Review of Accounting Ethics - Essay Example

Accounting ethics, which are set by the International Accounting Standards Board (IASB), and the Securities and Exchange Commission (Audi, 2009). The ethics are contained in the accounting principles that dictate the way businesses should account for their sales, profits, and costs. The principles are known as the International Financial Reporting standards, and these govern mainly public organizations, which are required to publish their annual statements. In the last decade, there has risen cases of bleach of accounting ethics, and this raised questions among investors concerning the effectiveness of the business environment (Kushniroff, 2011).

The cases involved organizations such as Enron, Tyco, WorldCom, and Yahoo among others. The rise of these cases triggered the implementation of several regulations in the accounting sector, which include the requirement for accountability and the involvement of the community in dealing with cases that concern bleach of ethics. The accounting environment requires state corporations to reveal their annual statements to the public through the media. The accounting boards require companies also to employ internal and external auditors to verify the annual statements.

Business stakeholders such as investors and shareholders are now more aware of business ethics than they were in the last decade. This indicates that the business environment and regulations are conducive for ethical behavior (Kushniroff, 2011). Those who break the rules are individuals who are mainly interested in making personal gains rather than companies. 2. Based on your research, describe the organization, the accounting ethical breach and the impact to the organization related to ethical breach.

Tyco is a company that offers fire fighting and prevention equipments to industries such as banking, transportation, health care, and marine in over fifty countries in the globe. Kozlowski, the chief Executive of the Company in 2002, bleached the accounting principles of the firm by assigning himself illegal bonuses worth six hundred million dollars. The executive also used the company’s finances personally by purchasing expensive jewels and organizing private parties (SEC, 2002). The company suffered the loss of finances that were used by the executive to satisfy his personal needs.

Tyco also wasted finances when following up the case against the executive; this money would have been used more efficiently had the case not arisen. The organization also lay off numerous workers. These consequences led to the decline in the company’s sales and profits that consequently reduced price of the firm’s stock (Kushniroff, 2011). 3. Determine how the organizational ethical issue was detected and how management failed to create an ethical environment. The case against the CEO of Tyco company was brought to light by Robert Morgenthau, a Manhattan District Attorney in 2002 (SEC, 2002).

The attorney discovered the fraud while he was investigating cases of tax evasion against Kozolowski. The investigation of tax evasion had been ordered by the Securities and Exchange Commission, which had discovered that Tyco was settling personal taxes for Kozolowski. Robert disclosed the fraudulent statements that he discovered in the company’s books to the SEC, which then launched further investigations. The management of the company had failed to cover personal expenses with their salaries.

The investigation