Ethical Reasoning - Sarbannes-Oxley   Term Paper ID:45661 Click to get this paper

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Paper Introduction: ethical reasoning in accounting Part Sarbanes-Oxley IssuesQuestion A Enactment of the Sarbanes-Oxley Act was necessary Five justificationsfor this assessment are as follows Many professional accounting firms had developed conflicts of interest between their professional responsibilities as external auditors and the services that they provided as financial advisers Within this group of professional accounting firms many crossed the ethical line The Sarbanes-Oxley Act lowered to probability of the recurrence of such behavior Corporate executives who were involved in questionable financial decisions and behaviors Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. Part 2: Case 3-3Question 1 Ethically, the Company management has an obligation to (a)stockholders and (b) employees. Self-confidence can be developed by thorough preparation and practice to thepoint that one is confident that (a) he or she knows his or her job and (b)is capable of communicating her or his knowledge and findings to others.Question 2 It is the professional responsibility of a new staff member in a CPAfirm to call attention to the presence of an apparent error in recording orreporting. Eachmembers of the team has a functional responsibility. A team member without self-confidence will not be ableto perform effectively in relation to either of these outcomes. The consultation approach would be ethically defensible in thatall parties would (a) be provided with full disclosure and (b) providedwith an opportunity to make alternative proposals for consideration byother stakeholders and by company management. The Sarbanes-Oxley Act lowered to probability of the recurrence of such behavior. 3. Reducing the number of quality control inspectors to lower productioncosts (option "c") creates the potential for risks to product safety. For theraw materials supplier, the alternatives also would include the opportunityfor the supplier to finds ways to moderate costs to the company for rawmaterials. Considered in this context, itappears that the senior CAP violated ethical standards. Conflicting and/or confusing applications of rules and procedures imposed by the Securities Exchange Commission, the Financial Accounting Standards Board, and other agencies and professional bodies created a legal thicket. Therefore, to effectivelydischarge its responsibility to the stockholders, company management mustalso discharge its responsibilities to employees. Thus, the auditor had aprofessional responsibility to assure that the recording and the reportingof financial performance were accurate. The alternatives would include the four options for loweringproduction costs. Corporate executives who were involved in questionable financial decisions and behaviors were able to mount defenses (successful or not) against culpability by claiming to be unaware of such actions. Frist, the Act was intended to protect investorsfrom the fraudulent actions of corporate executives, as opposed topreventing investors from experiencing losses from imprudent risk-taking.Second, as soon as the Sarbanes-Oxley Act became effective, many seniorcorporate executives, and their groupies in the Congress and in academia,began sniping at the provisions of the Sarbanes-Oxley Act and activelysuggesting strategies to avoid some of what they considered onerousprovisions, especially with respect to public disclosure. In a relatively small corporation ($4million in annual sales), the number of stockholders likely is quite small.Thus, the relationship between corporate executives and stockholders likelyis up-front and personal. Within this group of professional accounting firms, many crossed the ethical line. If, as the situation is described in this case, the relevantsenior staff member refuses to consider the finding, the new staff membershould (a) first go to the next higher staff members in the firm with therelevant information and (b) then be prepared to look for a new job.Question 3 The major violation in this case is recording the $1 million asoperating income as opposed to recording its as unearned income. The latter provision means that persons withoperational responsibilities in a public company cannot be members of theAudit Committee. Public confidence in the integrity of the accounting profession had been called into question by scandals such as Enron, Worldcom, and others. Each member of theteam relies on the quality and on the timeliness of the work performed byother team members. 2. The Sarbanes-Oxley requirements for top corporate executives to certify financial statements helped to correct this behavior. A third provision of theSarbanes-Oxley Act that improved the integrity of corporate governance is arequirement that external auditors report to the audit committee of apublic company, as opposed to reporting to operational officers of a publiccompany.Question C The Sarbanes-Oxley Act did not prevent the financial crisis of 2 8for two primary reasons. The Sarbanes-Oxley Act cleared out this thicket with the creation of the Public Company Accounting Oversight Board to exercise the control necessary to assure coherence in accounting regulations and procedures. The discipline imposed by the Sarbanes- Oxley Act has restored public confidence in the accounting profession. The union that represents company employees,however, likely would evaluate the proposal differently. The Sarbanes- Oxley Act strengthened disclosure requirements for public companies. 