Effects Of Manipulative Accounting Practices

3009 words, 13 pages

Intro Sample...

This paper examines the use of manipulative practices by accountants and the impacts of their manipulation in an ethical context. In particular this paper discusses the major accounting scandals in recent years and the effects on the accounting industry.
Users of financial statements typically assume that financial statements are presented fairly and thus rely on them to make economic decisions. This is not always the case as preparers of financial statements can be persuaded to distort or manipulate financial statements to tailor the overall message the financial statements present to suit their needs. We have seen proof of this with the Enron and WorldCom scandals. This is typically described as creative accounting or earnings... View More »

Body Sample...

According to www.sarbanes-oxley.com, the purpose of SOX is, “To improve quality and transparency in financial reporting and independent audits and accounting services for public companies, to create a Public Company Accounting Oversight Board, to enhance the standard setting process for accounting practices, to strengthen the independence of firms that audit public companies, to increase corporate responsibility and the usefulness of corporate financial disclosure, to protect the objectivity and independence of securities analysts, to improve Securities and Exchange Commission resources and oversight, and for other purposes.”
To achieve these goals numerous changes to U.S. accounting standards was necessary. The changes implemented by SOX are too vast to discuss in detail and are not necessary for the purposes of this paper but it should be noted that SOX dramatically changed the reporting of financial statements, the activities within the corporate world and the accounting profession.
SOX may fall under law enforced in the United States but its effects reached far beyond the U.S. border. Considering that the state of the U.S. economy greatly impacts other countries worldwide it is not surprising that the effects were felt globally. One of the requirements of the Act is that any company, regardless of their location, listed on a U.S. stock exchange must be in compliance with SOX. This requires companies worldwide to have to incur the significant costs required to ensure their internal controls and financial reporting comply with SOX and SEC regulations.
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