Arthur Andersen's Corporate Culture and Role of Sarbanes-Oxley Act of 2002 in Financial Reporting - Assignment Example

Truth, Trust, and Arthur Andersen Name Course Name and Code Instructor’s Name Date Introduction In the world of business, all the issues revolving are associated to ethical decision-making considerations as well as ethics. The values are what support ethics and the values are also known as the core values of trust and truth (Anwar 55). Every business is usually conducted with some degree of trust and truth. In the world of business, trust is usually the value of the truth, however truth different because of the fact that to different people truth refers to different issues. This is where the issue of law. Policies and agreements come in the business because they act as the truth meter between the different parties that are involved. 1. What is the purpose of having independent and external audits? How do such audits support good corporate governance and ethical decision-making? Accountability, trust and truth are very important for the success of any business and this explains the importance of having external and independent audits. They support the ethical decision-making and good corporate governance. One of the ways it helps is through accountability. Accountability refers to an ethical concept, which puts demands on responsibility, being able to answer, being reliable and being blameless. It is associated with the ability to make the right decision. This is a very important aspect in any profession since it determines ones performance expertise, effectiveness and efficiency in terms of production. Accountability is a key and vital area as far as the trust of people is concerned. Accountability is a very important aspect as far as the ethics of any industry is concerned. This is because every industry deals with the life of people (Sam 200). A good example is the health industry. Many are the times the life of people falls in the hands of a health care practitioner. Therefore, delivering of excellent health care services is their key objective. In actual sense, this is the biggest industry in the whole world because it entails many activities as far as health is concerned ranging from the manufacture of drugs to the actual treatment of the patients. It is associated with the ability of any personnel to be answerable to their actions, to have the obligation to make a report and to take responsibility. Ethically, accountability will also entail the creation of a favourable environment to the fellow workers, the community at large and the clients so that the organization can be able to achieve sustainable development (Virginia 65). Accountability is also very important in this industry because it entails an environment where people work with others. Health care practitioners are therefore required to be very accountable as they go about their work. Some ethical issues like confidentiality are very vital. It should be noted that the manner in which any health industry employee handle finances shows his or her accountability. Any organization in the level of management has an accountant or accounting department that controls the finances of the organization. Health industry is not an exception. The financial position of the health institute can largely be dependant with the person handling finances. The more responsible he or she is, the better the financial management. 2. Investigate how Arthur Andersen’s corporate culture changed over time, and determine the extent that this was responsible for Arthur Andersen’s eventual closure. To what extent was Arthur Andersen concerned about truth and trust in financial reporting, and did this concern appear to change along with changes in corporate culture? Many companies lose their customers because of shady deals in closing their business deals. In the case of Arthur Anderson, the consumers simply lost trust with the organization. It was after their customers learnt about their discretion in the manner they were operating their businesses that they lost trust in the organization. It should be noted that once the costumers lose trust with the company or an organization, thee company lose them and it ill take time for the organization to build trust in the organization or the company. Rebuilding lost trust is also very hard as compared to establishing trust from the first time. It is when a customer has total believe in a company that their product will be delivered in the exact way he or she has anticipated that expresses trust and if it turns out the opposite, the customer is frustrated, angered and disappointed. This is why the collapse of the Arthur Anderson Company was such a big hit in the financial world in 2001. The main problem was associated with poor managerial performances, loss of ethical principles and values, absence of the corporate culture, transparency and accountability. According to Rolland & Jan 58, benefit revolves around the facilities involved in the purchasing of insurances. Well, an insurance company is one whose customers demand a lot of trust. Whereby insurance is an instrument a consumer uses to protect the future anticipated risks as far as property, life and health are concerned. Therefore, the insurance benefit enables the beneficiary to deal with any loss that may befall him or her. The beneficiary usually pays some amount of cash or premium regularly to the insurance company of her choice. It should be noted that as time went by so many insurance companies came up due to great rise in competition. Insurance has greatly impacted the world in terms of resource management, individual health, society’s health at large as well as the health service delivery. There are a number of impacts in terms of trust in any company, resource management and customers as well as the society as far as truth is concerned (William 92). They can be either positive or negative; they can be felt by an individual, community or society. They can lead to a problem