External users most commonly include creditors, tax Authorities, investors, and customers. • Her supervisor (the chief accountant, who evaluates her). b) By adding $1,000 to the Equipment account within the trial balance, that account total is intentionally misstated. By not locating the error causing the imbalance, some other account(s) may also be misstated. Vu’s actions do not hold malicious or dangerous intent, but they still a strong incentive to manipulate financial reports in order to gain more money and status within her company.
The accounting statements were capital spending schedules, which differed in spending amounts (Mintz & Morris, "Case 2-1 Cynthia Cooper and WorldCom," 2011). When audit personnel, Cynthia Cooper, required an explanation for the difference in the capital spending schedules; finance directors explained it as “prepaid capacity”, but had no knowledge of what “prepaid capacity” meant (Mintz & Morris, "Case 2-1 Cynthia Cooper and WorldCom," 2011). The case from here became even more tainted with dishonest practices and explanations. Cynthia Cooper and Glyn Smith meet with numerous WorldCom directors, executives, and external partners to gained a more in depth understanding of the situation; but continued to receive the run around. There were some WorldCom directors who made entries, but didn’t know what they were for and GAAP support (Mintz & Morris, "Case 2-1 Cynthia Cooper and WorldCom," 2011).
The offenses are harmful to not only businesses in the United States of America but to the world of business as a whole and are unacceptable. If the law had been in place, many shareholders would have been safeguarded but numerous investors lost their lifetime savings by company insiders. The corporate world is a much more secure place with regards to investing with all of the changes and modifications which are now enforced. I still think there are other actions which can be taken to protect shareholders even though the modifications have significantly improved the procedure. Businesses must develop an ethical balance so as not to take advantage of unknowing shareholders who have invested their lifetime
Top executives of companies are hired to improve performance and the pressure to do so can lead them to take unethical action to ensure their success. Publicly traded companies are consistently pressured by internal and external stakeholders to perform at higher level. When organizations are about to release financial reports that would possibly lead to a financial loss to the shareholders, the pressure to perform unethical accounting practices will increase. There is an opportunity to adjust the numbers so the financial reports will represent a more desirable outcome. Employees have the same opportunity to perform unethical accounting activities as the top executives.
Company mainly focused on maximizing the shareholder value by the CEO and other management’s managerial philosophy. Currently, Hill Country uses a risk adverse strategy to choose their business or project. Hill Country’s industry is high competitive but it kept going well with cost efficiency and quick reaction to customer requirements. From these reasons, Hill Country has few risks. However, analyst and experts present that Hill Country’s excess liquidity with zero debt is going to lose benefit and fail to maximize the shareholder value.
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.
This sort the management to find a solution to fix their high turnover rate. A consultant (although not an expert in the industry) was brought in to help fix this problem. The consultant aided the management in figuring out what they were actually looking for and the execution. The management found that older employees spoke so highly of the training and opportunities given to them by their resort that word got around creating a platform of newer ambitious people began to apply for positions with Green Mountain. This allowed the management to embrace not only the high employee turnover rates, but also the companies new title of being a building block, in return for high employee work and service rates.
Ethicality of Accounting Activities While reading Cynthia Cooper’s account of what led to the WorldCom case our team discovered that it was not one person’s fault. Accounting issues may begin from the top, but it takes the rest of the accounting team to continue to contribute to the fraud. Our team learned that because the CFO, Scott Sullivan, of WorldCom created a prepaid capacity account that seemed viable within the capital expenditures to the rest of the employees it led to a scandal within the company. This scandal involved many people from Cynthia Cooper and Glyn Smith, the determined internal auditors, to Betty Vinson and Troy Normand, members of the accounting department staff (Mintz & Morris, 2011). One of the key members of this case is Scott Sullivan the Chief Financial Officer of WorldCom.
This saved the company millions, but if they had a better plan in place, this issue would have never resulted. Boeing was also sued for alleged violation of the federal securities laws in 1997 as a class action suit. “The plaintiffs alleged that Boeing had intentionally suppressed information about its manufacturing problems, which would have adversely affected the share price of the company during the first and second quarter of 1997, when merger talks with McDonnell Douglass were in progress” (Unknown, 2004, p. 3). This was definitely a lapse in
Enron is a prime example of how the temptation of greed and the actions of irresponsible behavior can grow and spread like an infection from a corporate boardroom. “In this case, the infection spread to the energy firm’s accountant’s at Arthur Anderson, who looked the other way and later tampered with evidence.” (Stancavage, 2010). All those involved at Enron should have had a complete understanding of ethics, which in this case was classified as an avoidance of questionable or criminal acts. But it can be about excellent customer service or asking “what does an excellent boss-employee relationship look like?” (Stancavage, 2010). It had been determined that there are, in fact, companies out there on U.S. soil that actually understand and accept the concept of ethical behavior within an organization.