...Chris Morton Ethics – Monday 6-9 Le-Nature, Inc. Case Study Gregory Podlcuky, Chief Executive Officer and Founder of Le-Nature, a Pennsylvania soft drink company, was accused of fraudulent activity costing investors, venders, and lenders around $684 million between 2000 and 2006. Podlucky received over $800 million in financing by falsely overstating the company’s revenues. This cooking of the books made Le-Nature seem more successful than it truly was, prompting outsiders to invest in its growth. Podlucky spent most of this investment money on his lavish lifestyle though, instead of on his company. Founded in 1992, and originally named Genesis Inc., Le-Nature was re-named in 2002 and considered itself an innovator in the bottling industry. Problems came to light in 2003, when the chief financial officer as well as to other highly ranked financial managers resigned unexpectedly. The fraudulent activity was difficult to figure out because it had many layers of fraudulent loan agreements. These loans created a false perception of a successful company. Characterized as a Ponzi scheme, the fraud was using newly invested money to pay off earlier debt obligations. Le-nature falsified invoices, checks, account statements, and other financial documents to verify business transactions and activity that never actually occurred. This falsely inflated the value of the company to banks and investors, who saw the business as a successful company that needed additional capital...
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...Case Study – Ethics are moral principles or beliefs about what is right or wrong and guide individuals in their dealings with other, within groups (stakeholders), and provide a basis for deciding whether a particular decision or behavior is right or proper. Go online to this site and report on one case of corporate fraud the government reported. Then write at least 350 words on the case and the ethics violations you see took place within the company you chose: http://www.irs.gov/uac/Compliance-&-Enforcement-News On their website, The Washington Ethical Society (2013) defines ethics as “the elements essential to human well-being and proposes principles to be used as guidelines for generating an ethical culture”. They go on to say that “ethics also refers to the specific values, standards, rules, and agreements people adopt for conducting their lives”. Jones (2013) explains that ethics are “moral principles, values and beliefs that people use to analyze or interpret a situation and then decide what is the ‘right’ or appropriate way to behave” (p. 44). The case chosen for this assignment deals directly with violations of ethics as defined above in addition to violations of tax laws and regulations. The case is regarding KPMG and their tax shelter schemes they created to help their clients avoid paying taxes (IR-2005-83, 2013). In the case against KPMG, the IRS found that principles at KPMG had “concocted tax shelter transactions and targeted them to wealthy individuals...
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...Nowadays the issue of business ethics is very important point in the discourse of business development. According to the latest statistics, the most part of the modern business enterprises are engaged in the sphere of services. Due to the importance of business ethics, especially in the sphere of services,cases concerning about the companies that did not follow the ethical principles are especially discussed by public. It is suggested by the specialist and observers of the market that the company, which once had problems because of ethical issues can not come back on the previous level of success.The level of sales of such problematic company, as a rule, noticeably falls. The twenty-first century is the age of consumerism society. Still the most of population of well-developed countries are individualist who protect their rights to be personalities, not just the wallets for the great companies. If the company do not show the necessary respect to the clients and perfect services, the enterprise can easily loose the great number of customers. Once the trust is lost, it is hard for the company to bring it back and to return on the previous level of selling rates. The example of such a company is Nestle. The violation of ethics by Nestle caused protests against the company all around the world. It was discovered that the advertisement of dry milk produced by Nestle caused the noticeable increase of...
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...Analysis of Ethical Corporate Culture between 2013 and 2015 Group 6: Michelle Delgado Lok Sum Lydia Fung Chau Nguyen ACCT 415 Dr. James Gong 5/14/2015 Executive Summary In business, leaders, managers, and employees face conflicting incentives, messages and pressures from multiple stakeholders. Conflict of interest is said to occur when a professional’s self interest offers an incentive that mitigates his or her judgment against the best interest of the corporation or its customers. In turn, most professionals are unaware of their unethical progression because they are blindsided by internal motivation and expectations. It has been proclaimed that the most important job of the board of directors is hiring the right CEO, causing most boards to fail to notice unethical behavior in someone they do not wish or expect to find it. In fact, research suggests that it is usually difficult to report wrongdoing in an organization because most employees believe the same and fear retaliation, rejection, or disbelief from corporate leaders. Ethical principles will often offer advice for procedures and norms that can reinstate ethical concerns before unforeseen behavior damages an enterprises culture or reputation. In general, ethical systems are designed to improve the ethical behavior within an organization. To do so requires examining the interaction of many factors and forces in a working environment - which were investigated (analyzed) in this report. Executives...
