23 Sep Enron Essay Examples
Thus, in order to avoid reporting earnings lower than analysts’ expectations, the manager will manipulate the earnings. People in their work lives are driven by some targets and goals which are triggered in them by the organisation where they work and that effects on their performance. Similarly, when they take decision in their work lives , they are not driven by their own values, the company’s formulated culture effects their decision making. The former establishes the organisational ethical values whereas the latter is a specific set of guidelines which must be developed in all functional areas of the firm.” To conclude, business ethics plays a pivotal role in developing a corporate culture. If I fit myself in a situation where I can easily inflate my account on company’s expenses, I would be swayed by the company’s culture.
Buy Free Custom «financial Scandals» Essay Paper Paper Online
Associates need many opportunities to practice making ethical decisions, this can be accomplished through computer based training modules, role plays, and even educational games. Utilizing multiple methods not only accommodates various learning styles but the repetition of practice helps to cement the desired behaviors. As a part of the training, businesses need to provide clear definitions of ethical terms, employees must understand exactly what terms like “integrity” and “diversity” means to their company. They need to know what behaviors are viewed as ethical and which ones may be considered marginal. As mentioned earlier, this can vary from person to person so it is extremely important that the business leaders spell it out as concretely as possible. The less that is left to interpretation, the more employees will be comfortable with the ethics policy and the more likely they are to comply. Fraud can be detected by deliberate effort through internal control efforts or by coincidence or chance.
Enron Scandal And Accounting Fraud Case
Subsequently, WorldCom reversed $227 million of capitalized expenses to make accrual release from liability. While no direct line can be drawn to indicate essayreply com one activity as fraudulent versus a non-fraudulent act, it seems that a preponderance of evidence pointing to direct intent as the divisor.
We thus see that the Enron debacle was an eye opener for corporate America and bought about accounting reforms, audit committee changes, board of directors’ regulations, security analyst recommendations, etc. The Sarbanes-Oxley Act of 2002 led in the implementation of changes following Enron. New York Stock Exchange and NASDAQ underwent reform for listed companies which were approved by the Securities and Exchange Commission. According to a special investigation report for the role of board of directors in Enron, it was found that the a few directors heavily profited from the debacle of Enron and were in compromise of the professional and ethical standards expected in corporate America. WorldCom nurtured a corporate culture in which employees did not questions superiors, and only did as they were told. These aspects of the company culture left employees feeling that they could not express concerns about company policies or witnessed behaviors. Worldcom ceased recognizing expenses for unused network capacity and capitalized $771 million of non-revenue generating line expenses into an asset account.
I might not even think of committing any fraud or inflate the expense on company’s account, if the company is strict in its policies. But at times, it also depends on an individual moral values of a person in taking decision which is transmitted normally from families. According to my vantage point, individual moral development for taking a decision is a secondary factor; what drives first instantly to the person to behave ethically is the corporate culture since a company cannot rely on every individual to behave ethically on their own.
The company’s Cash Management System which held cash for Adelphia, all of its subsidiaries, and additional non-cable related entities owned by the Rigas family was critical to the success of this fraud and central o the duplicitous accounting scheme. Many individuals had access to this account to withdraw money, and the complexity of one account holding cash for almost 50 entities aided the Rigas family in hiding debt and unapproved withdrawals (Johnson & Rudolph, 2007). In addition, critical http://www.alexwhitfield.co.uk/what-is-a-good-argument/ internal controls which could have prevented this cash management deception were absent at Adelphia (allFreePapers. com). These existing internal control weaknesses paved way to greater opportunity in committing fraudulent acts. Adelphia Communications The 2002 fraud case of Adelphia Communications Corporation involves both fraudulent financial reporting and misappropriation of assets. This case involves almost excl usively the founding family of the company perpetrating the fraud.
Accounting For Partnerships Essay
Such confirmations can be either positive or negative, and help in evaluating the credibility of the auditors. This should closely be followed by documentation evidence, both internal and external (Kranacher et al. 2011). This aids he organization to have clear records of the transactions that took place. Analytical procedures would then follow, where he documentation evidence is analyzed to see if it tallies with other forms of evidence available. If all these audit evidences are used, then the organization will be in a better position to discover any move of fraud at the earliest opportunity possible and employ mechanisms to control it. In June 2002 the world learned that the telecom company had overstated its profits by approximately $3.85 billion in five quarters. The amount of overstatement set a record in the US corporate history, doubling the previous overstatement of Rite Aid and was expected to lead to the predictable demise of the company already burdened with $30 billion of debt.
Your Time Is Important Let Us Write You An Essay From Scratch
Enacting these concepts will allow businesses to avoid mistakes that inhibit the development of an ethical culture and also allow them to reap the benefits of an ethical environment. By providing company relevant definitions business leaders would address one of the areas where they face some of their biggest ethics related challenges, the deficiencies in the law. Businesses can also attempt to assure that there is no retaliation against whistle blowers, but until the government’s actions back this up employees will be reluctant to disclose ethics violations, particularly when there is little or no possibility of remaining anonymous. Other problems with the law, help me with accounting fraud essay vague requirements and insufficient financial support for regulatory agencies, are even more difficult for a company to address head on, instead they will have to pursue solutions through legislative and regulatory bodies. To some this would seem counterproductive, but when the amount of money businesses have spent on compliance efforts is considered, it becomes apparent that it would be in their best interest to seek a final clarification of legal expectations. In addition to discussing personal examples of ethical decisions, managers must also provide employees with training that includes relevant, real life examples that the employees may face in their jobs.
