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Ethical and Legal Obligations in Accounting The recent and past scandals of major corporations such as Enron, WorldCom, Qwest, Tyco, HealthSouth

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Introduction

Running head: Ethical and Legal Obligations in Accounting Ethical and Legal Obligations in Accounting David A. Beckham University of Phoenix ACC 539 Dr. Anthony J. Matias, MBA, CPA February 6, 2006 Ethical and Legal Obligations in Accounting The recent and past scandals of major corporations such as Enron, WorldCom, Qwest, Tyco, HealthSouth, Rite Aid, and Global Crossing to name a few of the biggest have brought a new awareness to the ethical and legal obligations of financial reporting. Although fair accounting principles and theories have been around for some time, it has not been so closely analyzed and scrutinized as it has been in the past 10 years. Generally accepted accounting principles or GAAP are rules which are used to prepare financial documents and statements in publicly traded and privately held companies in the United States. These generally accepted accounting principles are not the same for local and state governments which follow the GASB or Governmental Accounting Standards Board. In the United States as well as some modern countries who operate under the English common law system, the government does not set the standards of generally accepted accounting principles. ...read more.

Middle

The PCAOB helps to shore up confidence of investors and further the public interest in preparation of informative, fair and independent audit reports. The board was created primarily in response to the many accounting scandals that were occurring during this time. The most notable scandals at this time were WorldCom and Enron. The Sarbanes-Oxley act is an extension of power to the SEC giving the government more control and inputs on generally accepted accounting practices and principles. The generally accepted accounting principles and practices are important to consumers and investors of publicly traded companies. Without some reform and repair or the current practices, the public will loose confidence in American companies and start looking abroad to invest capital. Financial reporting in order to be useful and trusted should be useful to investors and creditors by presenting them with information that is relevant, reliable, comparable and consistent. These are the four basic qualities of financial accounting. (Wikipedia.com) In order for financial reporting to achieve these qualities, some basic assumptions must happen. ...read more.

Conclusion

This information is typically presented in the main body of financial statements where it is most notable and easy to pick up on. These guidelines and generally accepted accounting practices are the foundation of the modern day accounting systems. The overall goal of the auditing companies, accountants and government organizations is to bring back trust to the accounting profession and publicly traded organizations. In order to keep American investors and financiers in the US, we need to establish the trust again. Dishonest accounting practices not only hurt the immediate investors, creditors, business owners and employees, but it hurts our economy overall. Resources Colson, Rober H. (2004, November). Back to Basics. CPA Journal, Vol. 74 Issue 11, p80-80, 1p Flegm, Eugene H. (2005, February). On Solving the Problem, Not Being It: CPA Journal, Vol. 75 Issue 2, p12-14, 3p. http://www.wikipedia.com Marshall, D. et al. (2004). Accounting: What the Numbers Mean (6th ed.). New York: McGraw-Hill. Victor, George I. (2005, November). Current SEC and PCAOB Developments. CPA Journal, Vol. 75 Issue 11, p28-31, 4p, 1c ?? ?? ?? ?? Ethical and Legal Obligations 1 ...read more.

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