Impact of Unethical Behavior Article Analysis

Identify situations that might lead to unethical practices and behavior in accounting.

The unethical practices and behavior in accounting would be misleading financial analysis for personal gain, misuse of funds, overstating revenue, and understating expenses, overstating the value of corporate assets or underreporting the existence of liabilities, sometimes with the cooperation of officials in other corporations or affiliates. Other unethical practices would be insider trading, securities fraud, bribery, kickbacks and manipulation of the financial markets.

ENRON: The example of the Impact of Unethical Behavior Article Analysis

Enron Corporation was an American energy company based in Houston, Texas. Enron employed around 21,000 people and was one of the world's leading electricity, natural gas, pulp and paper, and communications companies. Enron reported financial condition was sustained mostly by institutionalized, systematic, and planned accounting fraud. There were rumors of bribery to secure Contracts in Central America.

There were several reports of involving irregular accounting procedures bordering on fraud, perpetrated throughout the 1990s, involving Enron and its accounting firm Arthur Andersen, it stood at the verge of undergoing the largest bankruptcy in history by mid-November 2001.

Enron shares dropped from over US $90.00 to US $0.30. As Enron had been considered a blue chip stock, this was an unprecedented and disastrous event in the financial world. Enron's plunge occurred after it was revealed that much of its profits and revenue were the result of deals with special purpose entities (limited partnerships which it controlled). The result was that many of Enron's debts and the losses that it suffered were not reported in its financial statements. On January 9, 2002, the United States Department of Justice announced it was going to pursue a criminal investigation of Enron, and Congressional hearings began on January 24.

Impact of the Sarbanes-Oxley Act on financial statements:

Widely regarded as the most extensive provision of Sarbanes-Oxley, Section 404 requires companies to document and attest to the effectiveness of all their internal financial controls. Internal controls are the safeguards that are part of a firm's financial operations to ensure these operations are performed uniformly, and capable of detecting errors and fraud. The largest