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...Reporting Practices and Ethics Cassandra Pinkston HCS/405 March 4, 2012 Conway Brew Reporting Practices and Ethics Financial reporting is becoming a major problem within the healthcare organizations and the lack of morals and ethics is behind the problems with unethical financial reporting. Within the healthcare organization one must display morals and ethical standards when making ethical decisions. When reporting finances in healthcare financial managers should practice good ethical decision making by considering ethical principles such as; justice, autonomy and beneficence . The study of healthcare financial management can be so captivating and rewarding if practiced correctly. There are four elements of financial management that has been recognized and if used properly with good ethical business decisions could make financial reporting easy. The four elements of financial management are; planning, controlling, organizing and directing and decision making (Baker, J. J., & Baker, R. W., 2011). Planning is when the financial manager of a company takes the initiative to identify what steps needs to taken to reach the organizations main goal and once the steps have been identified the manager will set out to reach their goals (Baker, J. J., & Baker, R. W, 2011). Once the financial manager have identified the steps that needs to be take he/she must make sure each area of their organization is following that plan and this is considered controlling the plan that has...
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...Code, Division 3, Chapter 1, §§ 5100 (c), (i) and (j), and 5062. California Code of Regulations, Title 16, Division 1, § 58. | provide false tax advice | Revocation of CPA Certificate | No.AC-2006-13 | Baka, John Edward | 10/20/2006 | Business and Professions Code, Division 3, Chapter 1, § 5100 (c). | participated in the audit under the supervision of George Alan Fisher | Revocation of CPA Certificate | No. AC-2007-18 | Adamic, Jonathan Ernest | 6/17/2007 | Business and Professions Code, Division 3, Chapter 1, § 5100 (h). | failure to practice as an accountant | Revocation of CPA Certificate | No. AC-2009-3 | Affonso, Dale Albert | 10/26/2008 | Business and Professions Code, Division 3, Chapter 1, § 5100 (c) and (g). | implement fraudulent tax shelters | Surrender of CPA certificate | NO. AC-94-14 | Alas, Benigno Bercasio J. | 10/29/1997 | Business and Professions Code, Division 3, Chapter 1, §§ 5062, 5100(c) and (f). California Code of Regulations, Title 16, Division 1, § 58. | failed to obey all Federal, state, and local laws, and to timely file quarterly reports | Revocation of CPA Certificate | No. AC-2014-15 | Arding III, Arthur James | 7/5/2014 | Business and Professions Code, Division 3, Chapter 1, §§ 5062, 5097 (a), (b), (c) and 5100 (c). California Code of Regulations,...
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...government. To the clients, accountants have an ethical responsibility to: protect them, provide accurate financial information, represent them with enthusiasm and maintain high ethical standards. Accountants’ responsibilities to third parties consist of the accountant’s duty of care, possessing the necessary skills and acting the good faith. An accountant’s responsibility to the government is to provide accurate information to the public and to the government, they also have the responsibility to follow and obey the laws, regulations, and securities acts. The responsibilities of accountants is tremendous, “The standard of care applicable to the conduct of audits by public accountants is the same as that applied to doctors, lawyers, architects, engineers, and others furnishing skilled services for compensation, and that standard requires reasonable care and competence therein.” (www.USLEAGAL.com). Accountants’ Responsibility to Clients Accountants have certain responsibilities to their clients, some ethical responsibilities are: * Protect our clients. * Produce financial statements and tax returns to the best of our ability after performing a proper due diligence. * Avidly represent our clients with zeal, in the event of audit or other administrative settings, before the Internal Revenue Service, The Illinois Department of Revenue, or other governmental agencies and maintain our independence. * Maintain the highest ethical standards. (Chris Amundson.) Accountants’...
