Participation and Discussion - Ethics - Essay Example

Discussion Ethics applies to the decisions companies make. The financial performance of a company in terms of its four financial ments (income statement, balance sheet, statement of retained earnings, and statement of cash flow) could be overstated on understated by accountants who are experts at cooking up the books. An example of an unethical practice is changing depreciation methods without a justification and without including the change in the notes to the financial statements of the company for the purpose of altering the actual financial performance of a company. A specific ethical challenge an accountant could be confronted with is encountering a client that wants to underestimate the net income in order to lower his tax obligations. Accountants are not supposed to accommodate these types of requests from clients because it violates the code of ethics of the accounting profession as well as the generally accepted accounting principles (GAAP). Another ethical concern in regards to financial performance is payroll policies. Companies can decrease their labor costs by paying below market value to its employees, but such a practice can be counterproductive because personnel will be persuaded to leave the company and work for a competitor that pays better. 2. Discussion questions The Sarbanes Oxley Act of 2002 helped improved many aspects of the accounting profession that had ethical implications. For instance Section 404 of SOX deals with internal controls. These internal controls can be used to detect misappropriations and fraud. The Act increased the accountability of the profession. CEOs are now responsible for the accuracy of the financial statements. If fraud is detected the Sarbanes Oxley Act created capital punishment penalties of up to 25 years in prison. Sarbanes Oxley positive impacted Wall Street because it increased the customer confidence in the stock market. SOX helped safeguard the assets of a company. The Sarbanes Oxley Act also created auditor independence. The Enron scandal showed that how collusion can occur between and auditors and the managers when auditor independence does not exists. There things that could be done to improve the efficiency of the SOX law. Currently it is costing public companies over $1 million for compliance costs. The Sarbanes Oxley Act should be revised to eliminate the waste or inefficient processes that are causing compliance cost to escalate in the United States of America. Agency problems were reduced in companies that are complying in the Sarbanes Oxley Act of 2002. 3. Participation - Gigi I agree with you to a certain extend that the use of cameras can be perceived as a breach of privacy, but in reality business are protected by the law because they have to right to monitor the work of its employees. A grey area in the practice is the usage of hidden cameras. The employee should know if they are being recorded by video. It is my opinion that hidden cameras without the knowledge of the employee that they are been recorded is unethical and could be violating civil rights, but I am not a lawyer. If anybody knows the answer to this please continue the discussion going. 4. Participation – David Accounting is a profession that functions well when the accounting staff has high moral and ethical standards. There have been rotten apples in the corporate world that have caused major accounting scandals such as WorldCom, Tyco, and Enron, but the majority of accountants are very honest people. All accountants know they have to comply with the generally accepted accounting principles (GAAP). A lot of people don’t realize that accounting is a precise science that when prepared following GAAP will always give the same results. Currently the NBA and the players are on a lockout. To me it is sad that the players are claiming that the accounting losses of $300 million that the league suffered are not true considering the fact that a CPA certified those numbers. 5. Participation - Taneda I agree with you that ethics is extremely important in the business world of today. Back in the late 1990’s Nike Corporation suffered a major blow to their corporate image due to the revelation of sweatshops from Nike’s suppliers in emerging economies. The firm in 1998 loss half its total sales as customers stop supporting the firm. Nike learned its lesson and today it is recognized as one of the 100 hundreds companies in the world in terms of social responsibility, philanthropy, and high ethical standards. I also agree with you in regards to the importance of ethics in large corporation and that ethics can be used intrinsically to improve the performance of a firm. 6. Participation - Martine You are right in regards to the fact that ethics must be used to measure the performance of a company. An accountant that does have high moral standards and ethical expectations can fall into traps such as cooking the books. I think that whistleblowers are needed in corporate America to safeguard the assets of public and private enterprises. The accounting department is the first line of defense against fraud. When accountant detect irregularities or fraud they must notify the upper management immediately. If collusion and agency problems exist in the company the accountant is better off revealing the data and information to the Securities and Exchange Commission or the justice department. 7. Participation – Danelle It is never good when employees question each others work. Such a circumstance can lead to interpersonal conflict. The accounting staff depends on each other and teamwork and synergy are desirable traits. Synergy occurs when the whole is larger than the sum of the parts. The controller is usually in charge of the accounting department. He is responsible for the employees or staff members of the accounting department. I agree with you that proper documentation is extremely important when employees are performing accounting work. A lack of teamwork as you mentioned can be detrimental to the operational and financial performance of a corporation. 8. Participation - Gigi I believe that the Sarbanes Oxley Act has been extremely effective at preventing frauds. The CEO of a public company must sign the financial statements assuring the financial statements are free of material error or fraudulent activity. The accounting profession is changing a lot and today. Accountants have to learn more than one framework of accounting. Along with GAAP accountants in the United States need to have knowledge of International Financial Reporting Standards (IFRS). IFRS is used in Europe and other countries around the world. I agree with you that government intervention is needed to ensure compliance with the law. 9. Martine – Participation I agree with you that the Sarbanes Oxley Act of 2002 has been a good tool to regulate the market, but one of the biggest flaws of SOX is that it takes millions of dollars to comply with the Act. Some of the greatest achievements of SOX are that it increased the accountability, reliability, and the transparency of financial information released by public companies. Section 404 of the Sarbanes Oxley Act covers internal managerial controls. SOX created capital punishment for white collar criminals. The maximum penalty for violation of the Sarbanes Oxley Act is 25 years in prison. 10. Participation – professor A code of conduct to me represents a behavioral policy that the employees must follow. At the company I work for the code of conduct is given to every employee when they sign an employment contract with the company. The company’s code of conduct is very specific and it includes sexual, racial, and age harassment. I think that all companies should have a code of conduct. The document provides guideless concerning proper and unacceptable behavior in the workplace. Read More