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) accuses Xerox of misleading its investors by manipulating its earnings to enrich top executives. SEC says Xerox used improper accounting techniques to accelerate the recognition of 3 billion in equipment revenue. When companies do not fully disclose there ways of earning revenue, they can fool investors into believing that the company is doing quit well.
             When a company sees SEC's full disclosure act the company may not be sure on what the SEC means as "material information". A company may not be sure what the SEC means as material information, thus companies may opt to give little or no information rather than risks accusations. This could spark many lawsuits because people may think t...