In recent history, there have been quite a few memorable cases of corporations manipulating financial reports in order to deceive stakeholders. Deceptive accounting practices are like a disease, and should be rooted out immediately. These practices undermine the stability of U.S. financial markets, and can make people less willing to invest in stocks. Financial reporting is the key to maintaining trust in the financial system and any manipulation should not be tolerated. The purpose of financial statements Financial statements are the primary instruments used in assessing the performance of a business and its managers (Gibson , 2013). In order to make well informed decisions, interested parties must be able to assume that a company’s financial statements are an accurate representation of its performance. Financial statements are used by customers, employees, governments, investors, lenders, and suppliers to influence numerous types of transactions. Investors can use financial statements to determine a company’s value as an investment. Governments can use financial statements to determine a company’s tax liability. Lenders and suppliers can use financial statements for determine a company’s creditworthiness. Good decisions rely on accurate financial reporting. Situational Ethics An article titled; The Dangerous Morality of Managing Earnings, by the National Association of Accountants (1990) as cited by Gibson (2013), highlights a broad range of questionable financial reporting practices that many managers at many levels suggested were acceptable in the name of meeting their objectives. According to the article, many managers stated that taking unproductive actions to boost short-term earnings was acceptable because the accounting... ... middle of paper ... ...ncial statements reflect its true state. Greed can drive individuals to take risks with other people’s money, and as such, only those with the highest moral fortitude should have governance over the finances of a publicly traded company. When companies with countless investors fail, many people lose a large portion of their life savings and their faith in financial markets. Works Cited Gibson, C. H. (2013). Financial reporting & analysis: using financial accounting information (13th ed.). Mason, OH: South-Western/Cengage Learning: Management Accounting, August 1990. Gowthorpe, C., & Amat, O. (2005). Creative Accounting: Some Ethical Issues of Macro- and Micro-Manipulation. Journal Of Business Ethics, 57(1), 55-64. doi:10.1007/s10551-004-3822-5 Wilson, A. C., & Key, K. G. (2012). Enron: A Case of Deception and Unethical Behavior. Feature Edition, 2012(1), 88-97.
In this essay, the author
- Opines that deceptive accounting practices undermine the stability of u.s. financial markets and can make people less willing to invest in stocks.
- Explains that financial statements are the primary instruments used in assessing the performance of a business and its managers.
- Explains that earnings management is an unethical practice that affects reported income and provides no true economic advantage to the organization. financial reporting must be ethical and moral.
- Opines that ethical accounting practices should never be circumvented. enron used creative accounting methods to defraud stakeholders out of millions of dollars.
- Opines that it is imperative that a publicly traded company's financial statements reflect its true state. greed can drive individuals to take risks with others' money, and only those with the highest moral fortitude should have governance over the finances.
- Analyzes how managers favored manipulating short-term earnings by utilizing overtime as opposed to offering extended credit terms.
- Explains gibson, c. h., gowthorpe, & amat, o. (2005). creative accounting: some ethical issues of macro- and micro-manipulation.
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- Corporate Accounting Fraudexplanatory essayIn today’s day and age, there is a lot of news that is related to corporate accounting fraud as companies intentionally manipulate their financial statements to show a better picture of their financial health. The objective of financial reporting is to provide financial information about a company to its various stakeholders such as investors and creditors so that these stakeholders can make decisions accordingly. Companies can show a better image of their financial well being by providing misleading information. This can be done by omitting material information from the books or deceitful appropriation of assets such as inventory theft, payroll fraud, check forgery or embezzlement. Fraudulent financial reporting will have an effect on the
In this essay, the author
- Explains that corporate accounting fraud is a way of providing financial information to investors and creditors so they can make decisions accordingly. fraudulent financial reporting will have an effect on stakeholders.
- Explains accounting fraud, such as check forgery, inventory theft, cash or check theft and payroll fraud. embezzlement is a common form of misappropriation where companies manipulate their accounts or create false invoices.
- Describes tyco's misappropriation of assets fraud in the early 2000s. two executives used the money from investors and used it to pay unapproved bonuses and compensation to themselves.
- Explains that accounting fraud involves financial statements misrepresentation and manipulation to make the company attractive to investors and creditors. companies commit financial fraud to secure investors or to meet the expectations of shareholders.
