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Unethical Accounting - Unethical Practices

Essay by   •  January 10, 2011  •  Research Paper  •  762 Words (4 Pages)  •  1,925 Views

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Introduction

We all would like to live in a world where good morals and strong ethics are common practice. However, there are many individuals whom make unethical decisions. These decisions may be in their personal life, or in the workplace. As defined in the Law Dictionary, the word ethics is derived from the Greek word ethos, which means "character," and from the Latin word mores, which means "customs." (Ethics, 2009) Some individuals who have run businesses and corporations in our society have made unethical choices. Unfortunately, some of these unethical practices have caused major issues in terms of financial reporting. The Sarbanes-Oxley Act was enacted in 2002 to help "clean up corporate America" (Business Journal, 2009)

Unethical Practices

Many of the unethical practices in the workplace are of small consequence. For example; taking home a pen, making a long distance phone call, or perhaps going on the internet while at work. These are slightly unethical, depending on the frequency of the action. However, there are some unethical choices which are much more severe. For example, the choices made by Francis Loftin at Filmore Co. The decisions made by Loftin ultimately found himself pleading guilty to arson, embezzlement and mail fraud. Unfortunately, for Filmore Co, there were many questions which were never asked audits which were not preformed and many flags along the way which would have put an end to his unethical plans. (Edelman, 2009)

Before climbing the corporate ladder, subordinates found him untrustworthy and commented about his unethical behavior in his personal life. (Edelman, 2009) An individual whom is able to act unethically in their personal life is more likely to act unethically in the workplace. Filmore Co, could have preformed skip-level meetings where upper management could hear directly from the individuals whom knew him best.

While Loftin was Vice President he was in charge of determining policy, as well as being responsible for all operations of the business unit, including sales, credit and collections. His administrative assistant assisted with the billing, payroll and reporting. (Edelman, 2009) Had Filmore Co practiced separation of duties Loftin would not have been able to overstate inventory to hide illegal sales of merchandise, which he covered up with fictitious company's and created bad debt. Once he was finally questions, he set fire to the warehouse to hide these crimes.

Internal audits were not preformed because Loftin had made good friends with the president. The president did not want to offend his friend by sending an internal auditor. Once the president had no choice but to allow an internal investigation, Loftin responded with hostility and found excuses

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