It seems that everywhere we look there are unethical behaviors being shown across all industries.
This is when there is an action from someone that falls outside of what is considered morally right
or proper for an individual in a professional setting. Individuals and or businesses can act
unethically. The consequence of acting unethically is credibility. Industry and individual people can
perceive them in a different light and can hesitate to do business with them.
It is important to have a code of conduct that is followed by everyone. This written document
provides employees and managers with a constant reminder and overview of the type of conduct
and behavior that the company can expect. If there is an instance where an employee acts
unethically there is some time in place that can be measured and used to identify unethical
behavior.
There have been many people and companies throughout the years that have acted unethically.
The US Securities and Exchange Commission (SEC) oversees business exchanges, investments, and
mutual funds to promote fair dealings and prevent fraud. Well, they have fined Kraft Heinz
Company and two former executives for engaging in year year-long accounting scheme. The
company will have to pay 62 million dollars for misconduct to settle their charges against them for
misconduct related to the scheme. “Kraft engaged in various types of accounting misconduct,
including recognizing unearned discounts from suppliers, and maintaining false and misleading
supplier contracts, which improperly reduced the company's cost of goods sold and allegedly
achieved "cost savings." Kraft, in turn, touted these purported savings to the market, which were
widely covered by financial analysts. The accounting improprieties resulted in Kraft reporting
inflated adjusted "EBITDA," a key earnings performance metric for investors” (SEC.gov)
The SEC found that their internal controls were inaccurate and lacked accountability practices.
There were some instances where internal controls were overlooked and or did not address the
matter and continued to provide accurate information that led to misinformation and misconduct.
The accounting information was not trying to certify the accuracy and completeness of the reports.
Two former CPOs were heavily fined barring them from serving and a director of a public company
for 5 years.
How could this unethical behavior have been prevented? I believe having a strong unity among all
ranks is important. Being able to communicate reach out when there is a problem to fix it and not
be reprimanded for finding it and fixing it. Having a code of ethics and conduct that exists in the
company's culture and day-to-day will help minimize fraud and unethical behaviors. Providing
training of the Sarbanes Oxley on financial reporting and Circular 230 can help reintegrate the rules
of conduct when dealing with financial reports and tax returns.
Fraudulent financial reporting, financial statement manipulation, insider trading, and tax evasion
are examples of unethical practices within the accounting profession. Engaging in such behaviors
can result in substantial financial losses for investors, employees, and the overall economy (Decker,
F). Some suggestions on how to fix it is strengthening regulations by implementing stricter penalties
for misconduct. Encouraging companies to be clearer in their financial reporting could decrease
fraudulent activities. Independent audit and review by an external accounting firm to help protect
against unethical practices. The requirement of ethics to accounting students can guide them in
developing qualities and eliminating negative aspects of their character. This process assists them in
building a strong moral foundation and integrity, which ultimately benefits both the accounting
profession and society.
Moreover, by studying past mistakes made by various companies, new generation accounting
students can learn valuable lessons and implement measures to avoid similar errors in the future.
Moral education for accounting students can guide them to develop good qualities and eliminate
negative aspects of their character. This process assists them in building a strong moral foundation
and integrity, which ultimately benefits both the accounting profession and society. Furthermore,
by studying the mistakes companies have made in the past, a new generation of accounting
students can learn valuable lessons and take steps to avoid similar mistakes in the future. An
example of unethical behavior causing financial stress is the Enron scandal. The energy giant's
collapse resulted from the company's fraudulent accounting practices, causing investors and
employees to lose billions of dollars (Hayes, A).
References
Decker, F. (2019, February 26). Ethical issues facing the accounting profession. Small Business -
Chron.com. https://smallbusiness.chron.com/ethical-issues-facing-accounting-profession-
18307.html
Hayes, A. (n.d.-b). What was Enron? what happened and who was responsible. Investopedia.
https://www.investopedia.com/terms/e/enron.asp
US Security and Exchange Commission (SEC), September 3rd, 2021, Press release, "SEC charges the
Kraft Heinz company and two former executives for engaging in years-long accounting
Scheme."SEC.gov | SEC Charges The Kraft Heinz Company and Two Former Executives for Engaging
in Years-Long Accounting Scheme