- Explains how the infamous enron scandal led to the company's bankruptcy in 2001. the company concealed huge debts off its balance sheet, which resulted in overstating earnings.
- Explains that olympus' $1.7 billion fraud shows an unreal picture of the company's financial strength and makes investors make investments, which they otherwise would not have made if they had known the true picture.
- Explains how fraudulent financial reporting can have an effect on all stakeholders involved. the public loses confidence in the management and the company.
1084 wordsRead More - Enron: Who was at fault?analytical essayThough the numbers looked good, the process behind them was questionable. Unbeknownst to many, Jeff Skilling, a top Enron executive, was able to persuade the SEC and their accounting firm, Arthur Anderson & Company, to approve the use of mark-to-market accounting (M2M). This technique allowed the company to report profits from long term contracts up front, before all earnings had actual...
In this essay, the author
- Explains how jeff skilling, a top enron executive, persuaded the sec and arthur anderson & company to approve the use of mark-to-market accounting (m2m).
- Opines that the unethical decisions made by key enron executives aided in the downfall of the company.
- Explains that the sarbanes-oxley act (sox) aims to make financial reporting more transparent and restore investor confidence in the united states financial markets.
- Opines that the financial disaster was a collaborative effort of failure, and that society must continue to babysit, with corporate governance and educate on common sense and decency.
- Analyzes the controversy surrounding enron, the mega-energy company that "cooked" their books and cost their investors billions of dollars in lost earnings and retirement funds.
- Analyzes how the audit committee and outside auditors for enron failed to ask the right questions, did not involve itself with risk assessments or scrutinize the waiving of the code of ethics.
- Explains the dodd-frank wall street reform and consumer protection act's "whistleblower" program, which offers a reward for information leading to monetary sanctions. accounting fraud is one of the most difficult securities violations to inspect.
- Cites finch, mcafee, and gupta, p.p., weirich, t.r. and turner, l.e.
1665 wordsRead More - The Detrimental Effects of the Sarbanes-Oxley Actanalytical essayWhile fraud and financial scandal have occurred since before the inception of the United States, the late 1990s and early 2000s saw the problem become much more prevalent and wide spread than ever before. The overarching goal of providing assurance that financial statements accurately reflect a business was in place before SOX. What SOX changed was the way businesses must go about providing that assurance. Prior to SOX, while the Securities and Exchange Commission required the publication of annual audited financial statements, how a business and audit firm determined what measures they would take to achieve a necessary level of assurance was largely left up for them to de...
In this essay, the author
- Explains that while sox may have gone too far, congress was within their right to address the financial reporting issue. between 2001 and 2002, american investors lost over $300 billion as a result of various financial scandals.
- Analyzes how the burdensome costs of sox harm the bottom line of all companies, but the effects are disproportionately felt by the "small cap" companies.
- Explains that the sarbanes-oxley act of 2002 was passed in response to the widely publicized instances of fraud and corruption in large us companies.
- Analyzes how sox increased auditor independence and increased demands for internal controls to combat the rash of financial reporting scandals.
- Argues that financial reporting and oversight regulations adhere to the law of diminishing returns, which means each additional measure yields fewer benefits.
- Analyzes how the sarbanes-oxley act and neoliberal governance of corporate america impacted the 99%.
1741 wordsRead More - Merced Home Products Case Studyargumentative essayMost profit making companies understand conducting business within an ethical reporting framework is the proper way to report quarterly results. Often accounting managers are given opportunities to exercise judgment in financial reporting, using their knowledge about the business to improve the effectiveness of financial statements. However, accounting professionals need to perform their job tasks in accordance with laws, regulations, and technical standards while supplying information that is accurate, clear, concise, and timely. At the same time, managers need to be free from pecuniary anxieties, and disclose all relevant information that could influence an intended recipients understanding of the analyses or reports. However, when managers have incentives to produce positive results, profit management can occur while misleading those who review the company’s financial statements.
In this essay, the author
- Explains that profit-making companies understand conducting business within an ethical reporting framework is the proper way to report quarterly results. accounting professionals need to perform their job tasks in accordance with laws, regulations, and technical standards.
