Accounting Ethics Small Business Company

Accounting Ethics
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Confidentiality and integrity are important aspects of accounting ethics, and a violation of accounting ethics might result in disciplinary action. Violation of ethics and cheating are concerns for today’s corporations especially with cheating being on the rise in American society (Shaw, 2011).Accounting boards in different states establish ethical standards to be followed, and this typically aims to maintain integrity standards among members. Besides adherence to ethics, businesses need to adhere to the generally accepted accounting principles (GAAP) in preparation of their books of accounts. This paper explores the ethical issues surrounding Chesapeake Energy.
Even though, Chesapeake Energy undertook massive scale projects, the corporation operated in negative cash flow (DeMelle, 2011). Under these circumstances, there are limits on where the corporation can look for funds. The financial accounts of the company used creative accounting techniques to hide the scale of the company’s situation. In essence, this meant hiding huge losses in their accounts as well as misrepresenting fracking as a very profitable venture, while in fact the company was reporting losses. To further the highlight on ethical implications of the company’s financial dealings is a $ 1.1 Billion dollar borrowings by the CEO, Mr. McClendon to fund well drilling (DeMelle, 2011), and this was further complicated by dealings in a hedge fund ran by the CEO which also dealt with the same commodities as the company, and personal borrowing from a member of the company’s board. There is a conflict of interest and misrepresentation of financial information
The ethical issue with the company is that there was a conflict of interest by the C.E.O’s actions of engaging in business similar to that of Chesapeake. Furthermore, there was no disclosure of information that he borrowed from a board member, and this information would have influenced the auditor’s report as well as influenced investor relations with the company. Through these parallel dealings it is apparent that Mr. McClendon ran two parallel businesses disregarding business ethics, and would have been in a position to breach confidentiality for working from the two organizations.
Similarly, related party transactions would likely arise because of borrowing from the board member. Even though, there is no indication of business relations with the board member, it is possible that Mr. McClendon intended to use the money to further his hedge fund business, which was a direct competition to Chesapeake Energy. To investors, this is clearly a breach of trust as shown by the refusal to disclose this information. Mr. McClend...