The Pros And Cons Of Ethical Accounting Ethics

There are many highly publicized scandals about corporations getting caught using unethical and illegal accounting practices. Whether a whistle blower who is an insider with knowledge of illegal goings on at their company, a news reporter covering a story about a company ?? or an audit that might uncover financial irregularities noticing a company that is not using the generally accepted accounting practices (GAAP), a company not using the accounting standards set forth by governing oversight committees is bound to unravel.

WorldCom and Enron are just two of the many companies who used unethical accounting behavior this writer will discuss. Both corporations, leaders in their respective fields, were both caught up with corporate greed which will lead to the inevitable downfall for each of them.

Each company the product of a merger and headed by well educated men, and each company eventually becoming notorious for their unethical and illegal accounting practices. Both World Com and Enron filed for bankruptcy and both companies had senior executives serving prison sentences…..for….convicted…..

World Com accounting scandal is the largest instance of corporate fraud in United States history. The second largest telecommunications company in the United States, WorldCom stunned the corporate world by filing for bankruptcy protection in July 2002. Estimated at having over 20 million customers at the time of filing, it was unclear about the future of the company and how accounting errors of this magnitude could have gone unnoticed.

Financial analysts and customers were shocked to hear that WorldCom had filed for bankruptcy and subsequently announcing that it made an accounting error in the amount of $3.8 billion. What’s more,...

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...or fraudulent financial activity are much more severe. Also, SOX increased the independence of the outside auditors who review the accuracy of corporate financial statements, and increased the oversight role of boards of directors” Kimmel, PhD, CPA, Paul D.; Weygandt, PhD, CPA, Jerry J.; Kieso, PhD, CPA, Donald E. (2011). Financial Accounting, 6th Edition. Wiley. ISBN 978-0-470-53477-9.

Also known by the Senate as Public Company Accounting Reform and Investor Protection Act, and known in the House of Representatives as the Corporate and Auditing Accountability and Responsibility Act of 2002. Names after the two men who sponsored the bill U.S. Senator Paul Sarbanes (D-MD) and U.S. Representative Michael G. Oxley (R-OH).

SOX sets forth a standard of the regulations for financial practices that all public companies must adhere to and the penalties for not doing so.