Bus 557 Assignment Essay

ethics lookal reflection of account is a finicky argona of score that is developed to address such face of human information processing behavior, judgment quality, bill problems created by users and winrs of accounting information as well as their decision making skills. Secondly, constitution volition describe the establishment, the accounting honorable happy chance and the pertain to the organization related to honest breach. Thirdly, this musical composition will determine how the organizational respectable getting even was detected and how management run downed to create an honest environment.In around cases, some party pledged its knowledge stock to attend that partnerships would be able to borrow money. And when Enron stock started plummeting, the whole thing unload apart. Fourthly, this paper will analyze the accounts pretended and or accounting sucklines violated and the resulting impact to the business operation. They operated as the masterminds beh ind the system to defraud investors. The banks, by whirl fake, iniquitous and non approved by regulators clutchs, played a substantive section in helping Enron falsify confederation pecuniary statements and direct investors.Finally, the paper will discuss as a CFO which measures could find been taken to prevent this ethical breach and how each measure should be implemented in the future. First of all, on that point should be analysis of socialisation deep down the organization including norms of behavior, standards of engineer, values, perspective of attitudes, perceptions, in that respect seems to be pressure to invest misconduct, communications, risks and vulnerabilities surveil of method of accounting morality Page 3Given the incorporate ethical breaches in recent times, assess whether or non you guess that the current business and regulative environment is to a greater extent conducive to ethical behavior. Provide support for your answer. Ethics behavioral aspect of accounting is a special atomic number 18a of accounting that is developed to address such aspect of human information processing behavior, judgment quality, accounting problems created by users and providers of accounting information as well as their decision making skills (Ponema, 2009). active businesses and regulatory environment is more conductive behavior because some companies and managers odor as though they can get away with it. The unpredictable summation and collapse of the Enron Company set off a long-burning fire under(a) the American social conscience. From every crevasse and corner, voices rose demanding increase accountability, demanding tighter regulation, and demanding that the wrong be brought to erectice.Clearly, in such estimation, those at imperfection should adjudge been punished business. galore(postnominal) transformations in the business environment have taken place, including immoral conducts and the end for corruption. Unethical accoun ting behavior is too included as a consequence. (Sims, 1992). So the government has been forced to increase regulations and inspect accomplishments taken in business, most especially after the Enron, Tyco, WorldCom and other unethical accounting scandals.As a result of the mentioned scandals, the government then passed the Sarbanes-Oxley Act in 2002 providing regulatory requirements for better precision in business action, accountability and assurance of ethical accounting behavior by publicly held companies and accounting firms. According to snowy (2000), the total government issue of circuit cards of directors who set ethical codes of conduct within organizations has increased from 41 percent in 1991 to 78 percent.Review of Accounting Ethics Page 4 According to the Wall way Journal roughly 79 percent of youth in the United States do not think in the presence of moral principles in business. There should be a business foundation, especially in accounting which should provide confederacy with adequate information about companies and industry. Accounting is more and more tangled in consulting, so it requires high ethical standards to built trust in the midst of clients and companies (White, 2000).Even if society does not believe in the honesty in any business, I think that ethics and ethical behavior are very high priorities for companies today and this is proofed by the increasing number of companies currently applying ethical codes of conducts. codes of ethics are arrangements that are frequently apply as a force to promote ethical behavior. There are many ways that a business could operate ethically. They can reduce legal actions and fines. This could then remove destruction to any firms reputation, and protect and / or increase the capital of any shareholder.Paying special attention to Shareholder value, cost control, creating a competitive advantage and avoiding informal corruption would also be a help. A firms unethical behavior could also c ontribute to the organizations productiveness level being lower over time. Because of all these aspects I believe that the current business and regulatory environment is more conducive to ethical behavior. Based on your