Ethics Article Review
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Ethics Article Review
Ethical behavior applies to everyone in their personal and professional lives, ethics are essential for professionals such as accountants because people trust them with their finances, and livelihood. “Ethical values provide the foundation on which a civilized society exists. Without the foundation, civilization collapses” (Smith, para. 1, 2003).
In private industry and Government ethical accounting is a requirement for any organization to be successful. If the numbers being input are incorrect or purposely misleading a company can go from greatness to failure in the blink of an eye. A company makes decisions based on the accounting data provided to them. If the accounting data is not correct the data can mislead the companys management and investors in making decisions that could negatively impact the company.
In an article in the Washington Post Staff writer Dan Eggen wrote the “U.S Justice Department has opening criminal investigation into accounting practices of AOL Time Warner Inc” (Eggen, para. 1, 2002). During 2000 to 2002 AOL was accused of not properly annotating some of their revenue through a series of unconventional transactions. Two incidents brought attention to AOL from the SEC; first when AOL inherited an arbitration award from British Entertainment Company and settled the case by accepting an advertising deal instead; second incident was when AOL served as an advertising agent for eBay Inc and sold ads for eBay, but booked the revenue for the sale as its own. In both incidents, AOL has said that it accounted for these transactions properly and that their accounting practices conform to the accepted accounting principles. These types of accounting actions misled investors regarding AOLs financial condition and caused the stock price to drop 90 cents. To re-assure investors, AOL has restructured their Management and hired new-upper-level-management.
This article depicted how AOL did not properly implement and utilize the principles of basic accounting. The primary financial statements such as; Statement of financial position “shows where the company stands in financial terms at a specific date”, Income statement “activity statement that shows details and results of the companys profit-related for a period of time” (Williams, Ch 1, Pg12, 2003). Properly sighting where revenue is reported is essential to the companys financial statements and it could impact their future.
As a Manager for the United States Air Force, I am responsible for my departments budget and finances, and do not have to worry about investors or turning a profit to ensure that we are successful; a yearly budget is allocated to operate our organization i.e. maintaining facilities and performing our mission. We do need to guarantee that the money allocated is utilized in accordance with all the proper fiscal policy and procedures and we must also ensure that the funds expended are tracked correctly, the government has different codes assigned to different types of funding, we must ensure that the “right color of money” will be identified and used, for example, we cannot purchase computer equipment with funding that has been designated for maintenance.
This system is not always foolproof; we had an incident where a Manager used the departmental budget as his own personal checking account. This Manager was caught when an audit team arrived from our Headquarters and the audit team determined the Manager did not utilize the budget to perform his departments official mission but to purchase office furniture. This individual was held liable for misappropriating funds and relieved from his position.
Our organization is not directly responsible to investors but we are to the American public and we need to ensure our financial statements accurately depict our financial status. Our local finance management (FM)