of fraud as well as benefit the societies in enabling it prepare well for any catastrophe. The benefits have also impacted the area of resource management, in that economically, it has caused a boost. As we all know, healthy workforce means wealthy organization. Many people are able to concentrate at the work place due to the trust hence raising their work output. This has been so important since people are termed as the human resources whose work output enables the achievement of other resources. A large population will no longer missing work or school due to sicknesses hence a boost in the economy. Also due to a strong and health population, many investors have been attracted to start businesses and industries where the population has adopted that hence increasing the resources in that locality. In addition, through these benefits, qualities of services in the organizations are improved. This is because any healthy and accountable institute would want to be the most recommended by the insurance company as the best (William 11). Therefore, there has been a rise in competition in terms of good services delivery through winning their customer trust. Many organizations have also taken the risk of improving their technology. They have gone to a point of importing machines which measures up to the standards of the modern world. Employee’s accountability in any industry can be measured in a number of ways. The most important way, is the employee’s level of training. Training is a very important aspect of any profession. Actually, not anyone can be trusted with the health or life of human beings. Therefore, argued that a better trained employee is believed to be more accountable. In addition, the issue of the institution under which the employee went through the training is highly associated with his or her accountability. In addition, the capacity of the employee to make very delicate decisions on the process of performing the job shows how accountable they can be. The results after the employee works or their workout determines his or her level of accountability as far as the health industry is concerned. In addition, accountability can be measured by the ability on an employee to be trusted by the team-mates. Team work is very important in health industry and it goes hand in hand with the issue of being trustworthy. Accountable team member should also never be prone to making unnecessary assumptions. The issue of transparency and regular reporting is also a measure of accountability in any field. According to, a check and balance in any organization is a very important process in that it helps in the process of promoting accountability. This is because it entails the process of separating responsibilities or delegating duties. Once any employee has been delegated a duty it is their responsibility to perform it and do it in an excellent manner. This ensures that some of the employees do not get overloaded with tasks or someone does not cease an opportunity of using their power or mandate for the purposes of self interests. Accountability impacts an organization’s working culture in a number of ways. Firstly, increased accountability increases an organizational productivity (Robert & Randy 100). When the employees are accountable, it means they are able to not only accomplish their work effectively but also efficiently. Secondly, accountability results to trustworthy attitude. Once the employees are very accountable in their jobs, the clients gains trust with the organization hence creating a good client or customer relationship. It is important for every organization to create and maintain a positive working culture to avoid a working culture of blame. This can be achieved by thorough training of the employees on their responsibilities to ensure good output. Employees must be delegated duties. Each person must know what he or she are employed to do. This enables them to be accountable for their actions. In addition, employees need to know and carefully, apply their professional ethics when going about their duties. Last but not least, employees need to be very well versed with the issue of public relation (Timothy 133). This will enable them to deal with other people well. In addition, the management must be in a position to evaluate the workers output frequently or rather put supervision in place. 3. Review the Sarbanes-Oxley Act of 2002. How does this attempt to restore truth and trust in financial reporting? Investigate whether or not this has been successful. The Sarbanes-Oxley act of 2002 was signed by the president of the United States of America. It was mostly directed to the CPA and CPAs firms that deal with auditing the companies that are public, the trading companies that are publicly owned with their employees, the officers, as well as the owners. It also focuses to he attorneys who work for the publicly traded clients and the dealers, brokers, financial analysts and investment bankers working for the companies. It deals with annual inspections and the regulation of the corporate governance as well as financial practices. It states that accounting in any organization can be divided into three main parts namely: the cost accounting, management accounting and the financial accounting. It is the management accounts who are responsible for measuring and then reporting all of the nonfinancial and the financial information, which is very helpful to the managers in their efforts to achieve the organizational objectives and goal. The financial accountants report their findings to the external parties. They are involved in all of the business transactions by measuring and recording. These accountants produce the statements of finances based on the acceptable principles of accounting (Deborah 177). The cost accountants are the most important accountant in any given organization because they are the ones that give information to the financial and the management accountants. The management accountants are the most influential people