Corporate Ethics Failure †A Critical Analysis Essay Example for Free

Corporate Ethics Failure A Critical Analysis EssayArthur Andersen, in 1913 established a corporate entity that for decades provided a benchmark for auditing and consulting in the explanation industry. From the onset Mr. Andersen worked to build a foundation for his company representative of the principles of excellence in the technical and honorable aspects of his new company. His respectable model focused on Utilitarianism, the greatest amount of good for the greatest amount of people. In the late 1940s after the founder passed away, newly positive CEO, Senior Partner Leonard Spacek, further exhibited his leadership and commitment to good employments by helping to establish the Accounting Principles Board, their prinmary responsibilities being to set industry accounting and ethical standards. This is a direct reflection on the commitment Arthur Andersons executive staff place on the companys belief in performing their practice in an h acest and trustworthy manner. Spacek was so revered that former Federal Reserve Chairman Paul Volker once refered to as Spaceks tenure as a clock time when Arther Andersen was the Gold Standard for the accounting industry.See more how to write a critical analysis outlineThese standards built a composition in the accounting community which take to tremendous success. Honesty and integrity were trademarks of the company that concentrated on quality, leadership and developing its personnel to be experts in every aspect of the accounting industry . As the stock began to grow, Arthur Andersen eventually became a leader in the monetary industry, employing as much as 77,000 accounting professionals in 84 countries. A reflection on the many positive aspects of Arthur Andersen, its commitment to the many ethical principles it championed, both in its own corporate organize and that of the accounting community. In this writers opinion, with such metrics in place, it is amazing that such a large entity could implode and col lapse. However, if one understands the importance of ethical behavior and the mend of lost trust, the analysis is non difficult. The problems encountered at Arthur Anderson were the result of inappropriate ethical behavior which resulted from compromises of their own ethical standards.These began as small issues for various clients that over time grew creating a slippery slope from which Arthur Andersen could not recover. Corporate enterprises are funded by frameors, stockholders and consumers. Likewise, their activities, both internal and external, also affect investor, stockholder, stakeholder and consumer. All depend on the financial health and viability of the company to support their individual interests. The responsibility of the SEC is to verify financial wellbeing and provide a tool for which potential investors and stock buyers mickle fairly judge the risks involved as they decide which company their money should support.Auditors share the responsibility the provide ana lysis of the the financial condition while feeling for errors in the bookkeeping/ accounting of the companys financial position. The auditors responsibility is to correct or balance any errors thus preventing a misleading view of the true financial strength of the company. If this view is compromised by providing or allowing false data to exist, the companys position is weakened, investors are led under false pretenses, placing their investments at risk. The SEC depends on a complete, thorough and truthful analysis from an auditor to verify the financial status providing security for those desiring to invest or provide financial support.Arthur Andersens problems began precisely as mentioned earlier, when executives began to Behave unethically in a manner against the principles on which the company was founded. It is important to watch over that while Arthur Anderson employed good commercial enterprise ethics, the company flourished. As it began to compromise its integrity the lon g term consequences eventually to appear. The Enron collapse represents just one of many cases where mistakes were made and hidden. For Arther Andersen, in business almost 90 years, the destruction of Enron documents to prevent the SEC from gaining access to incriminating evidence shows how corrupt the accounting firmly had become.While millions of dollars in revenue for Arthur Andersen were at stake, the viability of the company depended on the reputation it garnered. The demise of the company resulted from the dishonest tactics it employed to remain in power. As of June , 2002, the company had laid off 7,000 employees, and lost more that 650 of its 2,300 public audit clients with the layoff of thousands pending. The slippery slope to extinction had begun. http//money.cnn.com/2002/06/13/news/andersen_verdict/In the condition 12 Ethical Principles for Business Executives by the Josephson Institute, published on December 17, 2010, stated that language establishing standards or rul es describing the kind of behavior an ethical person should and should not engage in, are ethical principles. More circumstantialally they are specified as Honesty, Integrity, Promise keeping and Trusworthiness, Loyalty, Fairness, Concern for Others, Law Abiding, Commitment to Others, Leadership, Reputation, Morale and Accountability.http//josephsoninstitute.org/business/blog/2010/12/12-ethical-principles-for-business-executives/ The founder, Arthur Andersen, embodied these principles to the point that he personally reimbursed a client for an accounting mistake made under his watch. While a disavowal on the part of Arthur Andersen guards against minor mistakes in the accounting audit/ review, it seems this created a gray area that was taken advantage of. Also, management should have developed a zero tolerance mechanism to maintain an ethical culture dedicated to preventing inappropriate behavior. Policy should have mandated regularly documented training on business ethics, and the importance of its implementation as the auditing process ensued. Any issues should have been to the client with reconciliation mandantory prior to an Audit Opinion being submitted.The indictment of Arthur Andersen and subsequent essay provided proof the Audit Opinion and review of Enrons balance sheet and financial statements were submitted with the intention to skew the true condition of the companys true financial condition, thus deceiving the shareholders, board of directors, potential investors and stakeholders. An overview of the measures in place to safeguard against inappropriate accounting behavior provide an insite to the items that were violated during Enron and Arthur Andersens quest to bilk investors share holders of millions. These arctic measures included Generally Accepted Accounting Principles (GAAP), Generally Accepted Auditing Standards (GAAS), Statements on Auditing Standards (SAS), and all professional ethics. The use of GAAP by accountants is standard protoco l. An accountant follows these principles as a matter of daily routine. According to several accounting texts, GAAP is identified as a dynamic set of both broad and specific guidelines that companies should follow when measuring and reporting the information in their financial statements.http//faculty.mckendree.edu/scholars/2004/stinson.htmThe article 7 Principles of Admirable Business Ethics presents seven additional principles which complement ethical behavior. Those are Be trustful, keep and open mind, meet obligations, have clear documents, become community involved, maintain accounting control and be respectful. http//sbinformation.about.com/od/bestpractices/a/businessethics.htm In conclusion, legal analysts formulate the opinion that executives at Arthur Andersen and Enron did not set out to have a positive impact on the accounting industry or any industry.They set out to make as much money for themselves as quickly as possible. They were willing to do whatever it took to make that money. These thoughtless acts and greed led both companies to an eventual downfall in bankruptcy. The subsequent prosecution of these firms has produced new controls which should serve to prevent this event of financial disaster. Most notably the Sarbanes-Oxley Act which includes requiring companies to reevaluate its internal audit procedures and makes sure the accounting practices either meet or exceed the expectations of the auditors. http//faculty.mckendree.edu/scholars/2004/stinson.htmStatement Regarding headmaster ConductThis assignment is my own work. Any assistance I received in its preparation is acknowledged within the assignment in accordance wth academician practice. If I used data, ideas, words, diagrams, pictures, or different information from any source, I have cited the source(s). I understand that copying text word for word from other sources without placing it in quotation marks is considered plagiarism and not acceptable even if I cite the source where th e material was copied from. I certify that this assignment was active specifically for this class and has not been submitted in whole or in part, to any other class at Walsh or elseware.