Unethical Accounting Practices

Unethical Accounting Practices and the Sarbanes Oxley Act In the wake of scandals involving companies kindred Enron and dry land Com, putors confidence in the truth of a corporations financial statements was shaken. Unethical acts much(prenominal) as providing traitorously information regarding expenses incurred, exaggerating business line revenue, or misusing business funds argon all reasons the Sarbanes Oxley Act (SOX) was implemented in 2002. Prior to SOX companies were not necessarily accountable for questionable bring out up practices and company executives would have got advantage of these practices for in-person gain. Companies would sharp estimate expenses occurred or exaggerate revenue to entice investors to invest money or creditors to free-spoken lines of credit. In some cases executives would debauch company funds for personal use, such as vacations on company credit card of use of company planes for individual(a) adventures . In 2002 SOX was enacted to make accounting practices in U.S. publicly traded companies to a greater extent than accurate and help investors receive confidence in where they were expend their money. This act imposes heavy penalties for wrong conducts and reporting and holds upper watchfulness and executives responsible for those accounting practices and financial reporting.

A study was performed to valuate how the financial reporting behavior of companies was affected by the delineation of SOX. This study evaluated two Canadian companies, one of which was impacted by SOX and the other was not, financial records twain prior to a! nd post SOX characterisation (Lobo & Jian 2010). The study revealed that these companies were generally more conservative in their financial reporting. An example of this conservatism is a more timely cite of losses and the delay of recognition of gains, until after the cash be given is recognized. Additionally, the study revealed that the use of non-generally reliable accounting principles decreased dramatically and more...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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