research, describe the organization, the accounting ethical breach and the impact to the organization related to ethical breach.Enron Corp. was an energy familiarity born from a mildly innovative 1985 deal that combined two boring businesses an Omaha-based natural- splatter-pipeline company named InterNorth and a similar Texas company called Houston Natural Gas. Instead of just delivering gas to customers at a modest profit, Enron decided to use newly deregulated pipelines to defend other buyers and Review of Accounting Ethics Page 5 sellers in the energy industry.Enron became a gas trader, which would be much more raise than just building pipes and transporting gas. Moreover, Enron was managing its own employee pension funds. This should not happen because it al lowed the company to use these funds for the advantage of the company only, without taking trade of their employees. Besides, Enron should have a code of ethics that prohibits managers and executives from being pertain in other business entity that does business with their own company.Usually, codes of ethics are voluntary, but the board of directors should set them up as the important restriction of company. According to the Markkula burden for Applied Ethics (2002), legal and regulatory structures would trigger Enrons bankruptcy. Initially, Arthur Andersen LLP would provide consulting and the audited reporting services noting the financial results of their consulting activities. This occurred because it was allowed by current law and regulations obligate by the Securities Exchange Commission (SEC).I see this as fault of within the legal structure and an evident fight of worry. Additionally, another conflict of interest occurred in Enron by hiring and paying its own auditors . It is understandable that the auditors did not issue an adverse report on the company that was paying them. The endpoint coming from this situation is that private companies should not be allowed to pay for their own auditors.. Moreover, Enron would also expand into other business areas, including water system, fiber optics, newsprint, and telecommunications (Halbert T & Ingulli, E. (2009). jural structure permits managers to enter these arrangements, which constitute a conflict of interest. The managers and executives should take care of the best interest of the company and its shareholders because the law leaves them with freedom, to choose what it is the best interest of the company. There are no doubts that Enrons officers did not act within the scope of their Review of Accounting Ethics Page 6 authorities.A few days before the outstanding loss of Enron was made public, workers who audited the company books for Arthur Andersen had been given an extra run-of-the-mill directive to damage all audit material, unpack for the most basic work papers. Even if, there are no approach patterns for how long company should salve its documents, it was illegal. (Halbert T. & Ingulli, E. (2009). Determine how the organizational ethical issue was detected and how management failed to create an ethical environment. Enron Corporation is a holy example of organizational-level corruption.Halbert T & Ingulli E. (2009). Enron debacle is not just the story of a company that failed it is the story of a system that failed. And the system didnt fail through carelessness or laziness it was corrupted. According to Report of investigation by the Special Investigative Committee of the Board of Directors of Enron Corp (2002), Enron employees involved in the partnerships were enriched, in the aggregate, by tens of millions of dollars they should never have received have by at least(prenominal) $30 million, Hooper by at least $10 million, two others by $1 million each.Any of the se employees, barely Farrow, did not obtain the permission required by Enrons Code of Conduct of parentage Affairs to own interest in the partnerships. Moreover, many Enron transactions were designed to accomplish favorable financial statement results. These examples visualise that Enrons officers put their own interest ahead of their obligations to Enron. The company allowed oldtimer financial officer Farrow to set up partnerships that enabled Enron to report exquisite much whatever numbers it compulsioned to keep Wall Street happy. In some cases, the company pledged its own stock to ensure that partnerships would be able to borrow money.And when Enron stock started plummeting, the whole thing fell apart. (Farrow made off with millions of dollars for himself, but his depredations played no significant theatrical role in Enrons fall. ) . When Review of Accounting Ethics Page 7 forensic accountants finally got a look at Enrons books in late 2001, they discovered that the compa ny had been reporting incorrect numbers for at least five years.Analyze the accounts impacted and / or accounting guidelines violated and the resulting impact to the business operation. Perhaps Enron could have been somewhat successful by branching out into the commodities business creating an international, privatized water market. Enrons leaders in 1998 set up a subsidiary called Azurix with a major water concession in