia- paid luxury properties in Colorado, Mexico and New York
City." (Maclean's 2002)

Here is yet another article that bashes Rigas's character, and
portrays his passion in spending shareholders' hard-earned money.

"But what was perhaps most unsettling was the unabashed manner in
which the Rigases had helped themselves to shareholder dollars.
Adelphia financed the family's $150 million purchase of the Sabres. It
paid $12.8 million in 2001 for office furniture and design services
provided by Doris Rigas." (Leonard, 2002)

Research Method


The subjects being analyzed in this research are mainly CEO's and
other upper management level employees (both current and former) that
operate/d large corporations. The companies/individuals being analyzed
will be involved in some sort of criminal investigation (i.e. fraud or
other unethical behavior). Furthermore, the subjects' being analyzed
will belong to corporations in North America, and they will be highly
publicized companies.

Sources of Information

The main sources of information will come from online peer-reviewed
journal and periodical databases. These will include, ABI Fulltext
Informational Database, Hoover's Fulltext Database, and Econlit
Database. Other sources will include newspaper articles from the Globe
and Mail, Financial Post, Gazette, and the Toronto Star. There will
also be supplementary information from class lectures and notes.

Data Analysis

The data will be analyzed based on the reported findings from the
published sources and current events in the daily news. A comparison
will be drawn between the advantages for the CEO's and upper
management employees in relation to the accountants working alongside
them. The motives for fraudulent behavior will be analyzed and the
individuals with the most incentive/monetary gain to benefit from the
execution of the scandalous acts will be deemed responsible for their


The main limitation of this study is that there isn't an opportunity
to obtain face-to-face interviews with the individuals in question.
They are either inaccessible due to security reasons, or they are
simply unwilling to divulge the personal information that is required
for the study. Therefore, a majority of the data will be obtained from
journals and periodicals which may possess skewed or speculative

Research Design

This study is qualitative and is primarily composed of secondary data
in the form of articles from journals and periodicals. Data will be
collected through the use of a few cases which may not be
representative of the entire population. The data received will be
descriptive, yet non-statistical in nature. The findings are meant to
be used as a base for initial understanding and to promote further
study in the area of ethical practices in corporations.


The anticipated out-of-pocket expenses for this research report
consist of the following:

Materials and Labour


Typing Services














Internet Usage


Automobile Usage




Approximate Total Cost


The approximate total cost anticipated for this research study is

Ethical Considerations

The people being analyzed in this study are all public figures that
have already been accused and some even apprehended for their actions.
The information regarding their criminal behaviors is already
available to the general public and thus there is no additional
invasion of privacy as a result of conducting this research. However,
all the individuals in this report will be treated fairly and with
respect. No additional/ unpublished information will be divulged
throughout the course of this study, which may further incriminate or
falsely accuse the individuals in question.


Business: 'Personal piggy bank'; Anonymous;Maclean's, Toronto; Aug 5,
2002; Vol. 115, Iss. 31; pg. 12, 1 pgs

Enron: Let US Count the Culprits;Business Week, New York; December 17,
2001, Iss. 3762; pg. 154

The Adelphia story; Devin Leonard;Fortune, New York; Aug 12, 2002;
Vol. 146, Iss. 3; pg. 136, 8 pgs

The mighty fall; Keith Naughton;Newsweek, New York; Aug 5, 2002; Vol.
140, Iss. 6; pg. 24, 2 pgs

Balancing the books: The crooked E; Anita Peltonen;Barron's, Chicopee;
Nov 4, 2002; Vol. 82, Iss. 44; pg. 44, 2 pgs

Finance And Economics: Prosecutor's dilemma; Enron and the economics
of greed; The Economist, London; Aug 31, 2002; Vol. 364, Iss. 8288;
pg. 61

Leaders: Fallen idols - Fallen idols; CEO's;The Economist, London; May
4, 2002; Vol. 363, Iss. 8271; pg. 11

Enron's dirty laundry; Johnnie L Roberts;Newsweek, New York; Mar 11,
2002; Vol. 139, Iss. 10; pg. 22, 7 pgs

Tyco: How did they miss a scam so big?; William C. Symonds; Business
Week, New York; Sep 30, 2002, Iss. 3801; pg. 40

At Worldcom, It's Deja Vu All Over Again; Heather Timmons; Business
Week, New York; August 5, 2002, Iss. 3794; pg. 14

The big Kozlowski; CEO's under fire; Nicholas Varchaver; Fortune, New
York; Nov 18, 2002; Vol. 146, Iss. 10; pg. 123

Jeff Skilling: Enron's Missing Man; The CEO who created its
in-your-face culture has been largely absent from the inquiry; Wendy
Zellner in Dallas, with Christopher Palmeri in Houston, Mike France in
New York, Joseph Weber in Chicago, and Dan Carney in Washington;Business
Week, New York; February 11, 2002, Iss. 3769; pg. 38

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