Good Case Study On Accounting 301a Intermediate Accounting I Ethics Case
I would like to draw your attention to proper business ethics that every employee is expected to uphold. The Human Resources department recommends that all employees reflect and learn from the case of WorldCom. The actions of Troy Normand and other management officials in WorldCom led to fraud of billions of dollars and drove the company to bankruptcy (The Associated Press).
The ethical issue involved is the manipulation of financial reports and statements against accounting principles and ethics. Entries were wrongly adjusted in order to reflect an increase to earnings while covering up the losses incurred by WorldCom. Scott Sullivan, who was the company’s chief financial officer, had asked Normand to shift some expenses and include them in the capital accounts (Eichenwald).
Troy Normand acted in an improper manner. Notably, he admitted to being guilty of high-level late adjustments of financial statements. Although he was under pressure to disregard business ethics, he felt what was being asked of him was not the right thing.
The first alternative course of action for Normand would have been to call for a meeting of the departments of accounting, audit and company management to deliberate a better way forward. Another alternative would have been to report the case to Securities and Exchange Commission (SEC). Lastly, Normand would have opted to resign
Some of the stakeholders in this case include Troy Normand, shareholders, Company investors and external audit companies. Normand would have suffered a loss of income if he would have resigned or if he was fired from his job. Shareholders would have suffered a loss of dividends and potential downfall of their share prices. Normand’s actions would have also led to a decline of investor confidence and interest. In addition, the case would ruin the reputation and integrity of the external auditors.
In reality, it is important for any employee who finds himself or herself in Troy Normand’s shoes to do maintain business ethics. Even under pressure to disregard business ethics, the employee should understand that it is for the greater good. In addition, there might be disadvantages associated with maintaining business ethics but it saves the majority from suffering even greater losses in the end.
Eichenwald, K. “2 Ex-Officials at WorldCom Are Charged in Huge Fraud.” The New York Times. 2
August 2002. Web. 28 March 2015.
The Associated Press. “Ex-WorldCom Accountant Gets Prison Term.” The New York Times. 6
August 2005. Web. 28 March 2015.
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