Applying Agency And Stakeholder Theories To Enron'S Ethical Collapse

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If a firm is not doing business in an ethical way, it is committing a series of blunders and crime. As discussed in the case Enron is a famous example of ethical negligence. It shows how indulging in immoral financial activities and breaching the code of conducts damaged the public sentiments. The Enron management indulged in fraudulent reporting and bribed the external analysts on their payroll. This predicament resulted in bankruptcy and misfortune for investors. Therefore such case that started in a discussion room hit the global face as a lesson of ethics and morality towards corporate reporting.

Business Ethics and Financial Reporting Quality: Evidence from Korea

Business ethics is a fundamental step towards attracting and maintain customer base. Stakeholders consider business ethics as beneficial to invest in financial products. They don’t buy from companies accused of unethical activities and liquidify their investments of such guilty firms. Institutional investors also refrain from trading with immoral companies. If a firm is publicly renounced guilty of practicing unethically, the users of these reporting outcomes exit the investment lines because there are many highly sensitive buyers who hold high moral respect.

Corporate Collapses in Australia: Case of Harris Scarfe

Poor ethical mindset leads to unlawful management decision. Management is the front line for the responsibility, appreciations and blames and ethical line of directions saves energies and investment for future benefits. It does so because in the race of competition many firm don’t want to be left behind and always emphasize on top performances. Thus when individual goals are not aligned with the truthful believes, the whole firm suffers from down fall. Ethics encourages team building because most of the problems arises by the individual motives and gains.

Ethics reporting provide immense benefits to accountants and those who rely upon them. Being moral towards their responsibilities bring prosperity in a long run. It helps them to develop higher levels of reliability and competence in corporate settings. By adherence to the concept of ethics, accounting and audit professional achieve a greater goal, i.e., social togetherness. Corporate morality narrows the expectation gap which lies between the top management and the auditors. If an accountant is not faithful towards financial report preparation or if the auditor is not trustful regarding checking the authenticity of financial reports, it causes a negative impact on the accounting and auditing society as a whole. In many case accountants and auditors fall prey to greed of top management by providing nonrealistic audits like in the case of Harris Scarfe in the early millennium. The firm collapsed after a series of fake financial postures.

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Ethical Issues of Financial Reporting

A system of belief shaped by a rally accepted code of conduct is called ethics as discussed in this article. Business ethics is the adoption of ethical conduct towards running the affairs of business. Though ethics are voluntary in nature but in today’s world business ethics are related in active as well as passive way. Ethics restricts peoples from indulging in fraudulent and criminal business practices which are highly disregarded in human societies. It builds high values for a business like openness, integrity, reliability and honesty. The desire to earn profit is at the core of each business but the means to achieve that goal through ethical practices reflects the core humanity features. In recent past, the importance of ethics in business has gained a lot of importance and most probably after the fall of giant companies due to fraudulent reporting, misstatement of revenues and faking the company share prices. Ethical course of conduct in business always bring fortune and regarding corporate reporting, ethical conduct has gain significant importance for success and credibility in long term business goals.

Implication of financial statements Ethical consideration is essential when it comes to stakeholders of different financial reports. Ethical empower independence in cases where the users of a financial document demand a higher degree of authenticity of the information provided to them for future endeavors. Moral and dignified approach becomes a necessity because many behavioral theories says that human are motivated by their own interested and as well as according to this report opportunistic considerations rises the platform for exercising self-interest.

Multi-dimensional ethical approach to accounting and reporting practices

A company when exercise business ethics with full zeal it actually does it through trading off between the social responsibilities and financial objective. Ethical practice attached many corporate benefits for the management, independent player and investors and society as a whole. Ethical firms are apparent by the moral values they promote and experience in their surroundings. Business ethics give rise to openness in a firm because the stakeholders are more concerned when a firm keep their affair hidden from the investors and shows them false truth to believe. The welcoming attitude is necessary to boost the confidence of stakeholders in the firm. By openness, a firm takes corrective measures towards betterment when necessary and do not fake the reality by indulging in various misleading activities. It helps them to keep on improving their operations and this is the reason that they accept all failure in business competencies which could be overcome in shorter period rather than misleading the users of financial reports towards doom forever.

Financial Statement Issues

So auditors are more on the verge on blamed because they have to perform their duties in more independent settings to ensure the validity, authenticity and fairness of the financial reports prepared by a company management.

Austrlaian Collapse Ali Yaftian

Business boundaries for long term sustainability are defined so that the public interest towards the firm is not violated by the intermingling of non-performing services. Especially ethical behavior uplifts the rule and regulatory guideline. For auditor, independent and confined services create fair outcomes of the services they provide. Like discusses in the case that auditor are more at verge of doubtfulness if they go beyond the limits of their responsibilities and indulge in activities irrelevant to the task they are paid for. Such activities by Anderson (in the case) are not immoral until they conflict with the public interest rather than management intentions. Once an auditor is motivated by personal gains they become questionable and commit unethical practice because they are bound by the payers to perform on sinful tone of management (in the case).

Financial reporting regulations, ethics and accounting education

However there are shortfalls that despite massive importance and emphasis of ethical representation in personal as well as professional life, sometimes ethical behavior is turned off. According to this report there is a believe that the ethical negligence cause severe blindness to people who believe that what they are doing is lawful and ethical despite the whole world shout against their ethical illiteracy.


Based on the discussion, ethical empowerment is the safeguard against evil practices of corporate world. Many regulatory bodies have emphasized the importance of ethics in their rules and code of conduct. Ethical perspective of business dealing could be made more vigilant by enforcing strict check and balance across the financial reporting matter. In corporate world, reporting is agreed to be the most crucial element which is based upon higher ethical standards for survival so it must be dealt with utmost care to deliver optimum levels of ethical behavior. The need therefore is to legalize such matters which fuel the personal interests and opportunity gaps. In business, the positioning of administration team and reporting team must be shifted towards the users. As it is not a matter of some companies; it is a shield for whole human society against atrocities of financial misconduct and lifelong shames.

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