- Explains how stacy cummins stumbled upon an accounting procedure causing her great concern. she reviewed the financial statements of the home security division discovering profits improved each quarter until a year end climax.
- Explains that preston lansing, vice president in charge of the home security division, has been allowed to inappropriately manage profits throughout the year.
- Explains that standard costing substitutes an expected cost in the accounting records, and then periodically records variances that are the difference between the expected and actual costs.
- Explains that standard costs may be set too high in the beginning of the year and are gradually set lower as year progresses. if mr. preston lansing is not communicating variances to accounting on a timely basis, it prevents users of financial statements from getting an accurate picture of quarterly profit.
- Argues that if the home security division followed a consistent cost standard approach, they would be provided benchmarks to assess individual performance and embrace continual improvement.
- Argues that stacy cummins should speak with the chief financial officer (cfo) about her concern. she should suggest creating an operational and accounting management team to review standard costs of each division before the next fiscal year.
- Recommends stacy create an accounting governance committee with the support of the cfo to ensure compliance with sarbanes-oxley act of 2002.
- Advises stacy to discuss business ethics with an impartial advisor or legal counsel if she does not receive support from her cfo or accounting manager. if the board of directors follows ethics guidelines, they will support ms.
- Explains that managers should exercise considerable care when dealing with financial estimations and discernments. a business shows creditability by following a disciplined process with standards such as those developed by the institute of management accountants.
1199 wordsRead More - Financial Comparison of Apple Inc. and Google Inc.argumentative essayThe Securities and Exchange Commission requires that publicly owned businesses provide annual reports, which are available to the public. Many different people use annual reports, to make informed business decisions. Management from the company uses the information to determine a number of items. Some of these items are the profitability of the company, the inventory turnover rate, and the accounts receivables rate. Creditors use the annual report to determine how well a company can satisfy its current liabilities, as well as, how the company is doing in the aspect of long tem survival. Another group of people who use the annual reports furnished by companies are the investors, who can purchase shares of stock from the publicly company. Annual reports are very important to these people, because they are an over all picture to help them determine the over all stability and reliability of the company’s financial outlook. These annual reports are important because they do not only contain the financial statements of the company, but there is a management ‘s note to discuss reasons for any unexpected numbers, and an auditor’s report, from an independent accounting firm, who either agrees or disagrees with the financial numbers. Market reporter Matt Krant said, “Ignoring these reports is akin to driving down the freeway blindfolded.”
In this essay, the author
- Explains that the securities and exchange commission requires that publicly owned businesses provide annual reports, which are available to the public.
- Compares the efficiency of apple's inventory management with that of google.
- Compares the growth of apple and google in the industry of technology, stating that managers look at accounts receivables turnover and collection times to determine whether the company is being run more efficiently.
- Explains that creditors use financial statements to determine whether a company can pay its current debt and stay in business long-term.
- Analyzes how berkas, jason, weygandt, jerry, kieso, donald e., kimmel, paul d. and krantz, matt.
1349 wordsRead More - Accounting Scandals: The ENRON Scandal in 2001analytical essayAccounting fraud refers to fraud that is committed by a company by maintaining false information about the sales and income in the company books, when overstating the company's assets or profits, when a company is actually undergoing a loss. These fraudulent records are then used to seek investment in the company's bond or security issues. By showing these false entries, the company attempts to apply fraudulent loan applications as a final attempt to save the company by obtaining more money from bankruptcy. Accounting frauds is actually done to hide the company’s actual financial issues.
In this essay, the author
- Explains accounting fraud, which is committed by a company by maintaining false information about the sales and income in the company books.
- Explains accounting fraud is the act of deliberately overpricing a company's assets in order to increment its share price. another example is due to financial problems, saving company from collapsing
- Explains that accounting ethics is difficult to control as accountants and auditors must keep in mind the interest of the public while they remain employed by the company they are auditing.
- Explains manipulation, falsification, or alteration of accounting records or documents from which the financial statements are prepared.
- Explains that assets can be misused in various ways like embezzling receipts, stealing physical assets or intellectual property, causing an entity to pay for un-received goods or services, and using entity’s assets for personal use.
- Describes the qualifications of mr. chirag patel, who is currently working and staying in north york, ontario.