5. The union likelywould view this option as a teleological act on the part of management,i.e., the end result justified the means. Form the company perspective, it would be a teleological decision; adecision, however, that might result in short-term benefits and long-termcosts. Changing raw material suppliers to lower production costs (option "b")appears from an ethical perspective to be teleological in nature with noapparent violations of other ethical principles from the internalperspective of the company. If the stockholders refused to concede any oftheir benefits, then management would have little choice but to implementthe four options suggested by Lumin. Depending upon the character and the durationof the relationship between the company and its present raw materialssupplier (not made explicit in the case), justice issues may be involved. There are plenty of culprits on which to pin the 2 8financial crisis. From thecompany perspective, this option would represent a teleological decision.Requirement 3 The best approach for company management to take in relation to thefour options is to pose the alternatives to all stakeholders for theirconsideration. ethical reasoning in accounting Part 1: Sarbanes-Oxley IssuesQuestion A Enactment of the Sarbanes-Oxley Act was necessary. The current raw material supplier, however,also is a stakeholder in the operations of the company, albeit astakeholder without a vote. Within this legal thicket, corporate executives could shield their actions or within which they could justify (fairly or not) a behavior on the grounds that it was not expressly forbidden by one or another bodies of rules and/or procedures. Importantly, the new provisions included a requirement to disclose all off-balance sheet transactions. This assessment almost certainly wouldbe adopted by the labor union that represents Company employees. The Sarbanes-Oxley Act is not one of those culprits. The recommended action formanagement in this consultative process would be to seek to persuadestockholders, management, the union and the employees, and the rawmaterials supplier to concede some of their current benefits in order topreserve some degree of benefits over the long-term for all stakeholders.If some stakeholders were unwilling to concede any of their benefits, theycould drop out of the mix. The union may view this action asa violation of the principles of procedural justice and distributivejustice. 4. A balancing act isrequired.Question 4 In one sense, the plan to lower labor costs through the process ofattrition (option "a") may be viewed as being consistent with the conceptof procedural justice. For the union and the employees, the alternativesalso would include (a) the potential for large-scale terminations if thecompany is unable to compete effectively with lower costs imports. The financialcrisis of 2 8 was caused primarily by (a) the imprudent trading of riskyand difficult to understand financial derivatives and (b) the unwisetermination of Glass-Steagall restrictions on the trading behaviors ofcommercial banks. Many professional accounting firms had developed conflicts of interest between their professional responsibilities as external auditors and the services that they provided as financial advisers. Another provision of the Sarbanes-Oxley Act that improvedthe quality of corporate governance is the requirement that all publiccompanies must establish audit committees. Within this context, the Sarbanes-Oxley Act also requires the SEC to examine all off-balance sheet transactions with respect to their adherence to generally accepted accounting procedures.Question B One provision of the Sarbanes-Oxley Act that improved the qualitycorporate governance is the requirement that all members of the AuditCommittee of a public company must be members of the Company board ofdirectors and that the members of the Audit Committee must otherwise beindependent of the company. Part 3:Question 1 Self-confidence is important for staff members in CPA firms becauseaccounting and auditing jobs tend to be team-based in execution. Arbitrarily reducing the paid vacation time of hourly workers to lowerproduction costs (option "d") would violate the principles of proceduraljustices and distributive justice. Adeontological ethical assessment of this option likely would hold thatwhether or not product safety is ultimately compromised it is ethicallywrong to allow users of the products to unknowingly be exposed to potentialrisk. The ultimate responsibility of management is tothe stockholders. This errorcould mislead bankers and suppliers with respect to the operatingefficiency and the product demand of the company. Five justificationsfor this assessment are as follows: 1. A smallcompany cannot easily shift its operations to a low-wage country in themanner that very large corporations act. For stockholders, the alternatives also would include (a)potential costs to stockholders of falling sales in the absence of costreductions in the short-term and (b) potential cost increases resultingfrom waste and inefficiencies stemming from the use of less well trainedlabor over the long-term. That being said, however, the value of the stockholders'investment will plummet in the absence of productive employees. Prior to the passage of the Sarbanes-Oxley Act, many corporations used off-balance sheet accounts to shield from view questionable or risky actions from public view. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.

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