Wk 2 Acc291

Effect of Unethical Behavior Article Analysis

ACC/291

July 10, 2012

Effect of Unethical Behavior Article Analysis

Business ethics are the moral values and principles that establish conduct in the business world. Unethical practices and behavior in accounting would be false financial information for personal gain, overstating revenue, and the misuse of funds, understating expenses, overstating the cost of corporate resources or underreporting the existence of liabilities. Other unethical behavior would be distortion of facts to mislead, insider trading, securities fraud, bribery, bribes and exploitation of the financial market. Greed has led many businesses towards unethical practices, legal complications and general mistrust.

Unethical accounting practices including a variety of questionable transactions resulted in huge losses for stakeholders and a disaster to investor’s. The scandal from the Enron outrage is what led the U.S. government to get involved and create the Sarbanes – Oxley Act of 2002. “The purpose of the act was to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes” (The Data Governance Institute, 2003). The law was passed in reaction to a number of major corporations and accounting scandals such as: Enron, Tyco International and WorldCom. These scandals resulted in a decline of public trust in accounting and financial reporting practices.

The law forced publicly traded companies to spend a large amount of money having their books thoroughly audited, and increased the penalties for executives who defrauded investors. The changes from Sarbanes-Oxley should have a lasting effect on improving responsibility and accountability for companies. Penalties can run up to $5 million in fines, a 20-year jail term or both. Not everyone agrees with the value of Sarbanes-Oxley, especially smaller businesses. While others believe the costs out-weigh the...