Strategies Of Committing Accounting Fraud
This paper objectify and evaluate the events that occurred prior and subsequent to the fraud, and the accounting schemes employed to get the fraud done. It presents examples of companies who have used inappropriate accounting practices. Enron, WorldCom, Tyco, HealthSouth and Adelphia were selected for analysis help me with accounting fraud essay because of the availability of information regarding specific events occured before, during and after the fraud period as well as the ethical issues involved . Seeking resolution to compliance questions is only one step that a company can take to improve on the issues caused by the deficiencies in the SOX law.
Fraud As A Threat To Financial Systems Definition Essay
When companies do not practice strong internal control, it leaves the door open for employees to misappropriate assets without being detected, except by chance. By the time fraud is detected by chance, it could have cost a company millions of dollars in misappropriated assets. SAS 109 states that the auditor must gain a sufficient understanding of the entity and its environment, including its internal control, so that the auditor can determine the risk of material misstatement of financial statements, either because of error or fraud.
They can also do everything possible to prevent retaliation and provide clear definitions of ethical terms that are relevant to the company’s values. By providing training that includes both clear definitions and relevant examples and also providing employees with opportunities to practice ethical decision-making, companies can avoid some of the common mistakes of ethical programs. Other mistakes can be avoided by essay writing assuring that managers speak to their employees about ethical issues and making sure they have the information and tools they need to feel comfortable doing so. Managers, of course, follow the example set by company executives so it is essential that the tone at the top reinforces the importance of ethical behavior and that everyone in the company knows that even the executives are following the same principles.
Adelphia was founded by John Rigas in 1952 in Coudersport, Pennsylvania (money. cnn. com). At the time it was charged by the SEC, it owned, operated, and managed cable television systems and other related elecommunications businesses. By June 30, 2002, in reports filed with the Securities and Exchange Commission (“SEC”), HealthSouth’s fixed assets, known as property, plant and equipment, were overstated by more than Sl billion; total assets were inflated by $1. billion; the consolidated balance sheet included more than $300 million in cash https://atmasparsh.org/2020/04/27/how-many-paragraphs-is-1-000-words/ that did not exist; and “Income Before Income Taxes and Minority Interests” had been artificially inflated by at least $2. Ernst and Young, on the other hand knowingly turned a blind eye to the very fraudulent and illegal practices y which HealthSouth falsified its financial statements and cheated Medicare and private insurers. Indeed, as alleged in detail below, as early as 1 994, E&Y learned of HealthSouth’s practice of reporting fictitious revenues and earnings, but chose to “turn its head” to retain the Company as a lucrative client.
At some point, the government may need to borrow internally hence causing an increase in borrowing rates in the country. High interest rates prevent customers from accessing loans and means bad business for the financial systems. In executing the audit plan explained above, there are several types of audit evidence that can be used. Physical examination is the first type of evidence, which entails the physical examination of the company’s tangible assets. The significance of this to auditing is that it gives the management a clue on the value of the company’s actual assets. Confirmation evidence should then follow, which refers to the oral or written response from a third party that is independent.
“They can’t just stand in front of people and say they want them to have a good attitude and be excited,” says Pecos River president Elizabeth Wilson. Rules and personalities of a business culture person eventually effects on the person and exerts pressure to conform to the firm’s culture. In most of the organizations, there are set rules and policies specifically formulated to make ethical environment.
- In summary, employees need to have a code to set the ethics foundation, training to help people truly understand it, and programs that permit them to inquire about and report ethical violations.
- Such a code must reflect and reinforce the values and principles of an organization.
- Besides that, ethics training for all members of the organization, corporate social responsibility programs, ombudsman services and help lines can be done to combat unethical behaviour.
Roberts’ rebuttal points out that quarterly earnings were the result of a reform that sought to provide investors with more timely information about the financial condition of companies. Roberts also mentioned how accounting had traditionally relied on «character and internal censure» to moderate fair practices. But in the sass’s the FTC changed the accounting culture to one where partners were not paid by seniority, but by how much business they could bring to the firm. In recent studies, researchers have examined some different how long is 1000 word paper incentives for EM, which include meet capital market expectations and contracting motivation (Healy & Wahlen, 1999). The incentive of meet capital market expectation is created by external investors and financial analysts, they widespread use of accounting information to help value stock of a company. If the growth firm cannot meet the analysts’ expectations it may suffer large negative price reactions . Inversely, if the firm report growth continuously in annual earnings, it may get a premium price than other firms .
An accounting essay’s subject matter is ultimately dependent on any one of several diverse field-related accounting functions, procedures, and various other contemporary programs. A good accounting essay can use any or all of the following emerging and contemporary subjects in any or all of these areas. Still, it should also make some general comments on how the existing accounting practices may affect future changes and improvements. Conflicts of interest were also introduced into this ultra when accounting firms began to consult with the businesses they were supposed to be auditing. (old. ) Roberts makes it clear that he believes federal regulations have a lot to do with the scandals that occurred. He seems to feel that a culture of honesty and integrity in the business and accounting professions Is the most effective way to curb shady business dealing.