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...must be made, that if is made in favor of the company and/or for personal benefit will be considered unethical. The business owner is the person who sets the standard for his/her company. He/she is the person who sets up guidelines that demonstrate the contrast between ethical and unethical values and behavior, establishing the first step in creating a company culture emphasizing and reinforcing ethical standards. In the accounting industry, professionals not only have the standard practices of accounting but also, board accountancy rules, such as SOX and GAAP, when creating ethical standards. Federal and state laws play a big consideration during this time. Such a time came for CFO of Excello Telecommunications when he considered inappropriately posting a $2.1 million transaction to boost year-end earnings. At the end of 2010, Excello faced the possibility of not meeting earnings estimates, which affects bonuses, stock options, and shareholders’ earnings (Mintz & Morris, 2011). At this time CFO Terry Reed learned about a transaction that would be recorded as a sale but the buyer requested that Excello hold on to the product until January 11, 2011. According to Generally Accepted Accounting Principles (GAAP), Excello...
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...Bernie Madoff: An Issue of Ethics There are many ethical issues in the world’s news today, some bigger than others, and many that get swept under the rug. One particular ethical issue is at the core of a huge story that has dominated the news for months on end and has lead to more trying times on Wall Street. The story is about Bernie Madoff and the massive effect he and his ponzi scheme had on hundreds of people who trusted him. This paper will discuss the ethical issue underlying the conflict, the damage that resulted from it, and the leadership that acted to counter suit his disaster. Bernie Madoff’s ponzi scheme is sure to go down in history as one of the largest business scandals ever and should make every person stop and make sure there ethics are in check. Bernie Madoff exploited ethical theories much like a hawk swooping down to kill its prey. Bernie’s twisting of moral philosophy, virtue ethics, universalism and business ethics controlled both common and upper classes within predominately Jewish investors, prominent social groups, banks, successful foundations and charities. He wielded his genius in investments and securities tantalizing those who could not spot his cabal. Bernie’s acute cognizance of small investors and the ruling classe’s desire to believe in moral philosophic principles, rules, and values let to the contamination of right and wrong with financial deals earning him 50-65 billion dollars. Bernie literally earned the title of greatest Ponzi schemer...
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...Ethical Issues – Bill Services There are many ethical issues going on with Bill that will affect his business and our firm legally and financially. Here are some of the issues: 1) He is planning on filing for divorce. His wife, Rotunda is a large and violent woman who has spent every penny Bill has made over the years. She has a moustache, missing a few front teeth and generally not a nice person. Ethical issues: Bill and Rotunda’s marriage seemed to change after the birth of their last child. Rotunda’s personality changed and she even put on extra weight. Rotunda continued to spend every penny of her husband’s hard earned money. Ethically, he has every right to want to file for divorce. Bill using the fact that she has a moustache and missing teeth are not a factor here. The mention of Rotunda being violent could be an issue as the divorce proceedings are under way. Choosing to divorce a person should be based on something that isn’t going quite right. You do not need to have a specific reason at all to request a divorce, but most states do have the option of using one of the grounds for divorce as your reason. Having one of these reasons can help your case, but if the two of you are not happy, then a no fault divorce would be the way to go. You are both on level ground and can go your separate ways without your record being tarnished. Choosing to get a divorce is not always an easy decision for...
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...and Leaders of Corporate America are not immune. Background: The beginning phases of WorldCom began in 1983 with a plan to create a long distance telephone carrier service named (Long Distance Discount Service) Mr. Ebbers was one of the major investor’s and later became the CEO. Like most businesses this one was no different and grew over the years and changed the name of the company to WorldCom. WorldCom grew into a worldwide known company. WorldCom became the second-largest long-distance telephone company in America (Daniels 2005). At first it seemed as though WorldCom was going to become the world’s most renowned company for the telecommunication community. However, it became known as one of the largest bankruptcy filings in U.S....
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...Review of Accounting Ethics Review of Accounting Ethics Dr. ACC 557: Financial Accounting May 22, 2013 Table of Contents 1.0 Corporate ethical breaches in recent times. 3 2.0 Accounting ethical breaches and their impacts 3 2.1 The Scandal of Enron 3 3.0 Organizational ethical issues and the management failure 5 4.0 Breach of the accounting practices and its impacts 5 5.0 Recommendations by the CFO 6 6.0 References 8 1.0 Corporate ethical breaches in recent times. Ethics is an important aspect of business in today’s enironment. Sometimes management ignores or leaves to state laws to govern the code of ethics within a company. Companies have faced a lot of issues regarding ethical situations in modern times. According to Baker (2012) contrary to the popular belief of the recent global financial crisis resulting from failures of accounting ethics, he argues that there is not enough evidence to support this connection. 2.0 Accounting ethical breaches and its impacts Breaches of the accounting ethical policies have become a source of concern for the firms today. The proper application of IFRS and GAAP standards is vital for each firm. In recent years as more scandals have come into the spotlight firms have taken more and more internal measures in addition to the policy making at the governmental level to ensure breach of consumers’ trust and laws does not take place in the future. There has been a tremendous increase in the interest in accounting ethics (Cowton, 2013)...
