Cooking the Books Essay

1043 Words5 Pages
Cooking the Books ACC 201 Abstract The key to the article “Cooking the Books” is to cover the business ethics of an accounting manager ordering one of his accountants to falsifying a company’s accounting ledger. The Generally Accepted Accounting Principle of expense recognition was not followed. The accounting manager was attempting to commit fraud for personal gain, he does this by manipulating the books to show higher revenue in order to meet the volume for management bonus. The accounting manager also created a hostile working environment by threating his accountant’s job security if he didn’t comply with his orders. The Sarbanes-Oxley Act will also be explored to see if there was a violation due to the unethical behavior of the…show more content…
As the scandals came to light, mistrust of financial reporting in general grew. One article in the Forbes magazine noted that “repeated disclosures about questionable accounting practices have bruised investors’ faith in the reliability of earnings reports, which in turn has sent stock prices tumbling” (Forbes). Imagine trying to carry on a business or invest money if you could not depend on the financial statements to be honestly prepared. Information would have no credibility. There is no doubt that a sound, well-functioning economy depends on accurate and dependable financial reporting. United States regulators and lawmakers were very concerned that the economy would suffer if investors lost confidence in corporate accounting because of unethical financial reporting. Situational analysis The external users that will want financial information about the company will receive false information because the books are incorrect and this one egregious error will be the tip of the iceberg. Once the external users lose confidence in the company then the company will be doomed to fail because of that lack of trust coming from the accounting department, the very ones that control the money. These violations are in direct conflict with the revenue recognition principle, (Ferris, 2014 p.27). Since the company already has the 1.2 million dollar revenue, they will not ship it until the next year and that is when they
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