Blinding Numbers
Essay title: Blinding Numbers
Numbers have an astonishing ability to influence almost anybody; they can destroy and enrich the lives of people, businesses, and countries simultaneously. The importance of accountants to preserve accurate, fair and reliable information concerning people and businesses is crucial. In a continuously evolving business world in which corporations face tremendous competition, businesses are not only trying to make a profit, but also, to survive. The essence of human evolution has been based on survival; thus it is not surprising that businesses choose financial security over ethical behaviour. There is an increasing trend in maintaining and updating financial accounting standards in Canada and the United States. However, financial accounting will always be partially judgmental. The aggressive business world fuels competition and threatens prosperity, and thus accountants and auditors face the difficulty of balancing their responsibilities to their clients, their profession’s ethical standards and their own self-interest. It is partially beneficial to implement stricter penalties and standards for those who abuse the system, but this strategy can not deter everyone, and thus in the end, accountants must make the choice to preserve the integrity of their own profession.
Financial security and prosperity represent aspects of survival and power for many humans, and sometimes are more important than acting responsibly for society. Many businesses drive to reach their financial goals by taking advantage of the accounting system. In competitive markets, corporations strategically attempt to distort their financial reports in order to entice stakeholders and increase their profits. Evolution has proven, although debatable, that those who are the most successful will survive. This theory can parallel the actions of many CEO’s, managers and accountants who will stop at nothing and ignore the essential aspects of GAAP. For example, in 2001 and 2002, Enron and WorldCom collapsed as a result of massive accounting frauds. It is partly due to greed; however, it is also because it is very easy. By overestimating future collections or the value of unsold inventory to blatantly ignoring the addition of expenses, these aspects of “conservatism” are just a few ways in which companies’ blind investors, competitors and everybody else.
Consequently, there must be implementation of stricter penalties and stringent standards in dealing with accounting manipulations. It is difficult to fully protect markets from disasters like WorldCom because there is a continual growth of business and accounting complexities (Gibbins 305). It is important for authoritative standards and the GAAP to keep up with this growth in order to tackle new ethical problems. Efforts are being made by accounting associations such as the Canadian Institute of Chartered Accountants and CGA-Canada who update their accounting practices regularly (Gibbins 304). In 2002, the United States also introduced the Sarbanes-Oxley Act, which forces executives and auditors to evaluate a business’s internal financial controls (Protiviti). However, simply keeping up the standards is not enough; large penalties and fines, and imprisonment are other ways to deter unethical behaviour. Accounting frauds are serious crimes that can cause the loss of billions of dollars; thus it is important to treat unethical business people similar to any other criminal.
However, even though more