Ethics of Financial Transaction

There have been several notable incidents in recent memory of firms altering financial statements to manipulate investors. Misleading financial accounts are a problem that needs to be eradicated as soon as possible. These actions jeopardize the credibility of the US capital sector and may discourage consumers from investing in stocks. Accounting information is essential for sustaining the public confidence of investors, and any modification should be avoided.

Accounting records are the most used tools for evaluating a company’s as well as its management’s progress (Ozlanski, 2019). Interested stakeholders should be willing to trust that a statement of financial position accurately reflects its progress in terms of making well-informed judgments. Clients, workers, authorities, shareholders, financiers, and distributors all require financial statements accounts to make decisions about a variety of transactions. Appropriate accounting documentation determines a firm’s trustworthiness, which is essential for making good judgments. This case study is going to analyze the research topic on ethics of financial transactions combined with the lesson learned from Enron’s company.

Having ethics in corporate financial operations is among the foundations to obtaining the trust of the clients and shareholders. Morality is crucial because, regardless of the size of the transfer of funds, they generate confidence, therefore without integrity, businesses and financial systems would begin to crumble. Commodity prices that underpin emerging economies are affected by economic transactions. Because of its power, money is only limited in its implications by morality. Money transfers that are conducted ethically would help to reduce unlawful acts.

To resolve bank transaction moral standards, companies should focus on fostering an environment of authenticity in the workplace, which might include establishing achievable goals and putting in place mechanisms to monitor and implement moral conduct. Integrity, fairness, and honesty are the three main qualities for recognizing morality difficulties. The firm and its workers must share the same moral ideals when it comes to financial operations and how to handle them properly.

Firm’s culture is crucial, since it maintains a positive workplace for employees. A new department could be founded with the involvement of the stakeholders as a monitoring agency to promote a proper ethical code of conduct. This division would be in charge of instilling the industry’s organizational values. It is indeed feasible to avert unauthorized transactions by publicizing the business’s condition as well as data about the things it sells. In addition, a firm can make itself convenient to consumers and employees on a frequent basis, and the open approach to management permits for more equitable interactions.

Confidential communications operated by third parties can concentrate on appropriate individuals who can preserve the leaker’s confidentiality and identity. Inspection and prompt disclosure to the management can help avoid a situation where upper executives choose to sustain the firm’s financial performance, which can ultimately lead to the firm’s insolvency. Staff and management may expect the businesses to be reachable constantly, and honest strategic planning permits for more equitable interactions.

By analyzing the case of the collapse of the Enron company, several lessons are learned. First, it is incorrect to praise the high performance of employees through unethical means. Professional leaders’ presumption in claiming to be the brightest and best, the most creative, and presenting themselves as superheroes ought to be a warning sign for stockholders, executives, and the broader population (Di Gianfilippo et al., 2020). This practice resulted in Jeffrey Skilling being convicted to 24 years of imprisonment; Chairperson Kenneth Lay was anticipating a penalty of more than 45 years, and CFO Andy Lay getting jailed to 6 years.

Another lesson learned is that inspectors must be capable of recognizing business misbehavior and not hide the truth. Every allegation should be considered credible by corporations and agencies. The privacy and confidentiality of the workers and investigative journalists engaged should be protected. Managers and stockholders must also be aware of the risks and incentives associated with the financial feature of the organizational structure by their firms, as well as a complete awareness of their firms’ core operations.

Additionally, the learning experience about ethical shortcomings is a constitutional violation. The most serious incidence of this was tied to the Enron executive’s involvement in the formation and operation of fictitious Special Purpose Entities (SPES) that the corporation possessed. The internal audit Arthur Andersen behaved irresponsibly by not acting in interests to the money transfer with the accounting entity (Krioni, 2018). He also consented to get substantial amounts of money in exchange for his assistance in organizing the SPE transactions.

In conclusion, the ethics of financial transactions are important since they allow clients to gain a trust of a business. Unscrupulous business practices, such as fraudulent activity, are frequently blamed on corporate governance weaknesses that fail to protect shareholders. Unethical financial transactions are the result of several faults, including incompetence within the management board or senior executives, inefficient risk management, and insufficient legislation. The absence of monetary operation integrity in the Enron Company resulted to its collapse. There was also losses and punishment of leaders by the court of law.

References

Di Gianfilippo, R., Sirinirund, B., Rodriguez, M., Chen, Z., & Wang, H. (2020). Long-Term prognosis of peri-implantitis treatment: a systematic review of prospective trials with more than 3 years of follow-up. Applied Sciences, 10(24), 84-90. Web.

Krioni, A. (2018). Detective Audit: Methodology for assessing the business reliability of a small and medium-sized business entity. Accounting Analysis Auditing, 5(4), 64-77. Web.

Ozlanski, M. (2019). Bright lines vs. blurred lines: When do critical audit matters influence investors’ perceptions of management’s reporting credibility? Advances in Accounting, 45, 100-416. Web.

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