Accounting Princeple - Essay Example

The expression ethics refers to the kinds of behavior considered by the society as either wrong or right. Theethics associated with the accounting field of profession put into consideration the standards of behavior and social standards relating particularly to this profession. Ethically, the public accounting environment has grown to levels of complexity. The code ruling accountants’ behavior professionally and more so the professional ethics is a development of AICPA, which have changed over time, is especially in reaction to the complexity of business issues as well as ethical issues alike.

(Schroeder, Clark and Cathey, 2010 p21) This is a write-out set to discuss the issue of professional ethics of accounting breach and more specifically it will pick one case that has occurred relating to this, which is a documented example. The study will give a comprehensive unfolding of events of this case. The case to be discussed is that of Bernie Madoff, who was sentenced in mid-year 2009 for his involvement in investors’ defrauding. This went down as one of the largest cases of its kind.

Bernie was sentenced to a 150-year jail term. This process of defrauding commenced few decades before 2009 and the main set up to deceive investors was the Ponzi scheme that was to pose as an investment management organization. The firm operating this kind of business was Bernard L. Madoff Securities Limited Liability Company. In such aforementioned scheme, the manager just utilizes money obtained from the new entrant investors to cater for the payment of the already existing ones. This, thus, is a payment not based on the firm’s returns as would have been expected professionally.

Ponzi schemes are renowned for their rapid caving in, but the case of Bernard was different. He was popular, reputable as well as a person with strong personal contacts, which enabled his prolonged survival. (Reeve, Duchac and Warren, 2011 p5) The Bernard Madoff case according to bizcovering.com website was that of a mega-thief. He was an auditor in New York. This auditor was discovered to have been appending signatures upon financial statements that were fraudulent. Following the scandal, an employee of Bernard Madoff, Friehling is facing a jail term as well.

The fraudulent actions occurred from 1991 through 2008 and they were organized from the storefront set up in New York. The conviction of Mister Friehling was because of several ethically incorrect issues in the field of accounting with the inclusion of abetting as well as aiding adviser fraud. The other counts included filing audit reports that were untrue to Securities and Exchange Commission- SEC and fraud of securities. A major discovery made by the SEC was that Mister Friehling was a major investor in this company owned by Madoff and his investment was a staggering 14,000,000 USD.

The arresting of Mr. Friehling in the year 2009 was the next step subsequent to Madoff’s charging in line with the Ponzi scheme. This scheme terminated in year 2008. (bizcovering.com, 2010) Therefore, in conclusion this discussed case of Bernard Madoff together with his accomplice counts as one of the most outstanding cases of professional ethics breaching in the US. The case is tackled in the bid to outline a major case of such misconduct as mentioned earlier would be the mission of the study.

Reference list:bizcovering.com. (2010). A Breach of Professional Accounting Ethics. Retrieved 16 May 2011 http://bizcovering.com/accounting/a-breach-of-professional-accounting-ethics/Schroeder, Richard G, Clark, Myrtle W and Cathey, Jack M. (2010). Financial Accounting Theory and Analysis: Text and Cases. Edition10, illustrated. New Jersey: John Wiley and Sons. p 21. Reeve, James, Duchac, Jonathan and Warren, Carl S. (2011). Accounting Using Excel for Success. Edition 2. New York: Cengage Learning. p5.