- Explains that the company's printing facility is based in toronto, on and prints business cards, letterhead, postcards, color copies, and flyers.
- Opines that all accounting scandals are not caused by top executives. managers and employees are pressured or willingly alter financial statements for the personal benefit of the individual over the company.
- Explains that the interviewee also discussed an accounting scandal which was already exposed publically. nortel was handing off the excess money earned by paying out large amounts of bonuses to the employees.
- Analyzes how the top management overvalued obsolete inventory by adding additional reserve to bring down the taxable income below small business deduction level because they were running short of finance and were not able to pay taxes.
- Analyzes how nortel's scandal contravened ethical decision-making criteria by taking advantage of other employees working in the company and making it difficult for their family and friends.
- Explains how nortel's top executives manipulated secret cash accounting reserves to push the company back to profitability. they recognized revenues earlier than they should have done to meet wall street expectations.
- Analyzes how the company's financial statements were reviewed, including gross profit ratio, inventory turnover, and cost of goods sold. a low turnover rate indicated poor liquidity, convincible overstocking and obsolescence.
1233 wordsRead More - Ethical And Legal Obligations of Financial Reportingexplanatory essayEthical financial reporting is critical to ensure consumer confidence within an economy. Accounting entries record cash transactions in the form of financial reports. Financial reporting is used to interpret and analyze business activities for the purpose of investing and efficient management. Misrepresentations, whether intentional or accidental, can send the wrong signal to interested parties resulting in wrong decisions being made. Companies have an ethical and legal obligation to financial reporting. To ensure correct reporting is followed, several agencies are employed to regulate business. The Financial Accounting Standards Board, FASB, Securities and Exchange Commission, SEC and Public Company Accounting Oversight Board, PCAOB, are all agencies involved in promoting fair accounting principles for United States businesses.
In this essay, the author
- Explains that financial reporting has implications which impact people's livelihood. fasb, sec, and pcaob have been created to increase the knowledge of ethical accounting.
- Explains marshall, mcmanus, and viele, d. accounting present and past.
- Explains m. marcus' accounting: what the numbers mean, new york: mcgraw-hill.
- Explains how the sec protects investors, maintains market integrity, and facilitates capital formation.
- Explains that financial reporting is critical to ensure consumer confidence within an economy. the financial accounting standards board, securities and exchange commission, sec, and public company accounting oversight board regulate u.s. companies.
- Explains accounting is based on the flow of money within an organization. accounting operates under the assumption that all entries are truthfully registered and ethical standards upheld.
- Explains that the american institute of certified public accountants, aicpa, and ima have developed and published their own code of ethics. integrity, objectivity and independence are three elements sought in professional accountants.
1134 wordsRead More - Ethical And Legal Obligationsexplanatory essayAccording to Marshall, McManus and Viele (2004), accounting is “the process of identification, measurement, communication of information about a business for the purpose of making decisions and informed judgment” (p.3). Decision makers look at balance sheets, income statements, changes in the owner’s equity and cash flow statement as documentation of the viability of an entity. Misrepresentation of the financial statements can place doubt of profitability in any company. The need for accountability and regulation of accounting practices is important in preserving trust in the business community.
In this essay, the author
- Explains that ethical and legal obligations apply to all members of society. financial reporting isn't exempt from ethical standards.
- Explains that accounting is the process of identification, measurement, communication of information about a business for the purpose of making decisions and informed judgment.
- Explains the role of the financial accounting standards board, the securities and exchange commission, and the public company accounting oversight board.
- Explains that generally accepted accounting principles (gaap) require entity statements show the following in a reporting period: the balance sheet, income statement, statement of cash flow, and changes in owner’s equity.
- Explains that business ethics involves morale principles and standards in the business world. integrity in accounting means being honest and candid when communication information within financial statements; objectivity means impartiality and staying clear from conflicts of interest.
- Explains the importance of maintaining a high ethical standard and upholding the law for accounts to maintain the trust and confidence in the public spectrum.
- Cites dahlin, l. a., mcmanus, and viele, d. f.
- Cites mcgraw-hill's public company accounting oversight board and the u.s. securities and exchange commission.
