The seemingly endless series of scandals affecting companies raises many controversies, questioning the involvement of intelligent executives in unethical behavior. Company control has drawn world consideration when the giant firms such as Enron in UK and WorldCom in US downfall in 2001 and 2002 successively. This paper seeks to analyze the relationship between the various ethical and regulatory, as well as governance issues.
The primary ethical principle that applies to accountants is integrity, objectivity, and competence. Integrity refers to being honest and forthright in dealings and communication with others; objectivity means impartiality and freedom from conflict of interest. Principled responsibilities also necessitate the auditor to be independent of the institute to which they are offering accounting and auditing services. However, WorldCom and Enron companies, corruption and fraud seem to be rampant. The accountant’s duty is fundamental to the ability of directors to make intellectual, knowledgeable choices about the imminent of the company. Such commercial pronouncements have a noteworthy effect on society as an entire. If a huge firm makes poor business judgment founded on defective accounting material, or if it cheats the civic concerning its monetary wellbeing and is not challenged by ethical accountants, the consequence on humanity as a whole can be demoralizing, as was confirmed by both the Enron and WorldCom breakdowns. Thousands of persons lost their occupations as well as their stocks and pensions because managers deceived the public about the monetary health of the establishments and this unethical conduct was disregarded and/or ignored by accountants.
Numerous approve that commercial governance is the chief factor in making the financial reporting. The corporate governance assemblies postulates the dispersal of privileges and responsibilities among the dissimilar members in the organization- such as the panel, executives, stockholders and other investors and form the rubrics and procedures for decision making. The process and arrangements control and accomplish the commercial and matters of the corporation towards improving the business affluence and corporate liability. Decent commercial governance aims at improving business affluence and at the same time accountability.
Transparency is a very vital constituent of monetary reportage. Lack of transparencies in WorldCom companies has resorted to a grave decline in the profit margin. This concern has indebted accounting researchers to distress themselves with instruments of transparency which seek to support the attention of executive and shareholders, and with the mechanisms of accountability such as audit committee, core audit, and threat management as pledges of the quality of financial reporting. In addition, distribution of info concerning the corporation happenings and their outcomes to shareholders is the most imperative factor to ensure efficiency of decisions taken by shareholders. The amount of info, professional items disclosed in yearly reports and the time information to be unconfined, are predisposed by the board of directors. Thus, the board of directors is self-regulating and perceives their duty to be answerable to shareholders or stakeholders; they will be apparent in revealing all the pertinent information in their financial reporting. The overall ethical challenge it to have genuine authority, therefore, the company requires to develop humanoid assets with outstanding ethical values.
Accountability of the auditor is an important element of efficient equity markets because audits can enhance credibility of financial information. The role of the audit is to directly supports better corporate governance practices through transparent financial reporting, and consequently effect apportionment of resources. This is because an effective and objective of the audit is an essential part of corporate governance. Auditors are given power to detect the company wrongdoings and accountable on the financial reporting prepared by the governance of the Company. Auditors rely on their income on audit and consultancy fee paid by their clients. In these situations, the auditors will be in a difficult position if their major clients decide to manipulate the figures. Nevertheless, this ought not to be a limitation to the assessors; they should put effort in transmit out their commitments and obligations accordingly. Therefore, to improve corporate governance of WorldCom and Enron, it is obligatory to embrace the answerability of accountants as they play a central role in the steadfastness of the monetary reporting.
WorldCom and Enron should embrace ethical leadership in the various departments, and at higher executives. Corporate governance should improve on the minority interest rights in the capital market. The lesser shareholders are limited to a certain degree as most of them are not conscious of their privileges under the corporations safeguarding their interest. The corporate executives abuse their power by ordering minority shareholders not to voice their opinions on aggressive or misleading financial reports. It is recommended to have a minority shareholder statement in the financial reporting to conform with the good corporate governance that has been the practice in WorldCom and Enron companies.
All the countries in the world have their regulation in guiding the corporate governance issue. The set of rules and regulation, aim at shaping comprehensive standards of good governance, however, essential having all rules on paper is not sufficient; it must be reinforced basically by well-organized execution and supervision. The issue of corporate governance failure will still occur if the enforcement is biased to certain parties and lack monitoring. The challenge barrier is to impose the rules and regulation to all and sundry without looking in to partisan influence, state position or individual credibility such as elite. Development of WorldCom and Enron in relation to class, ethnicity, and the state explore the elite effect. Destructive ruling elite coalition is ideally distressed with using the public to accrue wealth, supremacy and other individualistic interest. The company ought to have the best measures to prevent corruption and unethical practice to prevent matters such as corruption or fraud. These ethical practices can be reflected in enforcement and monitoring, to overcome the challenge of corruption and fraud in the corporate, and to create a smooth corporate governance in the country.
In conclusion, corporate governance became important when most companies collapse. The failure in corporate forced rules and regulation to be enacted, this rules and regulation are to be followed ethically to ensure the realization of the company goals. Failure of corporate governance could lead to failure of financial reporting. The enforcement and monitoring of rules and regulation should also practice ethically. Transparency in financial is another ethical approach that would enhance good governance. The accountability of auditors plays a major role establishing the corporate governance schedule towards a healthier fiscal reporting. Accountants should carry their duties ethically since their decision can build or destroy a company. Auditors should not disregard or ignore any relevant information to the financial wellness of the company. All information about the prevailing fiscal situation should be announced openly be made available to the executives and the entire public in wholesome.
References
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