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Ethics in accounting

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Sarbanes Oxley has significantly influenced the public's perception of ethical behavior on the part of auditors and accountants.

Let's say that you are a mid-level accountant for a publicly traded company. You're company has had a relatively poor year and are expected to disappoint the market with their earnings release.

The CFO approaches you with an accounting entry that will greatly improve the companies earnings. It is obvious to you that the entry is not appropriate and could be construed as fraudulent. You have a great relationship with the CFO and refusing to record the entry could damage it. Right before giving you the entry, the CFO also stated that he believed that you would be given a long awaited promotion with in the next month.

The CFO has also told you that he believes that the entry is appropriate and within the accounting rules, and by recording the entry, everyone in the company will likely receive a bonus that is 3 times the amount they received in the prior year.

In addition, you have been having cash flow issues at home, and the promotion and bonus would greatly alleviate (or even eliminate) most of the stress associated with your personal issues.

What would you do? Think about this very carefully. Don't just simply tell me no or yes, but tell me specifically what your concerns would be.

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Solution Summary

I will certainly not agree to do the entry because it is unethical and against the integrity and fairness of accounting statements.

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I will certainly not agree to do the entry because it is unethical and against the integrity and fairness of accounting statements. Such entry will misled the stakeholders such as ...

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Sandeep Bardia, MBA
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  • BCom, SGTB Khalsa College, University of Delhi
  • MBA, Rochester Institute of Technology
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