Unethical Accounting Situation
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What is an example of a potentially unethical accounting situation?
There are many reasons as to why someone would consider an unethical act when they are preparing financial statements and information. The most common reason is quite simply for selfish greed. An accountant can take funds from their employer for personal financial gain. On the other hand the CFO of a publicly traded corporation can create financial statements so that it appears that the company is doing better than is actually true, because they want to increase their stock portfolio. This is a lot like the scandal that happened with one of the CEOs of Best Buy who it was discovered that he had been taking money from the company.
Why is the situation unethical?
The situation mentioned above is unethical because it resulted in creative accounting, misleading financial analysis and information, and bribery. The role of the accountant is necessary to society because they serve as financial reporters and agents in the capital markets and their main obligation is to the public interest. The information they provide is required in aiding the managers, the investors in the making of economic decisions. With Best Buy the financial statements showed that they were losing money when in reality they were making money The CEO was putting company money into personal private accounts. This is bad because it was the accountants that were allowing this and making the entries.
How do ethics affect the financial results of a company?
Companies that have strong ethics normally tend to maintain a higher degree of stakeholder satisfaction, that positively influences the financial results of the company. On the other hand lack of personal ethics as well as professional ethics can lead to negative financial results such as recently shown by the Best Buy situation. Risky questionable business practices put many companies in a precarious situation. Ensuring ethical behavior in your company can help improve your companys economic performance.
Do you think the Sarbanes-Oxley Act has made a difference in the ethical behavior of companies regarding their financial accounting? Why or why not?
I think the Sarbanes-Oxley Act has made a difference in the ethical behavior of companies regarding their financial accounting. I think the increased internal control procedures and documentation is the leading factor. Even those companies that considered themselves to be very well controlled prior to Sarbanes-Oxley found that documentation often was weak or that some parts of the system needed improvement. By now, most of that effort has become relatively routine but having strong controls