The Legal, Ethical, and Technological Concerns

Yasmi M. Pacheco Ethical and Legal Issues in Business BUS-340 January 9, 2013 Professor Gerry Adams

The Legal, Ethical, and Technological Concerns Accounting is the process of recording a firm's financial transactions in appropriate bookkeeping records and of summarizing this information in the form of accounting reports, using acknowledged methods and conventions. (Collins Dictionary of Business, 2006) The use of the information in the financial reporting of the business is issue to investors, creditors, managers, government agencies, and employees. Based on the information provided in the financial statements the profession of accounting has created different agencies to monitor, establish, and

maintain ethical codes of standards. Because the information in financial reporting is very crucial for investors, creditors, manager, government agencies, and employees, honest reporting is critical. In previous years it was reported that temptations exists to manipulate figures for the interest of personal gain.

The process of financial reporting is the means by which public organizations provide that accountability. This information is provided to the public and creates ability to raise capital by establishing investor confidence to invest on the organization. Improper financial reporting would likely decrease investor confidence. This can also start a government investigation, shareholder litigation, and it will be timely and expensive to resolve this problem.

Sarbanes-Oxley Act of 2002 was passed by Congress to establish to restore integrity to business financial statements and for investor to regain their confidence on companys financial information. This Act was established after the discovery of financial irregularities of financial statements of several companies. The improper financial statements led to bankruptcies of

The Legal, Ethical, and Technological Concerns multiple companies causing some investors their lifetime savings and multiple employees without employment. (Barnes, Bowers, Langvardt, & Mallor, 2013)

Sarbanes-Oxley Act of 2002 regulates certain business financial activities and it also improves the accuracy of the financial information the corporation reports in their financial statements. The act prohibits personal company loans to officers and directors, require certification of financial information by a firm's chief executive officer and chief financial officer, protects employee whistle-blowers, increases criminal penalties for securities law violations, requires disclosure of off-balance-sheet financing, and calls for improvement in the accuracy of pro forma financial statements. (In Wall Street Words, 2003)

Fraudulent financial reporting can involve the following acts:

Alteration, falsification, and manipulation of accounting records or supporting document use for financial information.

Intentional omission from, misrepresentation in, the financial records or statements. Intentional misinformation of accounting information of classification and amounts.

An example of fraudulent financial reporting can be because of the pressure the management team is to achieve an unrealistic earning goal. Providing falsified documentation like invoices and receipts is considered fraud.

The Legal, Ethical, and Technological Concerns At times accountant can face ethical challenges when reporting accounting violations. It is ethical for accountants to report any violation detected in a company financial record. The

reporting can cause an accounting scandal causing the company a decline and can cause layoff of employees. Even though at times it can be difficult for the accounting to report this type of behavior. It is important to report any discrepancy detected in the company financial reporting. This would eliminate future problems that can become greater liability.

Greed in finance and business can cause unethical behavior for the reason of making more money. An example of greed would be Enron Corporation that became the largest bankruptcy and stock collapse in United State history. Enrons accounting practices was created to hide company financial losses. Their financial record would report incorrect information showing that the company was doing well. People kept on buying shares at a high price while Enron executives were slowly selling their shares. While Enron executive were informed about the financial crises the company was having. Enron employees were left with no job and with without their life savings. Shareholders lost their invested money in the company. Innocent people paid for the greed of Enron executives. (The Columbia Encyclopedia, 2008)

Accounting professional relay on technology to perform their accounting reporting tasks. For the purpose of technology in accounting companies hare created regulation and rules guiding the way accountants can analyze and collect the companies financial data. The main concern with technology is a third party getting access to the company financial information. It is crucial for

The Legal, Ethical, and Technological Concerns companies to keep their financial information away from harm. It is important for companies to invest in technology system that will protect their financial information.

Conflict of interest is an ethical issue in a organization. Someone with a conflict of interest may prefer his own interest to those of the organization. A conflict of interest is when a person has a position in which they can make a decision professionally that will benefit them on a personal level. A conflict of interest occurs when an individual or organization is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other. Having one person doing multiple jobs in an organization can create some conflict in an organization.

It is important for an organization have enough people working in the financial reporting side of the organization. If a company is lacking is this area it can create overworked individuals and under appreciated personnel. This can create mistakes in completing their tasks. The accounting department is a very important element in an organization. Mistakes can be made easily under stress and pressure. It is important foe companies to keep financial records accurate and up to date. It is legal and ethical to provide correct information. If incorrect information is issue by a corporation it can create legal problems that will affect the company, shareholder, and employees. Corporations should be aware of the laws and regulations dealing with proper financial reporting. Corporation should be informed of the consequence that would relate to improper information in financial records.

The Legal, Ethical, and Technological Concerns References

Accounting. (2006). In Collins Dictionary of Business. Retrieved from http://library.gcu.edu:2048/login?qurl=http%3A%2F %2Fwww.credoreference.com/entry/collinsbus/accounting

Enron Corporation. (2008). In The Columbia Encyclopedia. Retrieved from http://library.gcu.edu:2048/login?qurl=http%3A%2F %2Fwww.credoreference.com/entry/columency/enron_corporation

Mallor, J. P., Barnes, A. J., Bowers, T., & Langvardt, A. W. (2007). Business law: The ethical, global, and e-commerce environment (14th ed.). New York: McGraw-Hill.

Sarbanes-Oxley Act. (2003). In Wall Street Words. Retrieved from http://library.gcu.edu:2048/login?qurl=http%3A%2F %2Fwww.credoreference.com/entry/hmwsw/sarbanes_oxley_act