These elements not only epic corporate social responsibility, but also represent ethical standards of a company. It is unethical for some individuals to own so much and earn so much, at the expense of other suffering members of society. It is also unethical for companies to damage environmentally that result in illnesses and loss of life. It can be concluded that Social corporate responsibility and the maintenance of high ethical standards is not an option but an obligation for all
This breach has resulted in the formation of an ethical issue as it has caused the corporate social responsibility of the business to be in disrepute. Corporate social responsibility refers to ‘the obligation of organisation management to make decisions and take actions that will enhance the welfare and interests of society as well as the organisation.’ (Samson and Daft, 2012) There is potential for a culture of theft and fraud to be created as well as a breakdown in the ethical structure of the company ... ... middle of paper ... ...lak, S., Clayton, M., & Pill, J. (2011). A Guide to Forensic Accounting Investigation (2nd ed.). Hoboken, N.J.: J. Wiley.
The streams of these revenues had been sustained through illegal dealings on the part of Enron and negotiations they did with other businesses. This scandal demonstrates the need of substantial reforms in corporate governance in the United States, and the ethical situation that should be dealt with in a business. Moreover, risk management failure that occurred in the Enron collapse is one of the outcomes where it does not accord with the company’s instability. The risks the Enron did to trade businesses, which they did not manage well and ended up destroying the firm. When the company does not have a correct alignment between the managements interests and the shareholders interest it could end up in chaos.
Eventually, those manipulating accounting activities affect company collapse. Once leadership has done unethical professional accounting behaviors, unethical acts become accepted. Employees have many reasons for remaining quiet. While Enron still have ethical internal rules, when leadership in Enron did not abide and did not provide corresponding example of employees to follow (Prentice 2003, p. 417). Which eventually make Enron’s become one of the largest corporate scandal frauds.
Due to embezzlement a company can incur losses with the continual movement of money in employee’s pockets. Inflation on the other hand, is not bad in the short-term for businesses, but effects society the most. If businesses are ever caught practicing illegal activities, their reputation will be at stake with consumers, potential investors, partners, etc. The most important thing a business should have with its clients is trust and without it a business is likely to fail. Companies might see the need to inflate their inventory to recover lost resources and in turn can provoke other companies to outdo them.
This type of accounting fraud involves one or more employees or an entire accounting division, modifying , getting rid of or marring accounts so the true information on these accounts are not revealed to stockholders. Why would a company do this type of illegal accounting? Companies do this in order to show they are doing well in order to obtain a higher credit limit with a bank, or financial institution making higher loan amounts available. Another reason is to pump up the share pric... ... middle of paper ... ...holders/investors showing good assets yet the company itself can be cash poor. Companies with none to small cash flow are companies that are in financial difficulties, which again if not reported accurately to investors and stockholders can be misleading.
Some of these reasons might be the excessive greediness and dishonesty of certain people who may put their personal interests in front of the companies’ interests which they happen to manage. This is when auditing plays its role, as it may prevent certain opportunities for accounting fraud and thereby improve corporate governance. Corporate Governance Monitoring the corporation’s performance is the primary activity in which Corporate Governance is involved in, basing
The theory of corporate social responsibility is a constrain... ... middle of paper ... ...y conflicts of interests between different stakeholder groups. Secondly, the primary duty of directors or officers is achieving the best interest of the shareholder; the interests of shareholders should be taken into consideration only when they do not significantly damage shareholder’s interest .A redefinition of director’s duties in the law could be a burden for director to balance the interests of each parties appropriately. As a result, less efficient decisions would be made in such condition. Therefore, there should not be a change to the Corporate Act. Under the existing legal framework, ASX Listing rules are important supplementaries of Corporate Act.
In Loewen’s case, the risky acquisition strategy would have been rejected. • By adding up the number of independent directors, enhancing transparency, hiring an outside CEO, to make the board separate from the influence of the management, and ensure the shareholders be informed about the company real situation. CONCLUSION Because the exist of principle-agent issues, companies need good corporate governance to make each participant devote its own responsibilities. A conscientious independent board is essential in protecting shareholders and company’s interest. Word count: 990
Internal auditors have a inner knowledge of business process. Auditor has access to the much confidential information and all levels of management. But they may lose their judgement and they are not acceptable by the shareholder. “The overall objective of the external auditors is to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to report on the financial statements in acco... ... middle of paper ... ...pendence, whether pro forma or substantially, the quality of professional assurance service of professional accountants will be doubted by public and that will probably lead to serious results. The factors affecting independence of external auditors are multiple.