Litigation and Censures, and the Interference of Corporate Ethics

Litigation, Censures, and Fines
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Litigation, Censures, and Fines
Introduction
The concepts of litigation and censure elaborate on the role of ethics in accounting. These elements assure that auditors in the organization are responsibly handling the accounts information of the organization (Grenier, Pomeroy, & Stern, 2015). Moreover, a minus level of litigation and censure could lead to fines for the investors and creditors for inducing fraudulent activities or alteration in information towards the manufacturer or creditors (Boone et al., 2018). In connotation, this study has analyzed common causes of litigation and censures along with a list of ethical standards. Also, different examples of a code of conduct and their violation have been illustrated by this study. Eventually, some recommendations are listed for the maintenance of better levels of ethical considerations in the organization.
Primary Accounting Issues
False financial statements are devastating for both the company and the creditors as well. these statements are made to obtain leverage from creditors for paying their debts and share lower profits with the investors. In other terms, the false losses are shown in the altered financial statement so that the creditors and investors can be tricked and the profits are enjoyed by the managers solely. It is the responsibility of the auditors to demonstrate financial reports only after confronting a complete analysis of the information. Failure to this may lead to litigation, censure and fine for the managers as well as the auditor (Boone, Khurana, & Raman, 2018). Following are some examples of the convicted frauds by managers and auditors;
Example 1
Phar-Mor was a great grocery store after Wall-Mart until its financial statement showed litigation. Two auditors Coopers and Lybrand were appointed for analyzing the company’s financial statement (Grenier et al., 2015). The two auditors presented the statement without any confirmation. Consequently, it turned out to be a fraudulent representation that was proved, later on, this left the company at the bankruptcy of $500 million. Coopers and Lybrand were also penalized for their actions and they had to pay the fines to the creditors and investors of the company. Here, Coopers and Lybrand convicted censure by not reviewing the information and presenting it to the investors. Consequently, investors performed litigation on this act and the company as well as the auditors were charged with fines.
Example 2
Danielle Branner, the owner of Koshc cosmetics used the company’s money for her personal use (to invest in a game show). The situation was worsened when she lost the money in that gameshow and the fiscal year was just about to end. Consequently, the auditing was about to begin and she had to answer the investors about their loss. Ultimately, she was trapped so she bribed the auditors and managers to generate a false financial statement showing that the company has suffered losses and cannot share the profits with investors. Subsequently, the company can get enough time to regenerate the lost amount (Grenier et al., 2015). However, the investors were not satisfied with the reports of Branner, as a result, they set further investigations that burst out the truth and all three of them were penalized for their actions. The company was bankrupt with a penalty of $437 million and all three of them bear a penalty of $13 million each.
This case study exemplifies the process of litigation, censure and fines in modern accounting along with ethical consideration and conducts violation. The decision and action of Banner to use the company’s money initiated the violation of conduct as per her company’s policy that states, “company property is not for personal use”. With this action she also broke the ethical standards as using the company’s capital is an action out of ethical consideration. Then, she performed censure by bribing the auditors and the auditors also convicted violation of conduct and ethical standards by supporting Branner. Eventually, the investors were forced to impose litigation and charge penalties on individuals responsible for breaching them.
Interference of Corporate Ethics
The management of internal control is the responsibility of all the employees of the company. Each department owns a specific duty that is obliged to be performed by that department. For instance, the Human Resource is responsible for the management of people while the manufacturing department goes after manufacturing operations. Similarly, the finance and accounts department is mandated to deliver the correct financial information to the investors and creditors. The auditors should practice questioning own-self before accepting any false information and proceeding it to the people from whose money they are earning (Johnson, Reichelt, & Soileau, 2018). Moreover, the company is liable for not overlooking significant information like financial statements or else they have to pay heavily for this act (Grenier et al., 2015). No assumptions can be ind...