Accounting Ethics: Enron Corporation and Johnson&Johnson

Ethics
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Ethics
Accounting ethics is a component of business ethics. It denotes the laws and regulations instituted by regulating bodies to govern professional conduct, especially prevent the possible misuse of financial information or accounting position. Accountants deal with intimate financial information of individuals and organizations. Consequently, accounting ethics is necessary to prevent any potential for data abuse or manipulation of figures to either improve company perception or increase earnings management. The American Institute of Certified Public Accountants (AICPA) and the Institute of Management Accountants (IMA) have set ethics codes. Every accountant is expected to comply with the Code of Professional Conduct rules or face disciplinary action by the AICPA (Marshall et al., 2020). IMA’s Statement of Ethical Professional Practice also requires management accountants to adhere to the highest standards of ethical conduct during their professional obligations.
The Code of Professional Conduct and the Statement of Ethical Professional Practice categorize integrity and objectivity as the primary constituents of ethical behavior in accounting. Integrity refers to the tendency, to be honest and straightforward in all dealings and interactions with others. At the same time, objectivity denotes the ability to remain impartial and unaffected by any conflict of interest. These two values are insisted upon because they are critical to producing accurate and complete financial information in accounting, over and above, making informed and independent decisions (Marshall et al., 2020). Other essential elements of ethical behavior in accounting include competence, confidentiality, and acceptance of professional obligations to protect the welfare of the client, the employer, and the public. These elements are critical to improving the accounting profession, sustaining public trust, and establishing fairness and trust in all financial dealings.
This essay will compare the business ethics in the accounting of two companies (Enron Corporation and Johnson &Johnson) concerning accounting ethics. The Enron scandal is widely considered one of the biggest accounting scandals in the history of America, primarily because of the pervasiveness of unethical accounting practices both inside and outside the company. Enron Corp had reached dramatic heights during the 90s when minimal regulatory policies allowed the dot-com bubble to flourish: the value of revolutionary internet stocks was often exaggerated, and both investors and regulators came to accept the rising share prices as the norm. Enron successfully marketed its electronic trading website to participants and trading partners due to its established reputation, experience, and credit in the energy sector. The company was even regarded as one of the most innovative companies in America. However, its unethical accounting practices, which mainly were unknown, would result in one of the largest corporate bankruptcies in the U.S.
By mid-2000, when the dot-com trend started waning, Enron's famed EOL became unsustainable, and the company faced considerable exposure to ma...