Unethical Behaviors: Accounting Fraud

Discussion Questions: Accounting Fraud
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Discussion Questions: Accounting Fraud
Question 1
Accounting scandals have increased tremendously over the recent years as financial misdeeds and business scandals done by business executives are reported. From personal experience, accounting scandals entail complex tendencies of misdirecting or misusing funds, understating expenses, overstating revenues, underreporting liabilities, overstating corporate assets and so on (Action Fraud, n.d). On various occasions, managers of an organization carry out such fraud in collaboration with officials from other business entities. Overstating of assets or understating the liabilities is aimed at making the company appear financially well-off than it actually is. Accounting fraud makes an employee to present documents that do not portray the true value of financial activities of an organization. Several companies in the U.S. and other parts of the world have recently been accused of committing accounting fraud. AgFeed Industries Inc. was accused of inflating its revenues by close to $239 million through creation of fake invoices of purported sale of animal feeds that did not exist (Rapoport, 2014). According to Securities and Exchange Commission (SEC), the reason why the company reported fake revenue was to achieve financial targets so as to boost the share price. Over a period of three and a half years, the annual revenue of the company had been boosted by figures that range from 71% to 103%.
Question 2
Unethical behavior leads to dissatisfaction among involved parties, emergence of scandals, and can eventually lead to bankruptcy of an organization. The recent financial crisis brought to light some of the worst cases of unethical behavior to have occurred in financial institutions. A study carried out by Ernst & Young concluded that unethical behavior was directly responsible for the crisis, and issues of ethical behavior should be one of the leading agendas among man...