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Ethical practices in accounting
Corporate governance rules principles
Ethical Issues in Financial Accounting
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Introduction: Ethical accounting failure has continued to occur in multinational companies despite the increased legislation, enhanced corporate governance programs, and greater attention on business ethics by the academic community. (Croxford, 2010.) According to his research, Croxford believed “that accounting professional was discriminated against based on their age, culture, gender, and education”. Multinational corporations have been facing ethical failures scandal for many years. Example: One of the biggest financial scandals was the Enron Scandal. The mergers and the international development of the Big Six accounting firms have created new classes of problems for their management. There is a great need for multinational public accounting …show more content…
According to researchers, “the impact of varies cultures also reinforces the need for extensive use of expatriate management training by accounting firms”. (Cohen, Pant, and Sharp, 1993) When manager are trained properly the decision making process will improve the benefits of the company. In this paper, we will look at research related to how multinational executive compensation should incorporate more control over their corporate governance and programs, better performance of audit and quality controls, and provide management training for their mangers. The gap in the literature showed poor signs of commitment in managements as it related to business ethics. Research shows the agency theory has been the primary foundation for research in the relationship between firm performance and executive compensation. The agency theory holds executive officers of a firm tend to act in their own self-interest in conflict with the interests of the owners who seek to maximize the value of their investment. The hypotheses type that I like we’re will data was collected from varies industries using the ownership structure and instructional …show more content…
Corporate governance is most often viewed as both the structure and the relationships which determine corporate direction and performance. What is Corporate Governance? Corporate governance is gathering together a group of people around a board table to make good sound decisions on behalf of the company and its stakeholders. Corporate governance framework also depends on the legal, regulatory, institutional and ethical environment of the community. Corporate governance should put policies and regulations in place for multinational companies that is rewarding for the benefit of the company. Such policies can include benefit packets (retirement compensation, insurance benefits) trading policies, and employee compensations. It’s proven that if employees have reward programs or incentive to motivate them to work hard. According to researcher Thompson and Richter, “for multinational companies to remain global, multinational companies should design reward programs. Corporate governance has to come up with designer program for global employee. Through reward programs this will motivated employees to work hard for the benefit of company values and organizational structures. In contrast, corporate governance should be involved in the setting the standard of ethics for global industry. The standards should involve what is more beneficial to the global strategy. The model of the agency theory will
Individual Article Review Lily Cobian LAW/421 March 31, 2014 Ramon E. Ortiz-Velez Individual Article Review Introduction My article review is based on Sarbanes-Oxley and audit failure, a critical examination why the Sarbanes-Oxley Act of 2002 was established and why it is not a guarantee to prevent failure of audits. Sarbanes-Oxley Act talks about scandals of Enron which occurred in 2001 and even more appalling the company’s auditor, Arthur Anderson, found guilty of shredding company documents after finding out Enron Company was going to be audited. The exorbitant amounts of money auditors get paid to hide audit discrepancies was also beyond belief. The article went on to explain many companies hire relatives or friends to do their audits, resulting in fraud, money embezzlement, corruption and even the demise of companies. Resulting in the public losing faith in the accounting profession, the Sarbanes-Oxley Act passed in 2002 by congress was designed to restrict what company owners and auditors can and cannot do. From what I gathered in the article, ever since the implementation of the Sarbanes- Oxley Act there has been somewhat of an improvement but questions are still being asked as to why there are still issues that are not being targeted in hopes of preventing more audit failures. The article also talked about four common causes of audit failure: unintentional auditor mistakes, fraud, fatigue and auditor client relationships. The American Institute of Certified Public Accountants (AICPA) Code of Professional Conduct clearly states an independent auditor because it produces a credible audit, however, when there is conflict of interest, the relation of a former employer, or a relative or even the fear of getting fire...
Throughout the past several years major corporate scandals have rocked the economy and hurt investor confidence. The largest bankruptcies in history have resulted from greedy executives that “cook the books” to gain the numbers they want. These scandals typically involve complex methods for misusing or misdirecting funds, overstating revenues, understating expenses, overstating the value of assets or underreporting of liabilities, sometimes with the cooperation of officials in other corporations (Medura 1-3). In response to the increasing number of scandals the US government amended the Sarbanes Oxley act of 2002 to mitigate these problems. Sarbanes Oxley has extensive regulations that hold the CEO and top executives responsible for the numbers they report but problems still occur. To ensure proper accounting standards have been used Sarbanes Oxley also requires that public companies be audited by accounting firms (Livingstone). The problem is that the accounting firms are also public companies that also have to look after their bottom line while still remaining objective with the corporations they audit. When an accounting firm is hired the company that hired them has the power in the relationship. When the company has the power they can bully the firm into doing what they tell them to do. The accounting firm then loses its objectivity and independence making their job ineffective and not accomplishing their goal of honest accounting (Gerard). Their have been 379 convictions of fraud to date, and 3 to 6 new cases opening per month. The problem has clearly not been solved (Ulinski).
