Review of Accounting Ethics Essays

1352 Words Dec 6th, 2013 6 Pages
Review of Accounting Ethics - Week 3
Alessio Brasile
Strayer University
Financial Accounting
Dr. A. Golding
April 28, 2013
Review of Accounting Ethics - Week 3
Given the corporate ethical breaches in recent times, assess whether or not you believe that the current business and regulatory environment is more conducive to ethical behavior: In the past several years, Enron, WorldCom, Tyco, and others have committed financial scandals, which caused the stock market to take a hard hit. Investors and lenders learned from these scandals in the past, and just recently, have become hesitant to invest in any company that they think, or know for a fact, the company is corrupted and/or unethical. “United States regulators and
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1). Lehman Brothers got themselves in trouble by the way they were handling their books at the end of each quarter. “The mismatch between short-term debt and long-term debt illiquid investments required Lehman to continuously roll over its debt, which increased the firm’s business risk” (Caplan, Dutta, & Marcinko, 2012, p. 442). Lehman was borrowing billions of dollars practically every day (Valukas, 2010, Volume 3, p. 751).
Lehman Brothers’ executives were exercising repurchasing agreements differently than what they were intended for. Lehman Brothers were selling securities to their lender and when repayment was made, the securities would be bought back by Lehman Brothers. Because they were selling and buying back the securities, these transactions created “a materially misleading picture of the firm’s financial condition” (Trumbull, 2010, para. 3). Standard practice for repurchasing agreements are that securities would be transferred, not sold, to the lender in exchange for a cash loan. This transaction would have a nominal fee, which would be paid when the loan is paid back to the lender. An agreement is established between a company and the lender on a repayment date. On the repayment date, the company would pay the loan back, and in exchange, the securities would be transferred back

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