Buy custom Review of Accounting Efforts essay
There have been a rise in the unethical accounting behaviors in the recent years, and the government has had to put in tight regulations to help prevent this increasing trend. However, it is hard to believe that the current business environment is conducive for ethical behaviors to prevail because most of those who commit the breaches end up courts free. There are no foundations that provide detailed information of any company’s financial and accounting records to the public. This gives those participating in any fraud an amble time to commit the breaches. There is minimal trust between the clients and the companies, and thus people there are lack of conducive environment to support ethical behaviors. The recent scandals seen in the big organizations prove that ethical issues are far from being achieved in many companies. Many companies are, however, increasing their efforts to improve their ethical behaviors, but they need to focus on building a trusting relationship with its clients if it expects to maintain a good ethical trend in all its operations (Russell, 2006).
Buy Review of Accounting Efforts essay paper onlineBecome our VIP client
* Final order price might be slightly different depending on
the current exchange rate of chosen payment system.
SNC-Lavalin – an engineering and construction company – made an announcement claiming that its chief executive officer had to resign since a series of the internal investigation within the organization showed that he had breached some ethical codes of conduct. The executive officer made inappropriate payments to some agents, which is a violation of the codes of conducts stipulated in the company. The private investigations within the organization proved in its report in the quarterly results that SNC had suffered both ethical and accounting breaches, (Hillison & Hollander, 1995). The business, which have been in operation for the past one hundred years, claim to have never experienced such an issue before and that this was an isolated case. A large construction company, SNC, employs many people and has revenue of C$7.2 billion from different imports. The case of accounting breach may affect the business enterprise negatively because people pay close attention to the ethical codes of conduct within any organization.
The accounting breaches originated from misallocation of up to $56 million, which was paid off to third party agents. The situation began when the chief executive officer allowed some of his colleagues to pocket some $33.5 million even though the chief financial officer in the company had not given any permission for the transaction. The chief executive went ahead to authorize the payments, despitehe did not have the sign of the financial officer who, according to the codes of conduct in SNC, needs to give his consent before making any transaction.
The breach of the accounting ethical codes by the chief executive officer has had its effects on the organization, and the latter has had a difficult time identifying the participated in the fraud agents. The company’s stock has since dropped, and investors are reacting to the situation with a lot of concern. The stock has decreased by 20% since the scandal, and some of its investors are considering selling their shares if the circumstances do not change soon. The net income of the company also lessened; besides, it may record an 18% decrease in its annual profits. This shows how negatively the situation affected the company’s sells and the trust investors had in the ability of the management to deal with accounting breaches (Hillison & Hollander, 1995).
Limited Time offer!
Get 19% OFF
The company management came to identify the impending issues after a long time of complains from different parties claiming that there was some breaches taking place. This came into light with the departure of two senior managers. The management’s private investigation found the accounting breaches committed by the chief executive officer and some of his senior colleagues.
The group of individuals controlling the organization failed to create a good ethical environment in the company by overlooking some of the codes of ethics that guide its employees. The organization does not deny that it has a weak internal power over the financial reporting process. Consequently, the executive officer thought he would commit with impunity an accounting breach. The company has always provided its agents with the necessary for working materials without any compliance of accounting procedures, which expected to be the guidance of the payment made and the person who authorized the payment. The management, on its part, did not follow the provisions of the accounting ethics’ code as well as the policies that guide the relationship between a company and the commercial agents.
The breach affected different parts of the company’s accounting system, but the most affected was the stock exchange where its sales dropped by around 20% thus impacting the total income of SNC and the net income recorded at the end of 2011. The organization had to review its expenses and revenues accounts because the fraud increased its expenditures, which, in turn, inflluenced the net revenue of that financial year. The business has had to deal with the decrease in its stock value. Nonetheless, the resignation of the chief executive officer seems to have made the situation better as the stocks are picking up in the market with a 5.1 per cent increase since his giving up position. The aforementioned breach in this case is on the mode of payment and the relevant authority that gives consent for any payment made within the organization. The company has standard procedures requiring the chief financial officer to authorize payments by signing the certain papers to make the relevant payments. The chief executive officer breached this by authorizing payments to agents without the consent of the chief financial officer (“Private Operators Centre Based Long Day Care Handbook,” 1997).
The business operations of the company has had to adopt to new management procedures, and the management has had to go back to its budget and review some of the plans they had for the financial year. Thus, they have to work on a tight budget because of the money lost in the fraud. The persons controlling and directing the company have to work extra hard to make sure their stocks pick up value in the market to prevent further loses. The other change seen is in the new executive officer who has to take over the management of the business and prove to the stakeholders that he can manage the business well after the resignation of the former executive officer (Ashbaugh & Pincus, 2001).
Let’s earn with us!
Get 10% from your friends orders!
As the CFO Officer in the company, to prevent the occurrence of the same incident in future, I would put in several measures. The first thing would be to maintain – minimal relationships of the clients and the managers outside the working environment. This is because most of the frauds occur when the agents supplying the company with materials have some ties with the management. This would be implemented in the future by doing an evaluative research to determine whether there is any form of relationship between the agents and managers. The other measure would be to create distinct work roles for each manager and define the powers of each one of them. This way no one will have the power to exchange places and authorize the transfer of money. All the transactions done in the company, even minor, should be documented to prevent a repetition of the fraud. Documenting all financial transactions will help when following up on the cases like the analyzed one, and will make it easy to identify the involved in the transaction.
Want to know what your projected final grades might look like?
Check out our easy to use grade calculator! It can help you solve this question.Calculate now