Ethics And Financial Reporting Decisions

Such an intense focus has been placed on quarterly earnings as an indication of a company’s success by everyone from analysts to executives that ethics have for the most part been thrown out the window, sacrificed to the all important number, i.e. earnings per share. This is the theory in Alex Berenson’s book “The Number: How the Drive for Quarterly Earnings Corrupted Wall Street and Corporate America.” This number has become part of a game to be played, a figure to be manipulated – beat the number and Wall Street all but throws a parade, miss it and a company’s stock may be abandoned. Take into account the incentives that executives have to beat the number and one can find plenty of reasons to manage earnings.

Financial reporting practices and ethics have manifested an ocean of literature. This has mainly come from organization theorists that address accounting practices. These theorists and professionals have given fresh accountability measures. Their ideals give this industry the tools needed to survive, grow and prosper. The way an organization prepares and reports its financial information and handles its daily operations is in essence financial practices, and in the way it accomplishes this reveals their ethical standards to which they adhere to. This paper will discuss the financial practices, ethical standards, and

In improving a publicly traded company’s bottom line Sarbanes-Oxley can be a positive factor. By introducing ethics codes and internal controls and building an ethical mind-set in a

This paper provides an overview of the current debate and the theories that attempt to explain executive remuneration disclosure. Attention is given to underlying accounting theories such as Positive Accounting Theory, Normative Accounting Theory, Stakeholder Theory, Legitimacy Theory, Institutional Theory, Public Interest Theory, Capture Theory and Economic Interest Group Theory.

Accountants are held to a higher ethical standards and they must performed their duties in compliance with standards or ethical values of honesty, integrity, objectivity, due care, confidentiality, which must be fully committed to. They must put clients or public interest first before their own. They must have and ethical values and maintain those values way beyond what the society or the company’s code of ethic. It is important that accountants’ behavior or ethical values is in conformity with the

Excello Telecommunications has been a profitable company for many years, but recently the competitive landscape has become tougher. Competition from overseas manufacturers has lowered Excello’s market share and profits. For the first time it looks as is Excello will not meet earnings estimates. This information directly impacts bonuses, stock options, and the company’s share price. Top level management is concerned about the extent this impact will have on the company. This paper will serve to determine the ethicality of Excello’s actions and demonstrate what ethical standards and regulations

As a response to several corporate failures resulting from corporate misconduct and fraud, Congress passed the Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act is an accounting and business related law that was put into place to help boost confidence in financial accounting and financial markets (US Sarbanes Oxley Act). Some of its key provisions are that it requires the CEO and CFO to personally sign off on all financial statements, increases penalties for those who violate the act, and it protects whistleblowers (SOX 2002). Clearly, Sarbanes-Oxley can improve ethics in financial reporting and the purpose of this paper is to show how.

Excello Telecommunications was presented with a dilemma on how the company should report earnings so that they would appear to have met earning estimates for the 2010 financial year. The CFO, Terry Reed, was concerned with how failure to meet earning estimates would affect bonuses, stock options, and the share price of Excello stock. On December 201, 2010, the company sold $1.2 million of equipment to Data Equipment Systems. However, Data Equipment Systems requested that Excello hold on to the product until January 11, 2011, because they do not have the

This study aims to understand what effect has an ethical framework in accounting. In particular, we examine the influence of ethics on earnings management, financial reporting, and external accounting. Today, the commercial environment reveals the unethical behavior of management and accountants through the manipulation of accounting records to boost the company’s stock price, falsified financial statements to mislead investors, failure of auditors to correct errors and omissions due to client’s pressure and personal material interests.

Imagine trusting your hard-earned money like your retirement savings to a financial adviser or Certified Public Accountants (CPA) only to lose it all in a fraudulent Ponzi scheme. In today’s world of business many organizations, financial planners and accountants are in the news due to the financial ethical breaches that have affected their customers, employees, and the general public. A CPA has to be responsible for their audits and take any punishments as a result of their mistakes, incompetence or illegal actions. CPAs are expected to have integrity in their work,

Ethical issues have greatly transformed in our lives since the great Enron, Xerox and other huge corporations proposed big profits showing earnings of billions of dollars and yet in reality facing bankruptcy. These corporations faced great trouble with the federals and state for manipulating financial statements. But not only corporations can be blamed on this, accounting firms were involved in this as much as the corporations were. With the business stand point, ethics comprises of principles and standards that guide behavior. Investors, traders, customers, and legal system determine whether a specific action is ethical or unethical. Ethical issue is a vast subject, but we will look at the niche

As stated in Exhibit 3, Earnings management is the managerial use of discretion to influence reported earnings. Within the accrual accounting system, managers have significant discretion with their firms’ accounting choices. Management has the ability to make choices that can opportunistically lead to higher or lower reported earnings. Richard 's and Ira Zar’s (CFO) actions would not change if these results were the result of GAAP flexibility because he violated the rules of accounting, the conceptual framework principle of neutrality in numerous ways to report the financial results that CA did under false pretenses. It would be one thing if CA garnered these results through legitimate business decisions versus using accounting tactics like changes in accounting estimates or outright fraud as in the use of the 35 day Month. The purpose of which was solely to allow CA to meet or exceed analysts’ estimates.

Ethical and legal obligations apply to all members of society. As one in society, the obligation to act in an ethical, law abiding manner on a daily basis is vital to the integrity of daily life. Many professions have their own code of ethics. Financial reporting is not exempt from such ethical and legal standards. One’s lively hood depends on decisions made in the business world. Business transactions are done daily and can impact one’s economic stability. Trust is placed in the hands of corporate America and an obligation of financial reporting to reveal a complete honest and legal picture of an entity’s accounting practices is important in attaining trust. This paper will discuss the obligations of

Hence, the negative impacts of earnings management and accusing earnings management as one of the main reason of last decade financial scandals have forced accounting setters and financial regulators to provide solutions and initiatives for hindering earnings management. However, most of the attempts have failed, since earnings managements researchers found that managers still can achieve their earnings management objectives, through manipulating real activities. So it is more useful to examine the relationship between accounting responsibility in real earnings management. ????

Every corporation in the market should be able to have a skilled CFO, and the ethical issues of the CFO is to assure that financial managers are doing activities according to ethical standards and the ethical reasoning to increase shareholders wealth.