Review of Accounting Ethics - Research Paper Example

Accounting ethics is a vast term and have a lot of minor details in it. Looking at just the basics, it can be defined as providing right financial details to the company and to its stake holders. Numbers are something which can be manipulated very easily for one’s own interest and that is where the rules and regulations are made to make sure that the accounting ethics are not breached at any level. Businesses make sure that each and every account is made and maintained in the right manner (Cohn, 2013).

Accountants work in many different areas and fields. They are not focused on one particular subject but have to handle a lot of work at a single time. The accounting areas majorly include performing audits, making tax statements, making budgets and planning for the future, manage the ongoing accounts, consultancy and of course, preparing general accounts. Having so many things to handle, there is an opportunity for them to make frauds at each level or subjects they are working on. The greed of making huge amount of money in no time makes them get onto the wrong track and that’s where the ethical issues start coming into action (Mele Carne, 2005).

Although having all the right code of conduct, there are still some loopholes in the system which the accountants and the senior officials of the company identify and then use it for their own good. One of the biggest examples we can find in the history which was charged of the allegation of breach of accounting ethics is the Lehmon Brothers Inc. Lehmon Brothers was one of the giant companies and had a big name when it comes to the investment market of the United States of America and due to its unethical accounting methods it got bankrupt.

The business of Lehmon Brothers can be described as borrowing money from the general public and then investing that money into different assets. They earned interest from their investment into the assets and then share the interest earned with the people they borrowed loan from (Jeffers, 2011). Lehmon Brothers were considered a good company to invest in as they showed people their artificially made financial statements to the people. After they filed bankruptcy in 2008, the position of Lehmon Brothers came in front of the eyes of the people.

We will now discuss about how they betrayed people by showing artificially made good financial statements. A report was made by Jeffers, Agatha E. in which all the details regarding Lehmon Brothers bankruptcy and how they did breach the accounting ethics was presented. Lehmon Brothers used a Repo 105 accounting policy to misguide their investors. Repo 105 policy suggests that when an asset is given out and cash is received, it should be recorded as sale of asset. Although in accounting methods, an asset is not considered and written as sale until it is completely transferred to the second party and is fully non-operational by the company.

Lehmon Brothers accustomed to give assets as a guarantee to purchase loans from the institutions abroad. They recorded this transaction as sale of assets and showed people that they have got rid of non worthy assets and have earned good money from that. In this way their balance sheet looked less leveraged as they have less unproductive assets and more cash. Secondly they used to pay off some liabilities with the