Ethics of accounting
Although ethical standards in accounting were always an issue in business the general public did not really pay attention to the issue in hand. Nevertheless resent events have brought the issues to the publics attention, because some companies have not used full disclosure in their financial reporting. Also people are becoming more aware of issues such as insider trading and some companies tendency to withhold information on their formal reports.When a company does not fully disclose what it is they are doing, investors may be manipulated into seeing that the company is doing better than it really is. Companies such as IBM and Xerox used tactics to hide a company's true financial situation by not fully disclosing its transactions to make it appear that the companies are in all right shape. Just recently the New York Times has disclosed that IBM had used money to overcome its loses. The company used 340 million dollars from a sale of an optics business to reduce four-quarter overhead cost. IBM has been understating its overhead 10 percent each year since 1999. This didn't affect the company's net income, but it had the affect to make the company look better than it really was. The SEC (Securities and Exchange Commission) accuse
Withholding information from formal reports prevents investors from being able to properly see how their investment is doing in a company. The SEC needs to employ tougher penalties for those who leave out important information out of the formal reports. After a company is caught not reporting everything in their formal reports they should be under constant review for a couple of year to make sure they do not do it again. When companies do not fully disclose there ways of earning revenue, they can fool investors into believing that the company is doing quit well. The SEC should enforce these penalties to the fullest extent that they can. Executives at Enron may feel that selling their stock before the information about the company became public is not wrong. Many people are discovering that businesses do not report everything in their financial reports. When a company sees SEC's full disclosure act the company may not be sure on what the SEC means as "material information". There is no doubt that the SEC had good intentions when they established the full disclosure rule, but revisions are in order to make it work. Not reporting a slight decline in business over a period of time will stop people from pulling their money out of the corp. Many people may feel that there is nothing wrong with them selling their stock before information about the company becomes public. Investors are not able to make a proper decision on what to do with their money when companies lie about how they are doing on the Formal reports. Companies also need to change the way they do their formal reporting. Some may argue that not reporting information on Formal reports is good, but measures need to be taken to insure that all information, good or bad, be reported on formal reports.
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Acceptance Essays
