WorldCom comes to mind when I think of scandals and Bernard Ebbers. He built a telecom
company quickly through debt-funded acquisitions. Eventually, it came out that he and others used
accounting fraud to trick investors, including nearly $4 billion worth of expenses and inflating the
company’s assets by some $11 Billion. In 2002 they filed for bankruptcy; this was the largest filing
ever (Johnson, 2023).
Expose students to a variety of experiences, work with different students with different
backgrounds, and have this conversation often. Everyone has their own understanding of ethics
and what it means to do the right thing, so we must get everyone on the same page and let them
know what action is right and wrong at least a base.
My opinion on the debate about whether to use more checks and balances or just through the
sheep to the wolves we cannot simply let the wolves have them would that be right after all we
may one day soon be amongst them. If there are human beings here there will be greed so what
we must do I stress have to do is get the perfect system to stop this but, also not to cost these
businesses all their profits. I think that is why we have so many mega-corporations nowadays
because these costs are too high for small corporations unless you are just at the top of your game
and that does not last with any of them. We must keep working on a system that will eradicate all
the wholes that they keep finding although most just outright take what they want.
Unethical Behaviors in the Accounting Profession
The accounting profession has witnessed several instances of unethical behavior that have had far-
reaching consequences on the economy, investors, and employees. Some of the common unethical
behaviors include:
1. Financial Statement Manipulation: Enron's accounting scandal in the early 2000s is a notable
example. Enron's executives manipulated financial statements to hide debt and inflate profits,
leading to a bankruptcy that caused substantial losses to investors and employees.
2. b Auditor Independence Violations: The case of Arthur Andersen's involvement in the Enron
scandal highlighted how conflicts of interest and compromised auditor independence can lead to
biased auditing, eroding trust in financial reporting.
3. Insider Trading
Prevention Strategies
To prevent damaging behaviors in the accounting profession, several measures can be taken:
1. Ethics Education: Teaching ethics to accounting students and professionals is crucial. Ethics
courses should be an integral part of accounting education, emphasizing principles, values, and
ethical decision-making processes. This can help individuals develop a strong ethical foundation
early in their careers.
2. Professional Codes of Conduct: Strengthening and enforcing professional codes of conduct for
accountants and auditors can set clear guidelines for ethical behavior. Regulatory bodies like the
American Institute of Certified Public Accountants (AICPA) and the Public Company Accounting
Oversight Board (PCAOB) play a vital role in establishing and enforcing such standards.
3. Independent Auditing Oversight: Enhancing oversight of audit firms and auditors can mitigate
conflicts of interest and ensure auditor independence. Government agencies should actively
monitor auditing practices and impose penalties for violations.
4. Whistleblower Protection: Establishing mechanisms to protect whistleblowers who report
unethical practices can encourage individuals to come forward without fearing retaliation.
5. Transparency and Accountability: Companies should maintain transparency in their financial
reporting and practices. Independent directors on boards can help ensure accountability and
prevent undue influence by management.
Teaching Ethics
Teaching ethics to accounting students and professionals is essential. The "buyer beware" approach
is insufficient, as investors and stakeholders rely on accurate financial information to make
informed decisions. Without ethical training, accountants may succumb to pressure from
management to manipulate numbers, endangering the financial health of companies and
economies.
Enron Scandal
One example of an accounting scandal that caused significant financial stress is the Enron scandal.
Enron used complex financial structures to conceal debt and inflate earnings. This unethical
behavior led to its bankruptcy in 2001, causing the loss of thousands of jobs and wiping out
billions in investor wealth. This could have been prevented through:
1. Stronger Auditing Oversight: If auditing firms like Arthur Andersen had exercised greater
independence and scepticism, they could have detected the fraudulent practices earlier.
2. Transparent Reporting: Enron's financial reports lacked transparency. Requiring clearer and more
comprehensive reporting could have made it harder for companies to manipulate their financial
statements.
3. Ethical Culture: Fostering an ethical corporate culture that discourages unethical behavior from
the top down could have deterred executives from engaging in fraudulent activities.
In conclusion, addressing unethical behaviors in the accounting profession requires a combination
of ethics education, regulatory oversight, transparency, and a commitment to ethical corporate
cultures. Such measures can help prevent damaging scenarios like the Enron scandal and
contribute to the overall stability of financial markets and the well-being of investors and
employees.
References
Johnson, T. (2023, 04 27). WorldCom Scandal: The Collapse of a Company Due to Poor Risk
Management. Retrieved from Piranirisk.com: https://www.piranirisk.com/blog/worldcom-scandal-
the-collapse-of-a-company-due-to-poor-risk-management
Sawyers, R. G. (2021). Federal Tax Research. Retrieved from McGraw Hill.com:
https://mbsdirect.vitalsource.com/reader/books/9780357366448/pageid/1
Hayes, A. (n.d.). What was Enron? what happened and who was responsible. Investopedia.
https://www.investopedia.com/terms/e/enron.asp
