Review of Accounting Ethics

Review of Accounting Ethics – Tyco Scandal

Rochelle Garrett

Strayer University

ACC557 Financial Accounting

November 6, 2012

Professor: Aisha G. Meeks, CPA

Review of Accounting Ethics – Tyco Scandal

Ethics plays a significant role in a company's overall value and performance. CEOs and CFOs should be working to protect their businesses – and themselves – from violations. There are innumerable cases where ethical breaches have led to stock price declines, corporate reputational harm and costly litigation in recently years. What is ethics and more importantly business ethics? The Ethics Resource Center says Business ethics refers to clear standards and norms that help employees to distinguish right from wrong behavior at work. In the context of doing business, ethics refers to the extent to which a person’s behavior measures up to such standards as the law, organizational policies, professional and trade association codes, popular expectations regarding fairness and rightness, plus one’s own internalized moral standard (Quatro & Sims 2008). It’s simple. Do the right thing. Of course, this is easier said than done.

Tyco International Inc. is a scandal of epic greed. Tyco is a large global conglomerate that manufactures a wide variety of products including electronic components, healthcare products, fire, and security systems. For the 2004 fiscal year, Tyco reported net income $14.50 billion. In January 2002, questions began to arise regarding the validity and legality of Tyco’s bookkeeping, which led to a full criminal investigation of Tyco’s current CEO, L. Dennis Kozlowski and CFO Mark Swartz (Kemmerer & Shawver 2007). According to USA Today.com the following is a timeline snap shot of Tyco International scandal:

March 13, 2001: Tyco announces $9.2 billion cash and stock deal to purchase the CIT Group, a commercial finance company. Tyco director Frank Walsh helps arrange the deal.

Dec. 5, 2001: Tyco shares...