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...will address and analyze the different ethical issues and the questionable accounting practices that occurred to one of the largest accounting firms in the United States. We will look and review the mandated requirements for legal compliance (from Chapter 4) and determine which requirements apply to the Arthur Anderson case. Then we will discuss how the issues with the Arthur Anderson case may have played out differently if the Sarbanes-Oxley Act had been enacted in 1999. Next we will determine and discuss which elements of the framework for ethical decision making in business (from Chapter 5) played the biggest role in the Anderson case. Explain your reasoning. Lastly, we will discuss how the situations at Arthur Anderson may have played out differently if their senior management had displayed the habits of strong ethical leaders. Provide specific examples to support your response. Introduction Known as one of the Big Five the Arthur Andersen firm was founded in 1913 by Arthur Andersen and his partner Clarence Delany. The company name was very synonymous for their integrity, ethics and trust, which is necessary for an accounting firm to have and stand by. Our textbook states, “Andersen set standards for the accounting profession and advanced new initiatives on the strength of its then undeniable integrity (pg. 348). Andersen once shown a strong character but with the rise of many high-profile companies filing for bankruptcy, that same character would...
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...521 Corporate Financial Management Lehman Brothers and How The Use of Repo 105 Bankrupted the Wall Street Giant The year was 2008 and the United States was entangled in the most significant financial crisis since the great depression. Lehman Brothers the countries fourth largest investment bank with revenues of $19.2 billion in 2007 and in excess of $600 billion in assets became the largest bankruptcy in history when they filed on September 15 2008. Aggressive investment strategies, misuse of accounting practices, as well as significant exposure to the subprime mortgage market attributed to the demise of a legend that at its peak employed 25,000. As the housing bubble grew, Lehman Brothers acquired several mortgage lenders. Of the acquired firms some made loans to home buyers without full documentation (Jeffers 2011). When these mortgages began to default, market conditions became unpredictable and the likes of Lehman and scores of other banks faced immense losses. The write down of the defaulted debt securities had colossal adverse effect on Lehman’s balance sheet. Credit rating agencies honed their focus mainly on the leverage ratios of the investment banks and Lehman’s leverage ratios were already extremely high. Any downgrade on Lehman’s credit rating would have sent Lehman’s share prices sharply lower and eliminate their chances to receive any sort of financing. In hope of preventing such an occurrence, Lehman would attempt sell some of its assets to raise...
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...Insight on WorldCom Scandal Table of Contents ABSTRACT 2 The importance of accounting conceptual framework 3 Historical Background 5 The Scandal – what happened 6 PENALTIES 7 How the scandal relates to accounting theory 8 RELATION TO POSITIVE ACCOUNTING THEORY 9 Conservatism Principle 9 Lack of Reliability 10 Lack of Relevance 11 Financial Misstatement 11 Conclusion 12 Bibliography 14 Insight on WorldCom Scandal ABSTRACT The scope of this paper deals with the WorldCom accounting scandal of the early 2000’s as it relates to elements of accounting theory. The discussion will cover the key reasons that contributed to the collapse of WorldCom. Specifically, this paper will look at: Executive compensation, Earnings Management, and Information Asymmetry. The authors will present arguments that clearly show how each of these three sub-topics played a pivotal role in the scandal. The reader will also see how these reasons are often inter-related, and often overlap each other, the enormity of which caused the company to fall like a stack of dominoes. In particular, information asymmetry was allowed to flourish as the WorldCom executives lavished themselves with huge compensation, all the while keeping the board of directors and investors out of the loop. A poor corporate government structure existed as the board was filled with inept and ineffective individuals who were powerless to stop the pilfering of profits. The end result of these actions...
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