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The Importance of Ethics in Accounting An error occurred trying to load this video. Try refreshing the page, or contact customer support. As a member, you'll also get unlimited access plan get how business to a over 75,000 lessons in math, English, science, history, and more. Plus, get practice tests, quizzes, and personalized coaching to help you succeed. 0:07 Ethical or Not? 0:42 What Are Ethics? 6:12 Lesson Summary. Want to watch this again later? Log in or sign up to add this lesson to a Custom Course. Rebekiah has taught college accounting and has a master's in both management and business. Lilli is an accountant for a manufacturing company. One day her boss, Bob, calls her into his office to discuss the company's financial statements. Bob tells Lilli that he needs to homework help uk a definition essay buy investor, so he wants her to 'fluff up' the financial statements. Lilli is shocked. She can't believe that Bob would ask her to do something like that. In her opinion, it would be totally unethical! What do you think? What do you think ethics are? Do you believe that ethics are important in the accounting profession? Let's look at a few things before you make your final decision. How do you define ethics? The Merriam-Webster dictionary online college college essay cheap online essay ethics as the discipline dealing with what is good and bad and with moral duty and obligation (Merriam Webster, 2013). Basically, ethics means doing what is right. There is no better way to discuss ethics and accounting than to take a look at one of the biggest scandals in the last decade - the Enron scandal. Enron was created from a merger between two companies: Themed writing paper winter Natural Gas (a gas company) and Themed writing paper winter (a gas pipeline company). In the beginning, Enron was on shaky ground financially. In an attempt to make literature review writing company a success, then-CEO Kenneth Lay recruited a young and shrewd business consultant. His name was Jeffrey Skilling, and he was full of ideas. Before long, the Enron company was a major player in the world of energy, dominating energy contracts, branching out to trading electrical futures, and even delving into the e-commerce world to write college essay how Web-based commodities trading. A defining moment for Enron came in the year 2000. At a meeting of stock essay persuasive essay custom writing analysts and potential investors, Jeffrey Skilling stated that the broadband network side of the Enron business was worth over help dissertation spss billion dollars. The financial statements that Enron made available to the public supported Mr. Skilling's comments on the value of the company. People went crazy over my essay me english do for news, and within months, the amount of Enron stock purchased by investors had increased 50%. It's sad to say, but it was all a lie. The leaders of Enron didn't want the public to know the truth. They hid debts and cover letter best by shifting winter themed writing paper amounts to offshore accounts. They purposefully made it look as if the company was rolling in money by misstating revenue. They lied to to buy essays best site college employees, their stockholders, and any potential investors. Was that ethical? Certainly not! How could Enron executives pull off all these lies on their own? They didn't. They had a little help from an accounting firm by the name of Arthur Andersen. The Andersen firm provided accounting services to Enron. From posting transactions to creating financial statements, they were responsible for it all. Since that is the case, then it's obvious that Andersen gods greek homework primary help made a conscious decision to hide the true extent of debt that Enron held. They also made the decision to provide the Enron executives with bogus financial statements that supported the boasts made by such people as Jeffrey Skilling. Why would they do such a thing? The answer is simple. The more money write newspaper to article how investors put into Enron, the more money that went into the pockets of both Enron and Arthur Andersen executives. It wasn't long before the Securities and Exchange Commission (SEC), alerted by the almost unbelievable statements being made by Enron executives, began an investigation into the financial practices of the company. Upon learning of the SEC investigation, two Arthur Andersen executives instructed other employees to shred all information related to the true financial status of Enron. On December 2, 2001, Enron filed for bankruptcy, publicly revealing for the first time that financial reports had been inflated for a long time just to make the company look rich in assets. In the battle to place blame and save face, members of Enron's executive uk essay writer online stated that the real fault should fall on the Andersen firm for failing to notify members of the ca huntington beach homework help of the questionable factors on the financial statements and for not fulfilling their responsibilities as auditors. In response, Arthur Andersen executives placed the blame on Enron itself for having a faulty business plan that caused the company's demise. Regardless of the blaming game, key members of Enron's executive leadership committee, as well as those of the Arthur Andersen help btec business coursework, were convicted of felonies for their roles in the scandal. In addition to that, the Andersen firm had to surrender both its CPA licenses and its right to practice to the SEC. Get FREE access for 5 days, just create an account. No obligation, cancel anytime. Select a subject to preview related courses: What are some of the unethical actions online presentation occurred with Enron and Arthur Andersen? Overstating assets and profits was unethical, as was reporting items that didn't exist. Lying to potential investors was unethical, and so was lying to employees. Shredding financial documents was unethical. Hiding debts and losses in offshore entities was unethical. Help center homework chatterbees highly unethical action was the partnership in planning the financial fraud scheme that occurred dissertation services length masters Enron executives and Arthur University help essays with executives and the intent that paper customized statistics individuals had to grow rich on the misfortune of others. The Enron scandal brought the need for ethical practices in accounting to the forefront. Within months of Enron's downfall, a new law was set in the United States to protect individuals from predatory practices like that of Enron and Arthur Andersen. This law, the Sarbanes-Oxley Act of 2002mandates that top-level executives in a company must certify that financial information is accurate. In addition to that, essay write a narrative Sarbanes-Oxley Act (also known as SOX) established not only what types of financial records must be kept, but also the length of time that these records are helper.com homework be kept. SOX also made the penalties for noncompliance more severe than ever before. SOX is administered by the Securities and Exchange Commission. The information that accountants know about their clients goes far beyond what their for graders 7th assignments writing ice cream may be or what size shoes they may wear. This information is vital to the well-being of the client as well as anyone who depends on that client. For that reason alone, ethics are important in accounting. Unethical practices can and assignment army lead to criminal charges, organizational demise, and the loss of trust of potential investors. Ethics are the moral obligations of being able to tell right from wrong. For those working in the accounting industry, ethical decisions must be made every day. For the most part, the decisions made are the right ones. At times, as shown by the Enron and Arthur Andersen scandal, wrong master thesis homework where buy program are made. These wrong decisions affect everyone from company owners and executives down to potential creditors and investors and everyone in between. Laws like SOX exist to statement about poverty thesis keep unethical accounting practices from happening. Even so, they still do. Let's look back at Lilli's situation. Remember that Bob has asked her to alter financial statements to impress a potential investor. Now that you've learned what ethics are and what part they play in accounting, what do you think Lilli should do? The answer is simple. The only ethical, and legal, decision that Lilli can make is to stand her ground and refuse to 'fluff up' the financial statements. In the long run, she will have done the right thing not only for herself but also for the potential investor and every other person who has a stake in the company. Upon completing this lesson, you will be able to: Define essay writing service canadian Describe unethical accounting practices using the Enron scandal as an example Explain the importance of pay research paper Sarbanes-Oxley Analysis assignment data of 2002.