in as far as the strategy development, resources and capabilities building as well as strategy implementation are concerned. Accountants also have the role of planning and controlling the operations of a given organization Accounting practices are very important in as far as the success of any organization is concerned. This is because the information derived from the process of amounting is what influences the actions of the managers and the employees of the organization. This means that the accounting information can be referred to as being socially constructed since it affects every person in the organization Accounting is also a process that in it can not function effectively without the use of some theories. This is whereby some theories like the contingency theories must be involved in the accounting process to avoid some of the loopholes, which may fail the process (Jill 178). Budgeting is a very important tool as far as the issue of management accounting is concerned especially as far as the issue of control and planning are concerned. A perfect budget should be very specific, time scaled, realistic, measurable and achievable. It is very important especially through enabling the managers to plan for the actual operations. This is why the management of any Company must draw a budget to find out what problems they were anticipating or they were likely to find on the process of operations. In addition, it enables the managers to get to discover the changes in terms of the conditions that may probably occur and then come up with the solution. According to the provision, the managers are forced to look into the issues of the relationships existing among the employees, their operations as well as departmental relationships. It enables the organization mangers to be able to communicate their plans to the different departmental head. This is because it is very important for all of the members of the organization to know what their roles are to ensure the annual budget is met. The Knowledge of what their roles are will enable them to be more accountable and responsible in implementing and performing their duties (Rob 109). It is very essential in enabling the control of all the activities in the organization since they have to be within the limits of the budget. It is also a very important tool in motivating all the managers to work even harder in trying to achieve the laid down budget goals through much focused participation and setting their own target as challenges arise. It gives a basis for manager’s performance evaluation through the provision of a way of them to evaluate their performances. Budgeting as a tool for accounting management is helpful in the motivation of the staff through greater initiative provision as well as responsible decision making. It helps the resource managers to be more efficient in the resources allocation, helps the managers to be very cost effective in all that they do especially to be able to improve their operations, helps in budget inflation detection and it improves the level of coordination and communication in the organization. Wasteful as well as obsolete operations are eliminated through setting a budget for the organization or accompany. It gives the organization an opportunity to identify a chance to outsource when it arrives. Moreover, it helps the organization to stick to its objectives, goals, missions and vision (Deborah 98). Budgeting as a tool of management accounting also pauses some issues to the management of the organization like the need for managerial training who will be able to implement, monitor and evaluate the budget. A budget may also lead to a situation whereby there is no chance for new ideas development or even reduce some cost. It is also very possible for the budget to get outdated very easily before it serves the organization for the period it was intended to due to changes in some factors. Conclusion Decision making is another very important factor as far as the accounting management is concerned. This means that some of the financial inputs are of great help like the future or anticipated cash flow, which will depend on the variety of alternatives. Relevant revenues and costs are important in making decisions about selling prices, product mix, outsourcing and discontinuation. All of the named activities need proper accountability before their implementation and this explains how important the issue of accounting management is for the success of the organization. It is also very important as far as the special decisions on pricing are concerned (Anwar 23). Decisions on the product mixing are very dependent on proper accounting management especially on the capacity constraints. These helps the companies to scarce factors or rather limit those factors that cause restriction on the output of the company or organization. In addition, it is the best way to enable the company to be able to concentrate on services or products, which are likely to yield great contribution as per each and every limiting factor. Works Cited Anwar Shah. Performance accountability and combating corruption. Amazon: University of Missouri Press. 2007. Deborah Gibbs. Accountability. Madison, WI: University of Wisconsin Press. 2002.  Rob Lord. Accountability. Oxford: Oxford University Press. 2002. Jill Solomon. Corporate governance and accountability. Amazon: University of California Press. 2007 Robert Lebow, &Randy Spitzer. Accountability: freedom and responsibility without control. Princeton: Princeton University Press, 2002. Rolland Munro & Jan Mouritsen. Accountability: power, ethos and the technologies of managing. Princeton: Princeton University Press, 2006 Sam Lloyd. Accountability: managing for maximum results. Cambridge: Cambridge university press, 2001. Timothy Wright. The truth. Oxford: Oxford University Press. 2004. Virginia Anderson. Accountability, Chicago, University of Chicago Press. 2004. William Chamber. Trust and truth. Amazon: University of Missouri press, 2008. Read More