Ethics 376 Essay

1347 Words Feb 16th, 2013 6 Pages
Legality and Ethicality of Financial Reporting 2-25-2013 Ethics 376 Phoenix University

Unethical Practices are forbidden in every industry but at the same time they are also performed. Unethical practices occur when a business does “not conform to approved standards of social or professional behavior”. ("The free dictionary,") There are many situations that can lead to unethical practices and behaviors within the accounting profession. The Sarbanes Oxley Act of 2002 was put into effect to prevent a lot of these unethical practices. In every business owner’s life, there comes a time when a decision must be made, that if is made in favor of the company and/or for personal benefit will be considered
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Reed wished to record it in 2010 to cover the gap to meet the earnings estimate. If this was to be done, not only does he ethically breaches and impropriety against GAAP standards but he also deceives the internal and external users of the financial reports by inflating the end of the year reports to reflect false numbers. Shareholders, external users, are at the risk of being defrauded according to the Securities and Exchange Commission (SEC) if Excello proceeded to inflate revenue for 2010. Reed intentionally reflecting inaccurate information on the financial statements is against the code within the Sarbanes-Oxley Act of 2002 (SOX) but also breaks state and federal laws as well.

Such catastrophic scandals as Enron and Worldcom, led the US government to get involved and regulate accounting by creating and enforcing the Sarbanes- Oxley Act of 2002. The Sarbanes- Oxley Act was created to bring an end to such practices by implementing strict auditing and accounting regulations and make accounting transparent. “Sarbanes-Oxley sought to achieve its aims by having the Financial Accounting Standards Board (FASB) mandate that corporations use Generally Accepted Accounting Principles (GAAP) in reporting their balance sheets to shareholders.” ("Sarbanes-Oxley requirements have," 2008) Unethical behavior is very common, in every industry and as explained above

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