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  • Essay / The Pros and Cons of Ethical Accounting

    There are many high-profile scandals about companies getting caught using unethical and illegal accounting practices. Whether it's a whistleblower who is an insider with knowledge of illegal activities at their company, a journalist covering a story about a company?? or an audit that could reveal financial irregularities and notice a company that does not use generally accepted accounting practices (GAAP), a company that does not use the accounting standards established by the governing oversight committees is doomed to collapse . WorldCom and Enron are just two of the many companies that have resorted to unethical accounting behavior will be discussed by this author. The two companies, leaders in their respective fields, have both been overtaken by corporate greed which will lead to the inevitable downfall of each of them. Each company is the product of a merger and run by well-educated men, and each company eventually becomes famous for its unethical and illegal accounting practices. World Com and Enron both filed for bankruptcy and both companies had senior executives serving prison sentences…..for….convicted…..The World Com accounting scandal is the largest case of corporate fraud in the history of the United States. WorldCom, the second largest telecommunications company in the United States, stunned the business world by filing for bankruptcy protection in July 2002. Estimated to have more than 20 million customers at the time of filing, the future of business and the consequences of accounting errors were unclear. such magnitude could have gone unnoticed. Financial analysts and customers were shocked to learn that WorldCom had filed for bankruptcy and subsequently announced that it had made a $3.8 billion accounting error. Additionally,...... middle of paper ...... or fraudulent financial activity is much more serious. Additionally, SOX increased the independence of external auditors who review the accuracy of companies' financial statements and increased the oversight role of boards of directors. » Kimmel, PhD, CPA, Paul D.; Weygandt, Ph.D., CPA, Jerry J.; Kieso, Ph.D., CPA, Donald E. (2011). Financial Accounting, 6th Edition. Wiley. ISBN 978-0-470-53477-9. Also known by the Senate as the Public Company Accounting Reform and Investor Protection Act, and known in the House of Representatives as the Corporate Accountability and Auditing Act of 2002. Named after the two men who sponsored the bill, U.S. Senator Paul Sarbanes (D-MD) and U.S. Representative Michael G. Oxley (R-OH). SOX establishes a standard for regulating financial practices that all public companies must follow and the penalties for non-compliance. SO.