Causes of Accounting Scandals Essay
Causes of Accounting Scandals
The accounting entities and accountants of the world have defined several standards and ethical guidelines that need to be and must be followed by the accountants so that things are not misrepresented and no wrong information is provided to the investors. The accounting information generated by any company is generally used by external entities and stakeholders as well and hence it is crucial to maintain and define some standards and practices that serve the purpose and are in the best of interest of all the stakeholders of any organization. However, despite of the development and establishment of such specific standards and regulations, there are several fraudulent activities that take place and there are several accounting scandals that come into the picture from time to time.
There are several factors that lead to such accounting scandals despite of the presence of the ethical guidelines and standards. The scandals are shown to occur because of the unethical behavior o f the employees and one major factor that may lead to the unethical behavior of the employees is the corporate culture developed and used in an organization. Every company adopts and works on a specific type of culture and the culture should always be such that is facilitates the overall learning and development of the employees. But at times, due to some gaps in the expectations and the culture actually defined, the employees start adopting negative and fraudulent measures, thus leading to scandals.
Miscommunication can also be a major reason for the observed scandal in several cases. It is possible that certain guidelines or practices are mis-communicated to the people. At times, it happens to be that the person responsible for giving the information misses out or omits some information all together. And hence, the accounting scandals tend to occur not because of the deliberate effort of some employee or a bunch of employees but mainly because they were not clear of certain practices or standards.
The lack of appropriate management and guidance in an organization is also an important factor that contributes towards the development of different
accounting scandals. Irrespective of the roles and responsibilities of the employees, the management always needs to keep a check on the things that is happening and maintain a way of guiding and managing the employees. In conditions where the management fails to do so, there are certain differences that occur in the set guidelines and actual practices, which lead to fraudulent activities.
Thus, there are several factors that can be responsible for the accounting scandals that have occurred in the past and will keep occurring in the accounting world. In addition to these factors, there are also certain individual factors such as lack of professionalism, lack of knowledge, financial benefit or gain that can lead to scandals. And hence it is a mandate for every company to develop ways to monitor and avoid such unwanted and undesired situations.