1148 wordsRead More - A Critical Component Of Any Accounting Theory Courseopinion essayWolk, H., Dodd, J., & Tearney, M. (2003). Accounting Theory: Conceptual Issues in a Political and Economic Environment (6th edition ed.). South-Western College Pub.
In this essay, the author
- Opines that the fasb's purpose is to protect all financial statement users, but there are limitations with respect to cost and feasibility.
- Opines that the identification of investors and creditors as primary users of financials does not have an impact on the concept of neutrality.
- Explains that the conceptual framework identifies the primary users of accounting information as investors, creditors, and those who advise them.
- Opines that the inconsistencies in the fasb's sfac no. 1 should be removed.
- Explains the financial accounting standards board's conceptual framework for financial reporting. wolk, dodd, & tearney.
1218 wordsRead More - Accounting Fraud, the Investor and the Sarbanes Oxley Actexplanatory essayMadura, Jeff. What Every Investor Needs to Know About Accounting Fraud. New York: McGraw-Hill, 2004. 1-156
In this essay, the author
- Explains that the us government amended the sarbanes oxley act of 2002 to mitigate these problems.
- Explains that when a large company commits accounting fraud and is caught, the implications from their actions are very far reaching.
- Opines that accounting fraud is not directly affected by the bankruptcies. millions of americans who were heavily invested through their 401(k) retirement plans had to postpone retirement and rethink their investment strategy.
- Explains how executives can "cook the books" to make a company look more profitable and stable than it actually is.
- Explains that the sarbanes-oxley act of 2002 was enacted to protect investors by fighting corporate crime and improving corporate governance.
- Explains that the board of directors in a company must have at least five financially literate members appointed for five-year terms. the audit lead or coordinator partner and reviewing partner must rotate every five years.
- Explains that the act protects whistleblowers who come forth with incriminating information about activities within their company, especially with the increasing prosecution following sarbanes-oxley.
- Explains that sarbanes-oxley provides certain blackout periods for stock trading in which officers and directors cannot purchase or sell stock. profits resulting from sales in violation of this are recoverable by the issuer.
- Explains the sec's control over sarbanes-oxley, including the ability to restrict people from serving on the board of directors if they have a securities fraud issue in their background.
- Opines that the most challenging area for companies is the saving of all communications and the creation of transparent and auditable systems for recording transactions.
- Explains that sarbanes-oxley is intended to give the investor back some measure of confidence with the internal accounting practices of the organization.
- Explains that since the act has been put into place, nothing related to financial reporting is taken for granted. most companies have implemented better corporate governance procedures. audit committees and boards of directors are now more engaged in their responsibilities.
- Opines that companies are more often identifying and modifying control shortages before misstatements happen on their financial statements.
- Explains that companies will be forced to put into place systems and processes to track and save correspondence. they will often need to start new or serious changes on their it accounting systems to meet the standards for sarbanes oxley.
- Opines that training employees on new systems, processes, and procedures is expensive and should be larger up front. they can use their trained employees to train new employees in future years.
- Explains that applying sarbanes-oxley compliance in an organization will take a significant amount of time for involved employees. documenting processes will only need to be modified down the road.
- Opines that organizations must be prepared for the controls that will be given up to their systems when following sarbanes oxley.
- Opines that companies need to show due diligence to protect themselves from accounting issues. the higher the compliance checks and balances are and the more secure processes are in place, the better chance the company has to defend itself.
- Opines that sarbanes-oxley is only effective if the general idea of the organization leans toward ethical business practices.
- Opines that whistle blower protection should be strong and understood in sarbanes-oxley to help promote ethical standards. this will allow employees to discuss issues without fear of retribution.
- Opines that sarbanes-oxley is not an option for publicly traded companies. the company must decide whether to implement the minimum to get by with compliance or do you put in place a strong system to fully protect and improve current accounting practices.
- Opines that sarbanes oxley compliance is not an overnight transition. companies need to take a look at the needs of their organization, their current structure, and put in place what will work best for their investors, employees and company.
- Describes the contents of the book, "ethics in auditing".
1981 wordsRead More - Revive Marketing - Cash position and Profit Analysiscomparative essayThis report contains information that is calculated under accrual accounting principle. Because all transactions are recorded at the time when they are made rather than when actual money has been made or received, there is a likelihood that transactions are shown on one accounting period but actual change has not be made it, and it may deliver biased information about the company’s true financial position.
