Potential acts leading to unethical practices and behavioral in accounting is evident. These acts are in violation of the Sarbares Oxley Act of 2002 (SOX). A recent article on the student website is reviewed to identify potential factors leading to unethical practices and behavior. The article analyzed is called “Becoming a More Relational Firm in the Post-Sarbans-Oxley Era”.
As expressed by the article, the effects of SOX has been considered by companies in which use auditing services as their main source of business (Jelinek, Jelinek, 2010). SOX has caused agencies to have a strong battle obtaining clientele. The SOX act has changed provisions in which disallow an agency to sale services directly to company personnel (Jelinek, Jelinek, 2010). This has resulted in agencies having to go an outside committee to sale services or products (Jelinek, Jelinek, 2010). The act also requires the auditor agencies to resale from services after 5 years and disallows them to seek employment with a previous client within of a year of last audit (Jelinek, Jelinek, 2010). These new rules have caused the agencies to have very strict rules of operation procedures. With the information obtained in the article, is has been relevant that auditing agencies are having difficulty rendering services. So if auditing agencies are not doing auditing then companies are use internal auditors. With internal auditors the unethical practices and behavior chances have increased.
These are however situations even with an auditing agency that can lead to unethical practices and behavior. Thus misuse of funds received, is a type of unethical practice. Potential scenarios in which unethical practices and behavior can be encountered is identified. When funds are used for items other than authorized, the funds use is unethical. A situation that could lead to misuse is when a company is short of funds in one area and to finance another activity, the company uses other funds. This leads stock-holders in a direction of misconception of funds, thus causing a false picture of financial health. Another situation of unethical practice and behavior is the hiding of liabilities or debt. When financial statements do not report a debt or liability, again companies financial health is misrepresented. The practice of hiding liabilities or debt could be to make the company look better to investors or creditors. The neglect of information would cause debt to income ratio be more favorable.
In summary an article was analyzed. The article offered information pertaining to auditors having to change methods to become complaint with SOX. With the strict procedures, the auditors are not rendering services as much as before act. Auditors might decrease sales because companies have chosen to use internal auditors to detour from dealing with the changes. This being said a company could have potential risk of unethical practice or behavior. When this happens unethical practices and behavior will be caught in a manner that has already of cause long-term effects. To improve accounting practices, auditors of outside business will need to be hired to be able to catch misuse of funds and lack of reporting liabilities.
Jelinek, K., & Jelinek, R. (2010). Becoming a more relational firm in the post-sarbanes-oxley era. The CPA Journal, 80(9), 64-64-67. Retrieved from http://search.proquest.com/docview/756960959?accountid=35812