In addition, associated with the misapplication of accounting methods, the financial industry has been plagued with one disaster after another involving numerous scandals from top leading American companies. Consequently, the Sarbanes-Oxley Act was passed in 2002 compromising eleven sections that are generated to insure the responsibilities of the company’s managers and executives. This act identifies criminal penalties for particular unethical practices and currently has new policies that a corporation must follow in their financial reporting. The following examples describe some of biggest accounting methods as a result of the greed and the outrage of the ethical and financial misconduct by the senior management of public corporations.
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
The Sarbanes-Oxley Act was passes in 2002 in response to a handful of large corporate scandals that occurred between the years 2000 to 2002, resulting in the losses of billions of dollars by investors. Enron, Worldcom and Tyco are probably the most well known companies that were involved in these scandals, but there were a number of other companies guilty of such things as well. The Sarbanes-Oxley Act was passed as a way to crackdown on corporations by setting new and improved standards that all United States’ public companies and accounting firms were and are required to abide by. It also works to hold top level executives accountable for the company, and if fraudulent behaviors are discovered then the executives could find themselves in hot water. The punishments for such fraudulence could be as serious as 20 years jail time. (Sarbanes-Oxley Act, 2014). The primary motivation for the act was to prevent future scandals from happening, or at least, make it much more difficult for them to happen. The act was also passed largely to protect the people—the shareholders—from corporations, their executives, and their boards of directors. Critics tend to argue that the act is to complicated, and costs to much to abide by, leading to the United States losing its “competitive edge” in the global marketplace (Sarbanes-Oxley Act, 2014). The Sarbanes-Oxley act, like most things, has its pros and cons. It is costly; studies have shown that this act has cost companies millions of
The Sarbanes-Oxley Act, or SOX Act, was enacted on July 30, 2002. Since it was enacted that summer it has changed how the public business handle their accounting and auditing. The federal law was made coming off of a number of large corporations involved in scandals. For example a company like Enron was caught in accounting fraud in late 2001 when the company was using false financial statements. Once Enron was caught that had many lawsuits filed against them and had to file for bankruptcy. It was this scandal that played a big part in producing the Sarbanes-Oxley act in 2002.
Enron was a one-hundred billion dollar company in 2000, until questionable accounting practices, known as mark-to-market, saw their stock prices drop from ninety dollars per share to just pennies (Ferrell, Hirt, & Ferrell, 2015). All of the top employees were charged and convicted of various crimes and sentenced to time in prison. Because of loss of confidence among investors, the government put into place the Sarbanes–Oxley Act of 2002 (SOX). SOX is a set of requirements put into law in an attempt to regulate corporations’ accounting practices, in an attempt to protect stockholders. Sox has proponents, but it also has it’s critics. Some experts claim that it has helped weed out some of the corruption in business accounting. While other
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.
The Sarbanes-Oxley Act, frequently known as the SOX. The act was passed on in 2002 as a federal United States law. The law was drafted in response to the numerous numbers of financial scandals performed by high profile corporations such as Johnson & Johnson. The action has created a new company standard of responsibility in order to protect the valued stakeholders, as well as the public, from the deceitful practices of various organizations. The Sarbanes-Oxley Act
Sarbanes- Oxley Act (SOX) was created following the discovery of unethical and fraudulent activates of companies likes Enron were made public and lead to a major crisis (Fraser & Simkins, 2010). The SOX Act is a code of conduct that public organizations must abide by an was form to ensure that corporations not only make ethically decisions for legal decisions and practices as well. Public organization must abide by the state and federal laws that SOX consists of and their attorneys must report any violations. Organization must create code of conduct policies and ensure employees abide by the policy. Whistleblowers are protected under the SOX Act and any employees that were terminated under unethically and illegally can be reinstated and paid
“Laws and regulations are established by governments to set minimum standards for responsible behavior — society’s codification of what is right and wrong” and to satisfy stakeholder’s concerns regarding companies’ abilities to act in an ethical fashion at all times (Ferrell, Fraedrich, & Ferrell, 2013, p. 95). The Sarbanes-Oxley Act (SOX) was created following accounting fraud scandals of several companies, including the Enron Corporation and Worldcom (Ferrell et al, 2015). The Act was established to protect stakeholders and the public from accounting fraud. It has done a fair job of deterring fraudulent reporting (Langevoort, 2007); however, I do not think regulating legislation of any kind can completely prevent future ethical misconduct.
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.
After major corporate and accounting scandals like those that affected Tyco, Worldcom and Enron the Federal government passed a law known as the Sarbanes-Oxley Act of 2002 also known as the Public Company Accounting Reform and Investor Protection Act. This law was passed in hopes of thwarting illegal and misleading acts by financial reporters and putting a stop to the decline of public trust in accounting and reporting practices. Two important topics covered in Sarbanes-Oxley are auditor independence and the reporting and assessment of internal controls under section 404.
This paper provides an in-depth evaluation of Sarbanes-Oxley Act, which is said to be promoted to produce change in the corporate environment, in general, by stressing issues of public accountability and disclosure in the financial operations of business. It explains how this is an Act that represents the government's and the Security and Exchange Commission's concern in promoting ethical standards in terms of financial disclosure in the corporate environment.
When determining and defending the use of a particular ethical system within the confines of a profession, it is important to evaluate the system in terms of the professional culture as well as the expected professional conduct laid out within the vocation itself. The accounting profession has been evolving for thousands of years. Early accounting records date business transactions back as far as third century B.C. (Schroeder, Clark, & Cathey, 2009). Early record keeping was for internal purposes and as societies and economies expanded, it became important to maintain records for external purposes as well. According to Schroeder, Clark & Cathey (2009), by the ninetheeth centruy, bookkeeing expanded into accounting (p. 3). From this time, it has been the duty of the accountant to serve the public interest and the profession has been culitvated into an organizational culture with professional norms and standards constantly taking shape in an effort to complete an all-inclusive conceptual framework.
The need for ethical changes in the accounting industry has become increasingly pertinent in recent years. This is due to the rise of fraud in the accounting industry. In a recent survey completed by PwC(PricewaterhouseCoopers), nearly 45% of companies in the U.S suffered from some type of fraud within the past two years (Cohn, 2014). Accounting fraud can attributed to misappropriation of
Ethics, also known as moral philosophy, is a branch of philosophy that addresses questions about morality—that is, concepts such as good and evil, right and wrong, virtue and vice, justice and crime, etc.