Essay on Acc-291 Curbing Unethical Behaviors in Accounting

Submitted By fbtilden
Words: 581
Pages: 3

Unethical Behaviors in Accounting
Funmilayo B. Tilden
ACC/291

July 29, 2012
James Ferguson

The Sarbanes-Oxley Act (SOX) was enacted in 2002 by the U.S. Congress to set regulatory standards in financial accounting and reporting for all companies, large or small. The main objective of SOX is to protect the equity of stockholders. Section 302 of SOX specifically places the responsibility of ensuring that accounting records are free from misrepresentation on chief executive and financial officers (Hazels, 2010). Considerably, with so much effort put into protecting the rights of stockholders and regulating accounting practices, why are large corporations constantly brought under fire for unethical behavior? Unethical behaviors in accounting can cover a wide range of activities: overstating or understating assets and liabilities, insufficient internal controls, ineffective auditing, misuse of funds, or hiding debt, are just a few. All of these practices have been at the center of the most devastating accounting scandals in corporate history. Enron, WorldCom, AIG, HealthSouth Corporation, and Bernard Madoff Investments were some of the largest corporate scandals to hit the media and all were guilty of one or more of the aforementioned offenses. Brooke Corporation managed to escape penalization under the SOX act. Although Brooke Corporation suffered a financial demise after being the respondent in many lawsuits alleging misappropriation of funds, embezzlement, over-charging franchisees, and acting as a double-agent by wiring money through its subsidiaries. Brooke Corporation was an insurance agency that promoted individual franchises. Once agents opened these franchises, the company would overly control the money that the agents made and their expenses. However, Brooke Corporation never paid the expenses for the agents, causing them to suffer financially, and channeled money through its own bank and other affiliate companies. Brooke’s lack of making payments to creditors created insurmountable debt and left clients without the insurance coverage they had paid for (Hazels, 2010). When Brooke filed for bankruptcy, chief officers had already transferred funds outside of the realm of Brooke’s asset pool, leaving other banks with their debt. The company’s practices did raise eyebrows with the Federal Deposit Insurance Corporation (FDIC), the Federal Bureau of Investigations (FBI), and the Securities Exchange Commission (SEC). Although, these agencies conducted…