Unethical Behavior Evaluation in Regards to Accounting Fraud

Accounting is a financial feld that regulates financial data in organizations. The organizations collapse has created many concerns among the stakeholders rin regards to the accounting role. The accountants work abiding by work ethics and corporate rules is necessary for the outsiders and insiders in the organization. Regardless of the high salary that expert accountants get, they also manage to scam and phish companies by sending false data and fraud infor in their financial results. But their unethical behavior has resulted in accountants’ professional education. Because of the corporate collapse and different accounting services, more attention was shifted to the ethical standards required in the accounting profession. To curb this issues, governments, and accounting organizations have developed remedies and regulation to ensure the improvement of ethics (Martinette, Obenchain-Leeson, Gomez, & Webb, 2014). Potential shareholders, shareholders and other people who use financial report rely heavily on the annual financial statement of companies in making their own decision.

The United States requires ethical classes to scholars before doing their CPA exams. Moreover, ethics include, relating to moral issues to accounting education, developing the sense of moral responsibility, recognizing problems with the ethical implication in accounting. Similarly, having the abilities needed to deal with ethical conflict, having the knowledge of dealing with the uncertainties in accounting as well as understanding and appreciating the composition and history of aspects relating to accounting ethics together with relationship to the overall field of ethics (Martinette et al., 2014). However, for a financial statement to conform to the standards of accounting, the information presented should be accurate and faithful to help in decision making. For instance, in the United States, the Institute of CPAs gives plans for AICPA code of conduct that covers the integrity, overall standards of accounting principles and the professional ethics. They also review the responsibilities of accounting professional to the clients and public.

Unethical decisions can act as a threat to businesses. Such arrangement includes, first, wrong accounting where accountants bend the accounting rules leading to the falsification of financial statements thus providing a more favorable picture of the business than its actual position to benefit the company or themselves (Bailey, 2014). For instance, a company may provide high assets while hiding liabilities and debts to sell the business or to acquire a loan. Secondly, overbilling governmental agencies or clients than the actual prices. Also, a company may not write down bad inventories. These in return will inflate the net income hence financial performance.

An example of unethical activities is the scandal of Enron corporative company. This scandal was revealed in October 2011 which led to the bankruptcy of Enron (Martinette et al., 2014). However, the collapse came as a shock to the public due to its financial success. Moreover, the collapsed was due to the unethical behavior of the executive management by failing in external auditing and lacking transparency in their work. Arthur Anderson, an external auditor, approved that some measures taken in the accounting of the company were in violation according to the principles of accounting. These enabled the company to overstate they’re earning between 1997 and 2001 as the executives began to bend the companies rules to their gain (Martinette et al., 2014).

Most of the stakeholders were affected by the dissolution of the enterprise. These included the Enron employees, executive management, third party affiliates, stockholders and the economy of United States. According to Li Yuhao, the Enron company executive management believed that the company was the best in everything that they did thus they had to protect their compensation and their reputation to be considered the most successful executives in the United States (Bailey, 2014). These resulted in a short term financial gain at the expense of the litigation that followed and the reputation that haunt them. The employees of the company lost their job and retirement savings. This scandal caused the closure Arthur Anderson one of the unique and largest accountancy and audit partnership in the whole world. This outrage gave a clear reason for transparency in auditing in organizations. Moreover, shareholders investing in any organization require the executive management to accomplish their duties for the best interest of the company transparently and ethically. The Arthur Anderson scandal could have been prevented if the financial statement were audited correctly.

According to the Bailey (2014), sin corrupts the human thoughts, capacities, emotions, speech and their acts thus becoming the center of attack to other. These lead to our personal decisions been affected by the public that we are serving. However, religious belief a vital as they act as the influential factors to the individual decisions. Moreover, code of ethics could prejudice by the people who are have established the Christian beliefs (Bailey, 2014). According to the Christian life, following the correct way may be hard though the results always come out positive. However, we should follow the ethics of accounting regardless of the financial positions that may influence us to unethical behaviors. Having a good code of conduct benefit all the parties involved in the financial statements. Consequently, it encourages stakeholders and the investors to invest the money in such companies due to the commitment and integrity to ethics. It also encourages employees to work in the institution where their values are protected as well as consumers prefer to buy in companies with good reputation.

References

Bailey, C. D. (2014). Psychopathy, Academic accountants’ attitudes toward unethical research practices, and publication success. The Accounting Review, 90(4), 1307-1332.

Martinette, L., Obenchain-Leeson, A., Gomez, G., & Webb, J. (2014). Relationship Between Learning Orientation And Business Performance And The Moderating Effect Of Competitive Advantage: An Accounting Services Firm’s Perspective. The International Business & Economics Research Journal (Online), 13(4), 779.