Ethics Article Review

ETHICS ARTICLE REVIEW

2006

I . Introduction

Oxford Advanced Learner ' Dictionary defines ethic as a system of moral principles and rule of conduct . In this case , moral might apply not only for human being but also for organizations and their entire members Concerning the implementation of ethics in an organization , this discusses ethics in accounting and financial decision making . Prior to the elaboration , we provide a brief summary of article on ethics in accounting and the case study on Enron

II . Annotated Bibliography of an Article on Ethics

Kidder , Rushworth

M (2002 . Ethics at Enron . HYPERLINK "mailto :ethics globalethics .org " Institute for Global Ethics , Volume 5 , Number 3

In the article , the author , Kidder reveals the discussion on ethics in business is not as straightforward as people might think . This is because .e legal decision or policy in business might be legal but unethical . To provide an understanding on this issue , the author provides three examples regarding the unethical practices in Enron 's accounting system and financial decision making as following

Kenneth L . Lay , former Enron 's chief executive , said in a September 26 online session with employees that Enron recorded incredible earnings 600 million ) in Q3 but turns out to d for bankruptcy a month later ( illegal and unethical practices

Enron give its employees stocks as retirement program but they cannot withdraw /sell it . As the crisis got intense , employees witnessed their retirement savings disappeared as Enron went bankrupt ( legal but unethical practice

Arthur Andersen , the Chicago-based accounting firm , who cooked up with Enron to write a fake figure of the company 's profit in the book ( legal and unethical

II . Enron Case and Three Accounting Policies

In the case of Enron , the company and its auditor cooked up to show a bogus profit in their book so that investors see incredible performance of Enron and buy more Enron stocks , which in turn provide the company with huge capital . In financial report , basically , there are financial statements that investors love the most to see them in detail they are balance sheets , cash flow statements , and income statements

Concerning the Enron case , the fake profit is written in the income statement or also known as profit-and-loss statement or

L . This financial statement describes the revenue , expenses and profit for the company during the past year . From investors ' point of view , income statement becomes media to discover a company 's profit margins and other financial metrics for the business

III . Take Benefits of Rushworth M Kidder 's Article on Ethics

In the above article summary , we learn that an organization must learn about the difference between legal and ethical issue . Since any legal actions do not have to comply with ethical actions , therefore , the company that I work for must understand how to carry out both legal and ethical actions . Basically , ethical actions are those that people consider them as the right things to do and write them in the company 's ethics codes

The article also suggests that honest report also provides benefits for a company since they become instrumentals in enhancing brand name and reputation , creating a cohesive corporate culture , and avoiding litigation and fines

In addition , since investors rely on a company 's financial statements therefore , my company should not attempt to provide bogus profits since the situation will cause unfavourable perception in customers ' minds in the long-term

IV . Sarbanes-Oxley and the Importance of Ethics in Accounting

The occurrence of accounting scandals in the U .S . within the past decade including Enron and WorldCom highlighted that the U .S . government lacked of monitoring scheme to prevent a company from performing unethical business practice

Immediately after the case on Enron and WorldCom , the U .S . government set up 2002 Sarbanes-Oxley Act (SOA ) and 2003 SEC final rule that aim at changing the way auditing profession does its business . There are three changes in the accounting practice as following

There is a basic change in regulating accounting industry from previously primarily self-regulated environment to public regulation approach

New independence rules and regulations significantly rule out the audit engagement

New independent public oversight board (PCAOB ) has rights to monitor audit process , auditing standards , and disciplinary measure on auditors .Since regulation has a security hole that any criminal can break it therefore , the most important thing in accounting practice is the willingness of corporations and auditor to perform ethical business practice . This is because in the absence of good dedication of practicing auditors , it is impossible to present truthful financial statements , which in turn will counterfeit investors like ones happened at Enron or WorldCom

Bibliography

Investor Guide (2003 . Annual Report . Retrieved September 6 , 2006 from HYPERLINK "http /www .investorguide .com /igustockreport .html http /www .investorguide .com /igustockreport .html

BSR Staff . Ethics Codes /Values . Retrieved September 6 , 2006 from HYPERLINK "http /www .bsr .org " http /www .bsr .org / search

Kidder , Rushworth M (2002 . Ethics at Enron . HYPERLINK "mailto :ethics globalethics .org " Institute for Global Ethics , Volume 5 , Number 3

Lee , Hoseup . Effect of Sarbanes-Oxley Act of 2002 and SEC Final Rulings on Auditor Independence . Retrieved September 6 , 2006 from HYPERLINK "http /www .sba .muohio .edu /abas /2003 /vancouver /lee_auditor 20independenc e .pdf http /www .sba .muohio .edu /abas /2003 /vancouver /lee_auditor 20independence .pdf

Oxford Advanced Learner 's Dictionary (4th ed (1989

Oxford Advanced Learner 's Dictionary (4th ed (1989

Ethics Article Review

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