Each of us has such a set of values, although we may or may not have consider them explicitly. Robert H. Montgomery, describing ethics in accounting is accountants and the accountancy profession exist as a means of public service; the distinction which separates a profession from a mere means of livelihood is that the profession is accountable to standards of the public interest, and beyond the compensation paid by clients. In section 100, Introduction and Fundamental Principal in IESBA Code of Ethic for Professional Accountants, state that a professional accountant shall comply with the following fundamental principles. The first principle is integrity. Integrity is under section 110.
Many times companies break accounting procedures and falsify their financial statements in order to please both internal and external users. Even though this is a violation of the SOX act of 2002, corporations still chose to engage in these activities. The final thing we learned about is the ethical decisions made behind financial reporting. The AICPA Code of Professional Conduct was put in place to make sure companies have a standard to follow when creating financial statements. Legality Financial reporting activities and standards Earnings management has been used as the manipulation of the current standard of financial reporting established by G.A.A.P.
The Moral Rights Rule defines a decision as ethical if it protects people’s fundamental rights. Under this rule, the decisions made by Lay and Skilling should be the one which protects the rights of all stakeholders of the company. The employees and stockholders on the corporation had a right to know the true financial status of the company because if affects their individual finances and livelihood. Therefore, by the definition of the Moral Rights Rule, the decisions and actions made by the executives were not ethical. However, they
Introduction Companies have to answer to numerous people on the decisions they make and rarely are companies able to hide mistakes. They may think they can keep mistakes a secret, but almost always, the information eventually comes out and generally in a very public way. Executives and managers have an obligation to follow certain rules. There is a Civil Code that outlines the obligations of corporate directors. Article 144 requires “that a director/officer does everything in their power to serve the interests and obligations of the corporation first, ahead of any personal interests; does everything in their power to serve the interests and obligations of the staff, ahead of any personal interests; does everything in their power to serve the needs and requirements of customers ahead of any personal interests” (United America, 2009).
Others argued that audit committees with independent chairs contribute to more effective control systems as long as the management is not involved the selection of the directors (Carello etal.,2011). Abiding with the composition and structure requirements of an audit committee grantees performing its "oversight responsibilities" (Ferreira 2008). This necessarily requires total independence from the executive board members. The appointment of inside directors in an audit committee leads to a lower level of independence in an audit committee (Sharma etal.,2009). To enhance high-quality corporate governance and ensure transparent business environments, several regulatory codes have established on corporate governance.
Their business included some long term investment and no short term returns to the company. Enron’s auditor was also accused of conducting business in an unethical manner in his attempt to retain the loyalty of Enron executives. At that time laws and SEC regulations allowed firms like Arthur Andersen to provide consulting services to a company and then turn around and provide the audited report about the financial results of these consulting activities, therefore making an “independent audit” by Arthur Andersen independent in name only. The Accounting Scandal It was revealed that it’s reported financial condition was sustained substantially by institutionalized, systematic, and creatively planned accounting fraud, known as the "Enron scandal". The accounting techniques used to influence Enron’s financial statements were a combination of many different complex tactics.
In a bureaucratic organization the finger and blame gets put on the financial burdens and leaders as to in a patron-client organization all of the members are responsible and held accountable for either failure or success (WeeKoh, 2009). I see after the readings and studies that a patron-client or bureaucratic organization both have one main goal in mind whether a legal organization or illegal and that is to be successful and gain profit and or power. Both groups have many similarities the main difference is the leniency of what the members on the bottom can do without pre approval and how and who
Executives are hired to act as fiduciary agents of their stockholders for the purpose of increasing wealth (Smith, 2003). He argued that CSR amounted to spending the stakeholder’s money that clouded decision making by reducing the firm’s focus on maximizing profits, thereby placing the firm at a competitive disadvantage (Smith, 2003). Friedman’s approach is practical and takes into account the interests of both firms and society. However, it is not realistic to think that a firm can separate business and social responsibilities. According to Mintzberg "the strategic decisions of large organizations inevitably involve social as well as economic consequences, inextricably intertwined...there is no such thing as a purely economic strategic decision."
The Current Ethical Business Environment Corporations understand the importance of ethical behavior and usually have a code of conduct that all of their employees are required to follow. They also understand that for a code of conduct to work, it must start with executive management. According to Archer (2008), “Starting with the CEO, senior managers must continually demonstrate the company’s core values and reinforce standards of behavior.” Upper management understands that it costs more to be unethical than to follow the rules; such as reputational, financial, and operational costs. A Brief History of Freddie Mac The Federal Home Loan Mortgage Corporation, or Freddie Mac, was established in 1970 due to two main issues: to help with interest rate risk and to prevent a monopoly. Freddie Mac, one of the four Government Sponsored Entities (GSE), was created by Congress with the Emergency Home Finance Act and funded $100 million by FHLBanks (History of the Government, n.d.).
CASE STUDY of ‘The Moonlighter” I have read and understand Curtin Policies regarding academic integrity. This assignment has been submitted to Turnitin and has a minimum of 80% original material. 1. INTRODUCTION According to Lewis, business ethics is a topic that has received much attention in literature but due to its abstract nature, nearly all definitions available exist at highly theoretical levels (Lewis 1985, 377). Most people have the tendency to distrust corporations in the market and the larger the firm, the worse the problem of trust usually gets (Rushton 2002, 138).