Ethic is defined as a set of moral principles or values, a theory of system of moral values, the principles of conduct governing an individual or a group. In all its form, ethics deals with what is good and bad, and with moral duty and obligation. Hence, ethics is either a set of principles held by an individual or group, or the discipline that studies the set of principles (Duska, Duska, & Ragatz, 2011). Ethical theories provide principles that can be useful when solving dilemmas whereas business ethics refers to the ethical values that determine the interaction between a company and its stakeholders. The three major approaches in normative ethics identified are virtue ethics, deontological and utilitarianism (Kraut, 2012), but in this paper the focus is on the two major one proposed for the accounting profession – deontology and utilitarianism.
Ethical behavior, in a general sense, is a definition of moral behavior in regards to lawfulness, societal standards, and things of that nature. In the business world, ethics commonly refer to acceptable and unacceptable business practices within the workplace, and all other related environments. The acceptance of colleges regardless of ethnicity, gender, and beliefs, as well as truthfulness and honesty in relation to finances within the company are examples of ideal ethical business conducts. Unethical business behavior would include manipulating procedures based on bias or discrimination, engaging in activities that promote political gain, as well as blatant fabrication of monetary factors within the company and “can affect organizational performance and is costly to employers, employees, shareholders, and other organizational stakeholders” (Cox 263). When a corporation practices proper ethics, it is representing not only itself in a positive manner, but its partners, shareholders, and clients as well. On the other hand, when an organization partakes in unethical activities, all parties are negatively affected. The collapse of Enron is a major case of unethical conduct in the corporate world, because the circumstances surrounding the firm’s chaotic plunge where so scandalous that it left “creditors wrangling over Enron's skeletal remains” (Helyar) long after the company had seen its demise. There are numerous instances to be mentioned, including deliberate failure to properly report fiscal losses, insider trading, and overall relentlessness. The inclusive purpose of this paper is to further explore the underlining factors that contributed to the downfall of the once powerful Enron, and how a new way of approaching business ethi...
With every business activity come opportunities for fraudulent behavior which leads to a greater demand for auditors with unscathed ethics. Nowadays, auditors are faced with a multitude of ethical issues, and it is even more problematic when the auditors fail to adhere to the standards of professional conducts as prescribed by the American Institute of Certified Public Accountants (AICPA). The objective of this paper is to analyze the auditors’ compliance with the code of professional conduct in the way it relates to the effectiveness of their audits.
This report gives the brief overview of the concept of corporate governance, its evolution and its significance in the corporate sector. The report highlights various key issues and concerns that are faced by the organizations while effectively implementing and promoting Corporate Governance.
...6). Enron and Arthur Andersen: The Case of the Crooked E and the Fallen A. Global Perspectives on Accounting Education: Vol. 3: Iss. 1, Article 3. Retrieved from: http://digitalcommons.bryant.edu/gpae/vol3/iss1/3
Accounting ethics has been difficult to control as accountants and auditors must keep in mind the interest of the public while that they remain employed by the company they are auditing. The accountants should take into account how to best apply accounting standards when company faces issues related financial loss. The role of accountant is crucial to society. They serve as financial reporters to owe their primary constraint to public interest. The information provided is critical in aiding managers, investors and others in making crucial economic decisions. An accountant is responsible for any fraudulent financial reporting. Some examples of fraudulent reporting are:
Bibliography: Turnbull, S. (1997). Corporate governance: its scope, concerns and theories. Corporate Governance: An International Review, 5 (4), pp. 180--205.
This essay will talk about the ethical standards and code of conduct in the accounting profession, in particular for CPA Australia, the importance of ethical education for accounting students, the importance for ethical financial reporting and also addresses ways to deal with conflicts that arise from ethical issues in the
The aim of this paper is to provide the framework of the current professional accounting code of ethics. What are the ethics and how we define them? In this report we try to determine the main ethical principles that will establish the right and
The Asian Financial Crisis which exposed the corporate governance weaknesses was a wake-up call for all the policymakers, standard setters as well as the companies (OECD, 2014). The parties that involved and affected from the crisis started to realize the importance of having strong corporate governance practices in their countries. Consequently, the Asian economies along with the OECD established the Asian Roundtable on Corporate Governance in 1999, in order to support the enhancement of corporate governance rules and practices (OECD, 2014).
Solomon, J (2013). Corporate Governance and Accountability. 4th ed. Sussex: John Wiley & Sons Ltd. p.7, p9, p10, p15, p58, p60, p253.
Financial reporting is an example of an ethical problem for an organization or business. Many busin...
Corporate governance is the set of guidelines that determines the control and organization of a particular company. The company’s board of directors is in charge of approving and reviewing changes to this set of formally established guidelines. Companies have to keep in mind the interests of multiple stakeholders, parties who have an interest in the company. Some of these stakeholders include customers, shareholders, management, and suppliers. Corporate governance’s focus is concentrated on the rights and obligations of three stakeholder groups in particular: the board of directors, management, and shareholders. Corporate governance determines how power is split between these three stakeholders. A company’s board of directors is the main stakeholder that influences the corporate governance of a company (Corporate Governance).