Litigation, Censures, and Fines - Term Paper Example

In recent years auditors are using unqualified comments to warn the companies to take good care of their bookkeeping process but the latter entities are not following the recommendations. The situation got worst with the passage of time and due to this reason public started to challenge the practices of national accounting organizations. Government responded to these challenges by tightening the regulations and ordered the auditors to give qualified objections upon repeated incidents of non-compliance from the companies.

Nevertheless the public’s knowledge grew with the help of internet and other modern day technologies that resulted in a significant growth in the number of lawsuits against accounting firms. Recently internet and other technologies compensated for the producer-customer knowledge gap and therefore the organizations cannot fool general public by not following matching principle (Persons, 2011). It is suggested that organizations focus on enhancing their effectiveness and efficiency. But the major question arises that why do litigations happen against the accounting firms?

The answer lies within the inability of accounting companies to uphold the accuracy of the financial statements. They only care about upholding and applying the Accepted Accounting Practices and fail to see their application for the sake of disguising the information. Accounting firms play a significant role in false overvaluation of the stocks and when people purchase the shares those corporate companies do not pay dividends. Thus the abovementioned condition is creating anger and hatred against the accounting companies in the general public.

On the other side accounting firms’ credibility suffer significantly in reaction to the stockpiling of lawsuits against them in every nation’s major justice centers. Now this paper turns its focus towards analyzing the basic and fundamental needs for which the art and science of accounting and financial management were conceptualized in the first place. The elementary reason for developing accounting practices was to create and foster confidence and trust in the shareholders but apparently the financial management firms have forgotten the basic lesson and therefore they are working to save the skins of their employers in order to make some extra bucks so that they can fight semi-permanent global recession.

In reality nonetheless they are not true to their profession that is causing them to face embarrassment in court of law. A recent case occurred when Ernst & Young, KPMG, and PricewaterhouseCoopers were sued by Simon Marketing, an offshoot of the Simon Worldwide. The lawsuit stated that the featured financial firms did not record and report the costs of distributing promotional games designed to promote McDonald’s worldwide. Previously, the food chain launched the games named ‘Monopoly’ and ‘Who-Wants-to-Be-a-Millionaire’, for promotional purposes.

But the Simon Marketing’s management reacted severely to say the least because firstly Ernst & Young have never worked for them while KPMG stated that they were never informed of games questionable legitimacy and finally PricewaterhouseCoopers affirmed its resignation from the position of chief auditor. Given the aforementioned condition the management is trying to cover up something big because dragging previous auditing partners into a lawsuit is not such a good idea. Yet, it can be presumed that