A doctor follows certain standards in treating a patient’s illness. An architect
follows certain standards in designing a building. An accountant follows certain
standards in reporting fi nancial information. For these standards to work, a
fundamental business concept must be at work—ethical behavior.
Ethics in Financial Reporting
People won’t gamble in a casino if they think it is “rigged.” Similarly, people
won’t play the stock market if they think stock prices are rigged. In recent years,
the fi nancial press has been full of articles about fi nancial scandals at Enron,
WorldCom, HealthSouth, AIG, and others. As the scandals came to light, mistrust of fi nancial reporting in general grew. One article in the Wall Street Journal noted that “repeated disclosures about questionable accounting practices
have bruised investors’ faith in the reliability of earnings reports, which in turn
has sent stock prices tumbling.” Imagine trying to carry on a business or invest money if you could not depend on the fi nancial statements to be honestly prepared. Information would have no credibility. There is no doubt that a
sound, well-function.
A doctor follows certain standards in treating a patient’s illness. An architect
follows certain standards in designing a building. An accountant follows certain
standards in reporting fi nancial information. For these standards to work, a
fundamental business concept must be at work—ethical behavior.
Ethics in Financial Reporting
People won’t gamble in a casino if they think it is “rigged.” Similarly, people
won’t play the stock market if they think stock prices are rigged. In recent years,
the fi nancial press has been full of articles about fi nancial scandals at Enron,
WorldCom, HealthSouth, AIG, and others. As the scandals came to light, mistrust of fi nancial reporting in general grew. One article in the Wall Street Journal noted that “repeated disclosures about questionable accounting practices
have bruised investors’ faith in the reliability of earnings reports, which in turn
has sent stock prices tumbling.” Imagine trying to carry on a business or invest money if you could not depend on the fi nancial statements to be honestly prepared. Information would have no credibility. There is no doubt that a
sound, well-function.
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