Ethics: Fraud Accounting Ethics

This post will discuss two ethical accounting dilemmas that could occur in the CPA profession. For each dilemma, it will explain how the dilemma could be resolved based on logic and reason. It will then support that proposed resolution through support from the American Institute of Certified Professional Accountants (AICPA) Code of Professional Conduct.

Corporate accounting fraud is the major factor that has led to the collapse of many companies, one of which is Parmalat company scandal. The Parmalat group, a world leader in the dairy food business, collapsed and entered bankruptcy protection in December 2003 after acknowledging that billions of euros were missing from its accounts. Its collapse had been labeled as “European Enron” and has led to a deep questioning of the reliability of accounting and financial reporting standards as well as that of the Italian corporate governance system. Therefore, this paper has discussed, firstly, what factors have allowed fraud to occur in Parmalat. Secondly, how the fraud could have been avoided from happening in this company. Thirdly, has discussed some red flags that indicate fraud was occurring in the company. Lastly, the paper has discussed some of the lessons that can be learnt from the Parmalat company scandal.

Line costs are fees that WorldCom paid to other telecommunication companies to use their networks for long distance calls.

This is case study of what caused the increase and fall of Nortel and what might be done to stop it. problems with misreported monetary information, board structure and the potential for fraud might are prevented if Nortel had taken preventative measures and had a written fraud interference policy. Having a Code of Ethics and a Code of Conduct in situ helps to align managers with the interests of the stakeholders and is for the bigger sensible of the corporate. It additionally permits the corporate to proceed with prosecution of the party or parties concerned within the fraud. Processes place into place to stop fraud by workers

* Bo and Mo do explicitly say that it is up to Kevin to decide how to increase his productivity.

Following the several financial scandals of the early 2000s involving the former notorious companies such as Enron and WorldCom corporations, the Sarbanes-Oxley Act of 2002 emerged. Indeed, SOX required that every publicly traded company CEO and CFO endorse the accuracy of their organizations financial statements prior to the official release. Obviously, the idea behind this decision is certainly a way to ensure the integrity of the upper management which dismisses the existence fraud on the financial statements. However, a discovery of fraudulent information on certified financial statements is subject to civil liabilities and criminal prosecutions.

Therefore, money handling duties are separated from the record keeping duties when internal control of cash is needed (Averkamp, n.d.). In a typical setting, there should be a mailroom clerk who retrieves the mail, which is sent to the accounting department, who records the cash payment, then sent over to a controller, who finally and should immediately place into the bank for safekeeping. Internal control consists of methods and measures adopted within an organization to safeguard its assets, encourage employees to follow company policy, promote operational efficiency, and ensure the accuracy and reliability of its accounting records (Nobles, Mattison, & Matsumura, 2014). There are five components of Internal Control CRIME: Control procedures, Risk assessment, Information system, Monitoring of controls, and Environment. Control procedures are the policies enforced in company’s infrastructure. Risk assessment deals with the company’s ability to process and analyze their data. Information system is the technology that limits individuals from falsifying data records. Monitoring controls is simply supervising that financial data are accurately being recorded. Control procedures are those that set the tone of the organization such as values and best practices (Mercer University,

Businesses, investors, creditors rely on accounting ethics. The accounting profession requires honesty, consistency with industry standards, and compliance with laws and regulations. The ethics increase the responsibility and integrity of accounting professionals, and public trust. The ethical requirements influence the management behavior and decision-making. The financial scandal of Enron and Arthur Anderson demonstrates the failure of fundamental ethical framework, such as off-balance sheet transactions, misrepresentation of financial statements, inaccurate disclosure, manipulations with earnings, etc. The confronted accounting profession and concern for ethics in businesses forced regulators to revise the conceptual framework of accounting processes.

The financial fraud, which took place at Waste Management Inc., brought a number of changes in the accounting world which are being experienced currently in the world. First, it awakened investors to the crisis in the accounting world. For instance, Roger Hamilton, a manager of John Hancock Value Funds, succeeded in unloading $600,000 of his shares before total collapse of stock, even though he

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,

As the WMI accounting fraud case shows, change exposes organizations to considerable financial fraud risks. The top officials used acquisitions and merger as means to perpetuate this fraud. This financial fraud took place due to the organizational breakdown of internal and external audit controls. As a result, the top management was able to commit this massive fraud without facing any resistance. It never occurred to them that they were violating the law because what mattered to them was pocketing as much as they could.

A number of financial statement frauds went undetected from auditors in past and attracted a high profile attention. The businessmen add fake assets or transfer the assets of companies to their personal assets and result in accounting scandals when the affected companies are bankrupted or are even close of bankruptcy. Just to mention a few names, accounting scandals of Enron, AOL Time Warner and Xerox are among the hottest accounting scandals of the century. This means that despite presence of professional auditors accounting scandals happen and there is a need to learn from the mistakes of the auditors who overlooked these activities. In this report the case study of Xerox is analyzed in detail to highlight violations of accounting principles and present an example from which lessons can be learnt for the future.

From careless and fake accounting, auditors found two significant new details of data that only aided to the fraud at WorldCom. One, WorldCom

“Internal controls are policies and procedures put in place to ensure the continued reliability of accounting systems” (Ingram 2017). WorldCom’s attempts at maintaining internal controls are less than favorable. Segregation of duties enables the division responsibilities to ensure that no employee completes two similar tasks. The CEO’s monitoring of WorldCom’s financial processes shows that the company has a lax segregation of duties, which makes it easier to commit fraud. Access controls protect financial data from unauthorized access, however, WorldCom’s extent is password-protected computers. No access inventories are taken to monitor employee usage, so there is no trail of when employees are doing during work.

A business can not work out without an account system, which includes internal. Internal controls are used by companies to make sure financial information is accurate and valid. Strong internal controls are signs of a financially healthy company and protect the company’s integrity. Strong internal controls can also increase a company’s profitability. There are several types of internal controls that companies used to protect themselves such as: Segregation of duties, asset purchases, supervisor review, internal audits and adequate documents and records. This paper will discuss several topics from a case study about And the Fraud