Effect Of Unethical Behavior Essay

498 words - 2 pages

Effect of Unethical Behavior
September 2, 2012

Effect of Unethical Behavior
A quote from Ray Beier, a partner of PricewaterhouseCoopers, puts the idea of ethical behavior and its effect on financial statements into perspective. He states, “From the corporate scandals, we now realize that accounting was too rules-based, where it needs to be more principles-or objectives-based” (Bisoux, 2005, p. 24). Corporations had been so concerned with financial gain that the idea that there was a need for better internal controls did not exist. As long as the corporation was providing financial statements that presented the picture of a company continuing to grow and make money, it was assumed that the company ran smoothly. As a result, it was far too easy for corporations to overstate the ...view middle of the document...

The company’s stock fell so sharply and quickly that many stockholders were caught off guard and lost millions of dollars.
The Sarbanes-Oxley Act was enacted to mandate a sound ethical structure for corporations to operate; creating a level playing field where everyone plays by the same rules. A specific section of the Act seems to get the most response from individuals within the corporate world. Section 404 consists of three main issues that reflect the strongest impact the Act will have on corporations. First, management must create and implement internal financial controls that are reliable; second, management must “attest to the reliability of those controls and the accuracy of financial statements that result from those controls” (Bisoux, 2005); third, independent auditors must attest to the financial statements. These three requirements have caused corporations to review internal financial operations and determine what changes are necessary for them to become compliant.
Sarbanes-Oxley was developed to ensure corporations and their financial statements properly represent the company’s financial standing and viability. There may still be an opportunity for unethical behavior within a corporation, but if the proper internal controls are in place, many of the unethical decisions will be discovered during the annual audit and can be corrected.

Bisoux, T. (2005, July/August). The Sarbanes Oxley. BizEd, 24-29. Retrieved September 2, 2012
from AACSB.edu http://www.aacsb.edu/publications/archives/julyaug05/p24-29.pdf

Hazels, B. (Nov/Dec 2010). Eight Years After The Fact Is SOX Working? A Look At The
Brooke Corporation. Journal of Business Case Studies 6.6, 19-29. Retrieved September
2, 2012 from http://www.oppapers.com/essays/Impact-Unethical-Behavior-Article-

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