In this essay, the author
- Explains that revive marketing is doing well based on its income statement, and a positive profit has been recognised. however, its cash position does not show any sign of improvement.
- Recommends that software updates be delayed, ethical problems be avoided, and accounting documents be regularly reviewed to better monitor the performance.
- Explains that accrual accounting is an accounting method used to prepare accounting documents, and the general idea of this method is to record revenues and expenses when they occurred rather than when cash exchange has been made.
- Concludes that revive marketing's overall performance is good, expense is well-controlled, and sufficient revenue has been made during financial period. however, cash level is not well positioned.
- Explains helfert, erich a., "the nature of financial statements: the income statement". mcgraw-hill.
- Introduces revive marketing's current financial position and discusses the reasons behind these financial data. the main issue is why an improvement of profit has been noticed during the accounting period while cash position has not been increased.
- Explains that income statement measures a company's financial performance by indicating the detailed revenue and expense entries and measures whether the company is making profit or loss. the result combined the current operating cash inflow and outflow with the future expectation of cash movement.
- Recommends that alan consider hiring a part-time accountant and separate the duties, allowing one accountant to handle cash and letting the other one record all the documents.
769 wordsRead More - The Impact Of Accounting Fraudexplanatory essayDowd (2016) runs above and beyond with the clarification to state accounting fraud incorporates the change of accounting records in regards to sales, incomes, costs and different components for a profit motive, for example, boosting organization stock prices, getting ideal financing or maintaining a strategic distance from obligation commitments. Dowd is of the feeling that covetousness, absence of straightforwardness, poor administration data and poor accounting interior controls are a couple of explanations behind accounting fraud. (Dowd,
In this essay, the author
- Opines that accounting fraud is a consistent thing that will reliably be around, and that an extensive apportion of organizations fight with fraud, either from within the organization, or from outside.
- Explains that bolt-lee & kern (2015) affirm that there is no single template for fraud or single face of a fraudster.
- Explains that if one's objective is to execute financial statement fraud, there are huge amounts of approaches to do, including income administration/control.
- Explains that accounting fraud is the deliberate control of financial statements to make a veneer of an organization's financial wellbeing.
- Explains shapiro's definition of accounting fraud as purposeful deception of financial statements, culpable criminally or commonly, with a specific end goal to get wrongfully favorable position, hold an advantage, or keep away from an impairment.
- Explains bolt-lee's view that generally accepted auditing standards require extensive client inquiry, while brown, hays and stuebs, jr. acknowledge that the open door for fraud happens when controls are ineffectual or nonexistent.
- Explains that accounting mistakes resemble fraud without awareness of falsity or incompleteness. the principle territory to be addressed was accounting fraud and how it could impact an organization.
- Cites bolt-lee, kern, stuebs, and boyle, d. m.
1617 wordsRead More - Analysis of the Enron/Arthur Anderson Scandalanalytical essayGiroux, G. (Winter 2008). What went wrong? Accounting fraud and lessons from the recent scandals. Social Research, 75, 4. p.1205 (34). Retrieved June 16, 2011, from Academic OneFile via Gale:
In this essay, the author
- Explains that enron and arthur anderson were both giants in their own industry. their "creative" accounting methods resulted in record-breaking earnings, while anderson failed to comply with auditing standards.
- Explains enron's unethical accounting practices date back to 1987. anderson investigated and reported these unusual transactions to the audit committee, but failed to discuss the illegality of the acts.
- Explains how enron's creative accounting practices spiraled out of control as competition grew against the energy giant.
- Argues that anderson failed to meet and exercise the standards of auditing. anderson provided both audit and consultation services for enron, earning substantial fees for their services.
- Explains how acl (n.d.) a, analytical techniques to fraud detection. fraud detection using data analytics.
- Argues that anderson should have planned additional auditing procedures to test the effectiveness of internal controls at enron.
- Opines that it is too late for those at enron and arthur anderson to learn from their mistakes.
- Cites the american institute of certified public accountants (aicpa) and cunningham, g.m., and elder, r.j.
- Explains the sarbanes-oxley act of 2002 (sox), thomas, c.w., the rise and fall of enron.
1550 wordsRead More