Importance of Ethics in Accounting

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Running head: IMPORTANCE OF ETHICS IN ACCOUNTING Importance of Ethics in Accounting Everest University Importance of Ethics in Accounting Accounting fraud is common but is not as trivial as the common cold; a typical organization loses annual revenues of nearly 5 percent to fraud. In addition, almost one-quarter of reported fraud is exceeding $1 million dollars. The accounting industry is constantly growing and changing. Consequently, difficult decisions have to be made every day. While accountants follow a simple code of conduct; nevertheless, due to the infamous scandal of Enron, the Sarbanes-Oxley Act of 2002 was constructed to reestablish confidence in the public marketplace. The importance of ethics and integrity are…show more content…
These regulations are mandatory and set the rules that all accounting firms must follow. The Sox Act of 2002 modified the existing laws set by the Securities Exchange Act of 1934, and its purpose was to prevent widespread scandals in accounting from reoccurring. The amended alterations under ”Title VIII of the act (Corporate and Criminal Fraud Accountability) increased penalties to $5,000,000 in fines and/or up to 20 years imprisonment for altering, destroying, mutilating, concealing, falsifying records, documents or tangible objects with the intent to obstruct, impede or influence a legal investigation” (Addison-Hewitt, & B2B, 2003a). Also within this area it “imposes penalties of fines and/or imprisonment up to 10 years on any accountant who knowingly and willfully violates the requirements of maintenance of all audit or review papers for a period of 5 years” (Addison-Hewitt, & B2B, 2003b). Before the scandal of Enron, companies found practicing illegal accounting without serious consequences had little to no effect on moral behavior. While the laws and regulations are clearly spelled out; those caught violating these laws will lose their license or certificate to practice, and any ethical violations will be referred to the appropriate law enforcement agencies while the serious violations
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