The past years have seen increased reports of organizational fraud, corruption and general unethical behavior for many multinationals. Corporate scandals have rapidly continued to take hold unabated. Honesty and integrity are proving futile, not only in financial systems but also in federal organizations. In my view, trying to solve problems in the financial and economic market while avoiding issues regarding ethical conduct is a hindrance to economic growth. Can ethical behavior be regulated? This can be possible with a transparent compliance system in place.
Preparation and maintenance of financial statements is the central role of financial accounting. However, several indicators point to the fact that many corporations design a way of presenting their report in a better form than it is in reality. In many accrual accounting practices, it is widely known that management tends to increase earnings and to hide much of the costs. On the full understanding that the most clients agree to deal with the companies on the premise of the financial statement general outlook, some companies unethically include the fraudulent inclusion of revenues at the point of contract signing before receiving or producing the real product.
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The attempts to cover up for the real financial position of the firm, some managers tend to apply specific accounting methods that indicate very little dept on the balance sheet. This is done by including joint ventures or purchases through leases other than indicating full ownership in the balance sheet. The financial statements should take into effect the influence of leaders on economic policies.
The fidelity to ethical financial practices can be possible with a transparent compliance system in place. Continued creation of unethical accounting method aims at lowering the taxable income for the companies. Through the generation of the unrealistic asset, valuations make the companies indicate low assets on its balance sheet but increase its liabilities. The regulation of financial ethics is proving a hard task for many companies, owing to the race to continued survival in the commercial market.The need for employment of professional financial management and inclusion of government financial experts in private company finance departments can compel ethical financial practices in many corporations.
