Accountants' Ethics in Shaping the Companys Financial Reality Assignment

Accountants' Ethics in Shaping the Companys Financial Reality - Assignment Example An accountant working for a public company must also abide by the standards set forth by the Sarbanes Oxley Act (SOX) of 2002 and all other Securities and Exchange Commission (SEC) regulations. There specific ethical challenges accountants may face that can change the revenues of a company. For instance, if a company switches from LIFO to FIFO depreciation, it can overestimate or underestimate the revenues of the firm.   Whenever a change occurs in depreciation method accountants are supposed to reveal the change in the notes to the financial statements. The accounting profession requires people that have high moral and ethical standards in order to properly serve the best interest of a corporation.The financial services industry has been under heavy scrutiny in the United States ever since the government gave the banks a bailout package worth over $700 billion. There are ethical challenges the industry faces in multiple segments of the industry. Prior to 2008, the banking industry acted unethically in many of its decisions because it gave out home loans to people that did not qualify for loans under normal credit criteria. The risky loans created the housing bubble. The housing bubble was one of the main factors that led to the global recession. The supply for housing exceeded demand. The realtors acted as brokers instead of facilitators and they sold homes to people based on speculative price appreciations. Full compliance with the Sarbanes Oxley Act can help accountants comply with the highest ethical standards possible since SOX covers accountability, internal controls, and prevention of fraud issues. The top executive management teams are subject to prison terms of up to 25 years if the financial statements of public companies have material error or fraud. Overall financial risk can be mitigated in the financial industry by using sound diversification strategies.