Fraud is defined as “the intentional deception made for personal and monetary gain” (Hill, 2005). Many people think think of fraud as making an illegal ID or forging papers. Another type of fraud that often goes unnoticed to the untrained eye is unethical accounting, also known as accounting fraud or ‘Cooking the books”. Accounting scandals are complex and can be very tricky to locate even under close inspection of a company’s accounting records. Accounting relies heavily upon numbers balancing each other out.
Because of the fake account, CNNMoney spoke with several former Wells Fargo employees who attempted to report the illegal tactics, but faced harsh punishment by the organization. These whistleblowers used the appropriate channels to report the wrongdoing and suffered retaliation that ranged from a hostile work environment to termination of employment from Wells Fargo. The suppression of whistleblowing by Wells Fargo could result in legal consequences for the executives for any retaliation that occurred against employees who called the ethics hotline to report the illegal
Background WorldCom, once known as one of the most powerful telecommunication organizations of the world, is now studied as a case of a fraudulent company that carried out unethical financial activities to cover its weakening position in the market. After some aggressive investment decisions, the company started to witness huge financial pressure. The management used various forged accounting entries to conceal its weakening position. Cynthia Cooper, Vice President Internal Audit, discovered the unethical activities and raised the issue with the management and relevant departments and received bitter responses. She carried out internal audits in her own capacity with her colleagues and compiled evidence against fraudulent activities.
In the west we have recent examples like the recent Libor scandal in London as well as numerous scandals before and during the global financial crisis concerning unlawful and unethical action. Cheating seems to be in the heart of these unethical behaviours where rules are bent and misinformation is leveraged on purpose for financial gain like in the mortgage backed securities scheme, that some have argued, was the harbinger of the collapse of the Western financial system. For this kind of behaviour to take place social scientists have offered different models of justifying cheating, fraudulent actions and taking advantage of other people. Most models that the discipline of economics offer a model of people as selfish agents that are ultra-rational, making every action a computation to maximize personal gain. This model of actors is commonly referred as Homo Economicus.
Today, Arthur Andersen & Co. is notoriously known for its’ unethical behavior of collusion with Enron, leading to thousands of hard working Americans losing millions of dollars. This type of behavior shows how far Arthur Andersen & Co. has strayed from its original foundation of honesty and integrity, instilled in it by the founder and senior partner Arthur E. Andersen. Originally named Arthur, DeLany & Co. in 1913 then soon changed to Arthur Andersen & Co., Andersen sought to challenge the status quo of the public accounting system. Andersen continually forged new ways of serving his clients, training his employees and growing his company. Using the motto “Think Straight-Talk Straight,” Andersen challenged traditional accounting practices
Recently Wells Fargo’s scandal of creating phony accounts has raised ethical concerns in the corporate world. Wells Fargo employees opened more than two million unauthorized bank and credit card accounts to meet sales projections. The company was charged with huge fines and earned a bad reputation that will take years to rebuild. According to the Deontological perspective on ethics least some acts are morally obligatory. Under this approach, an action is considered morally bad because of some characteristic of the action itself, not just because the product of the action is bad.
As employees faced pressure to reach quotas, they found ways to cheat the system. If a customer came in to open an account, the employee would simply make it two or three. The intense pressure placed on employees created an environment that not only rewarded dishonesty and malpractice, but made it necessary to maintain employment. Many employees attempted to report these illegal practices to the Wells Fargo ethics line, but action was never taken and the problem escalated. Many employees who attempted to report the crimes were fired and unable to find work due to a “black mark” Wells Fargo placed on their U5.
Bear Stearns and Lehman Brothers got -0.0635 and 0.7507 respectively, which suggesting these two companies might use some methods to hide its operating performance. In table 9, Enron, Qwest, Global Crossing, and Tyco also had red flags. This tells us that Quality Ratios works efficiently for fraudulent financial reporting companies. 6) Valuation Ratios Lehman Brothers and Bear Stearns got red flags on all valuation ratios. Many major fraudulent companies had red flags of P/E ratio and many large U.S. banks had red flags of P/S ratio.
INTRODUCTION Background of the study The area of accounting ethics has gained significant interest within the past few years in tandem with the occurrences of various global accounting scandals. Accounting scandals such as the Lehman Brothers and Enron in a series of financial irregularities in the world. After the collapse of Enron, Arthur Andersen, and other similar inferences, the pressure for ethical or moral transparency has increased. Business ethics dilemmas are a result of the need to balance economic and social performance (Easterling, 2009). Determining and maintaining the ‘right’ balance are becoming more difficult as today’s business organizations operate in an environment that is characterized by an unprecedented level of complexity,