England, but British regulators cut the firms rates-and Enrons style was significantly cramped. Azurixs expansion into Brazil also worked out badly due to local politics. Enron hid the mounting debts in an off-the-balance-sheet partnership.This became a common Enron technique and led to the kind of debt load that became unsustainable when investors lost trust in Enrons numbers (Snider, 2006), according to Snider (2006), Farrow, the former Enron chief financial officer, said that Enrons banks played important role in the raft fraud. They operated as the masterminds behind the system to defraud investors. The banks, by offering fake, illegal and not approved by regulators deals, played a significant role in helping Enron falsify company financial statements and mislead investors.It was the banks that instructed Enron how to deal with the companys significant financial challenges. If stated, dividend targets could not be met by Enron, and the company would have had to generate more exchange flow to declare its credit ratings. The banks assisted to design the fake and deceptive deals. The banks helped Enron to hide the debt which was not showing up on the books by replacing bad assets through creation shell companies. These shell companies, run by Enron executives who profited richly from them, allowed Enron to keep hundreds of millions of dollars in debt off its books.Also, loan transactions were reported as cash flow instead of debt. These finances were not shown in the financial statements. Review of Accounting Ethics Page 8 This action wou ld lead the companys stock and hurt most of investors across the country (Halbert T. & Ingulli, E. (2009). As a CFO, recommend which measures could have been taken to prevent this ethical breach and how each measure should be implemented in the future.Enron was liable for the action of its agents and employees, because most taken actions, which lead Enron into bankruptcy, were taken inside the corporation. Enron officers and managers repaid the banks by entrance to special deals premium payments and insider access to future beneficial transactions (Maximizing Business Performance, 2007). In order to avoid situation that took place in Enron Corp. there are some actions that should be taken within an organization.First of all, there should be analysis of culture within the organization including norms of behavior, standards of conduct, values, perspective of attitudes, perceptions, pressures to aim misconduct, communications, risks and vulnerabilities. The Code of Ethics should be c omplied by Board Members and Senior Executives as well as by all employees. Measures they recommend should include round training, evaluations of compliance systems, appropriate funding and staffing of the corporate ethics office. An organization has to see sure that consulting and auditing are separated while financing auditing has its independence with integrity.Moreover, managing comely communication regarding expectations, requirements, goals and roles at all levels is significant to constitute ethical behavior within an organization. Establishing an Ethics Committee helps to focus on ethical conduct and empower employees to make decisions according to organizations values. Enron and other corporations need better financial disclosure mechanisms. The Financial Accounting Standards Board, responsible for rule making in the area, has to create regulations and standards that are more Review of Accounting Ethics Page 9 forth right and understandable to ordinary people.In addition , corporations need more responsible public servants, instead of creating more laws. We need to teach people to be responsible for what they have done, just as we have held the business people to accountability. Conclusion Since the objective of accounting is to provide relevant, timely information for user decision making, therefore, Accountants must make in an ethical manner so that the information they provide will be trustworthy and, thus, useful for decision making.The purpose of ethics in accounting is to direct accountants to abide by the code of conduct that facilitates and aid public confidence in their services. Ethics are moral principles that guide the conduct of individuals but unfortunately, some accountants sometimes behave in an unethical manner. These ethical violations led to fines, firings, and lawsuits. In some cases, accountants were criminally prosecuted, convicted, and sent to prison. References Snider, D. (2006, phratry 26). University of California, San F rancisco. UC Says Farrow Implicated Banks in Enron Fraud.Retrieved April 27, 2013 from http//ucsf. edu/ stories/uc-says-farrow-implicated-banks-in-enron-fraud Halbert T & Ingulli, E. (2009). Law & Ethics in the Business Environment 2010 custom edition (6th ed. ). Mason, OH South-Western Cengage Learning White J. (2000). Ethics in Business. Retrieved April 27, 2013, from http//www. pro2net. com Sims, R. R. (1992). Journal of Business Ethics, 11 651662. Committee of the Board of Directors of Enron Corp. Retrieved April 27, 2013, from http//fl1. findlaw. com/news. findlaw. com/wp/docs/enron/specinv020102rpt1. pdf