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Unethical Accounting and the Impact of Sarbanes Oxley

Prepare an article analysis in which you identify situations that might lead to unethical practices and behavior in accounting. Then, examine the impact of the Sarbanes-Oxley Act on financial statements. Cite references if there are any.

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Several situations can occur that can lead to unethical accounting practices, but none more so than the way in which a manager is compensated. A poorly-structured bonus plan can not only open the door to abuse, in some circumstances it actually encourages the behavior. In an environment where minor offenses are overlooked, managers will often find creative ways to increase their pay often at the expense of fellow coworkers and even shareholders.

For example, suppose the production manager at a manufacturing facility is given a bonus based upon the overall gross profit of his division. This is a common pay arrangement in many small companies as it is relatively easy to compute and is, in ethical hands, a relatively good tool to measure a manager's performance. However, in practice, the unethical manager seeing that he is bound to underperform this month might begin ...

Solution Summary

This essay-style solution discusses situations that might lead to unethical accounting practices and the impact of Sarbanes Oxley upon financial statements in 550 words.