The Importance Of Accounting As Well As Ethics

In 1985 The Enron Corporation came into existence after a successful merger between two gas pipeline companies. The company nurtured a very competitive culture, which encouraged employees to win at any means necessary. Enron’s culture led employees to “cast loyalty and ethics aside in favor of high performance” (Ferrell, p. 494). The executives of Enron covered up their increasing debt by using special purpose entities. Meanwhile, Enron continued to report increasing profits to their investors, which led to more investors giving Enron their money. There were many factors that aided Enron in their demise, but the largest was the greed of Enron’s executives, the auditors, and the attorneys. The corporate culture of Enron, their auditors bankers and attorneys and their Chief Financial Officer played vital roles in the fall of Enron.

How much reliance should Enron’s corporate BOD have placed on the Andersen in understanding the company’s accounting decisions and policies?

This now bankrupt company, misappropriated investments, pension funds, stock options and saving plans after deregulation and little oversight by the federal government. However, with deregulation an increasing competitive culture emerged as the CEO Jeffry Skilling motto to his organization was to “do it right, do it now, and do it better” this was the rally cried that pushed ambitious employees to engage in unethical behavior as Enron use deceptive “accounting methods to maintain its investment grade status” (Sims, & Brinkmann, 2003, pp.244-245). As Enron continued to flourish and received accolades from the business community this recognition drove executives to continue the façade of bending ethical guidelines before their public fall from

Arthur Andersen (AA) contributed to the Enron disaster when it has failed to the management by failing to have Enron establish and enforce its own internal control. There has been flaws to AA‘s internal control. There has been assumption that AA partners were too motivated by revenue recognition thus, overlooking several criteria when providing their services to Enron. Additionally, AA also recognised the retention of audit clients as vital and a loss of any clients would be disadvantaged to an auditor’s career. In AA internal control, the person who is able to make most of the decisions is the person who is most concerned about the revenue or losses of the client’s company.

Ethics are crucial to the accounting profession and the business world, so choosing an ethics system to base your moral decisions on is extremely important. Accountants and all business professionals will be confronted with moral dilemmas on a daily basis. Being strong in your faith and knowing what you believe in will help you to always make the right decision. Based on this reasoning, this essay will explain why deontology is the best ethics system for the accounting profession.

Enron’s fraudulent financial practices lead to the Sarbanes Oxley Act of 2002. Mistakes made by the company and their leadership shocked the world and cost billions. Enron’s leadership could have taken steps to prevent or mitigate the repercussions of their actions. The act restored ethical and reliable financial practices to the market.The major provisions of the act made corporations responsibility for financial reports, and required internal and external audits. The Act changed the accounting regulatory environment. And although corporations incurred the additional expense of audit and new reporting standards, these changes restored consumer investing confidence, strengthening the corporations and the stock market overall. (Flanigan, 2002.)

Ethics in any industry is important, but for Accounting professionals and those in need of their services, it is a particularly stressed element. Information provided by accountants is used to make major decisions, including investing, downsizing, expanding, etc, so accountants are expected to be competent, reliable, and have a high degree of professional integrity. Because of these high expectations, the professional accountancy industry, like many other professions, has adopted professional codes of ethics (Woelfel, 1986). These ethical codes go above and beyond the requirements for state or federal laws and regulations. There are several professional organizations within the

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.

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,

1. Given the corporate ethical breaches in recent times, assess whether or not you believe that the current business and regulatory environment is more conducive to ethical behavior.

Paper concentrates on the specific instance of professional ethics in the connection of the accounting calling. After quickly examining late occasions that made us reevaluate our understanding of corporate governance, accountancy and ethics, we attempt to delimit the cutting edge by taking a gander at ethics from the accounting callings ' point of view. Instructing ethics to accounting understudies ought to no more attempt to persuade them that they ought to act in an ethical way, however raise their mindfulness with respect to ethical issues in accounting practice. Codes of ethics are subsequently helpful by considering normal issues being managed inside the business environment. It is here that we attempt to bring our commitment by building up a theoretical methodology that would improve ethical conduct. At the point when intending to elucidate professional ethics, we nearly break down respectability taking into account the most recent improvements embraced by European professional bodies. Discoveries are utilized as a part of recognizing approaches to add to the attempt of adjusting the calling 's execution to society 's sensible desires.

Enron and Arthur Anderson were both giants in their own industry. Enron, a Texas based company in the energy trading business, was expanding rapidly in both domestic and global markets. Arthur Anderson, LLC. (Anderson), based out of Chicago, was well established as one of the big five accounting firms. But the means by which they achieved this status became questionable and eventually contributed to their demise. Enron used what if often referred to as “creative” accounting methods, this resulted in them posting record breaking earnings. Anderson, who earned substantial audit and consultation fees from Enron, failed to comply with the auditing standards required in their line of work. Investigations and reports have resulted in finger

Most of the world has heard of Enron, the American, mega-energy company that “cooked their books” ( ) and cost their investors billions of dollars in lost earnings and retirement funds. While much of the controversy surrounding the Enron scandal focused on the losses of investors, unethical practices of executives and questionable accounting tactics, there were many others within close proximity to the turmoil. It begs the question- who was really at fault and what has been done to prevent it from happening again?

For these reasons, corporate financial accounts do not provide accurate or sufficient information to corporate managers, investors, or regulators. This leads us to recommend that the SEC allow each stock exchange to set the accounting standards for all firms listed on that exchange and to promote the development of industry-specific non-financial accounts to complement the financial accounts (After Enron 53). The most important lesson of the Enron collapse is that every link in the audit chain including: the audit committee and the board, the independent public auditor, the bankers and lawyers that aided and abetted the misrepresentation of Enron’s financial condition, the credit-rating agencies, and the Securities and Exchange Commission failed to deter, detect, and correct the conditions that led to that collapse. Although not a part of the formal audit chain, most of the market specialists in Enron stock and the business press were also late in recognizing Enron’s financial weakness (Corporate Aftershocks 12).

The case of Enron Corporation and Andersen, LLP can be noted as one of the most infamous fraud scandals in US history. Investors lost millions of dollars and ruined the public’s trust. Enron was once the seventh largest public company in the United States and Andersen LLP was the world’s largest and most respected business organizations. Enron’s stock prices soared to approximately $100 to less than $10 in 2001. How did these two big giants fall into oblivion and what could have been done to avoid the disaster of these companies?