Effect of Unethical Behavior Article Analysis

Effect of Unethical Behavior Article Analysis

Mike Jacob

Principles of Accounting II

ACC/291

David Fewkes

May 20. 2012

An accountant is not just a number cruncher; accountants provide information to the public about the financial stability of a company. The public in turn uses that information to decide whether or not to invest their money in these companies. In order for the public to trust the information accountants provide they must act ethically and with a level of confidence in their knowledge of the financial security of a company. Ethics is the study of the customs and values of a group or person and the analysis of the concepts of good and evil, right and wrong and public responsibility. Ethics play a major role in determining the failure or success of a company.

U.S. government lawmakers created the Sarbanes-Oxley bill in 2002. Sarbanes-Oxley also known as Public Company Accounting Reform and Investor Protection Act was created after several large corporations went bankrupt. Companies like Enron, Tyco and WorldCom had been using creative accounting techniques to bolster their financial statements in order to receive loans from banks when they should not have qualified for the loans. Prior to the Sarbanes-Oxley Act of 2002, the Securities Acts of 1933 and 1934 were the accounting professions most recent set of standards. Some of the possible penalties for non-compliance to Sarbanes-Oxley include lawsuits and negative publicity. A corporate officer who does not comply or submits an inaccurate certification is subject to a fine up to $1 million and ten years in prison, even if done mistakenly. If a wrong certification was submitted purposely, the fine can be up to $5 million and twenty years in prison (OffsiteDataSync, 2010). Companies should make ethics part of their basic corporate structure. Good compliance policies and a vigorous oversight committee should be put in place to assure that policies are followed. Employee ethics training should be mandatory for all employees but especially for those that are required to file financial information.

Sarbanes-Oxley not only holds U.S. companies to these standards but also any foreign company that does business in the U.S. Because of this many countries have instituted their own accounting ethics legislation.