Effects of Manipulative Accounting Practices

This paper examines the use of manipulative practices by accountants and the impacts of their manipulation in an ethical context. In particular this paper discusses the major account statement scandals in modern years and the effects on the history industry.

Users of fiscal statements typically assume that financial statements are presented slightly and thus rely on them to make economical decisions. This is non always the case as preparers of financial statements can be persuaded to distort or manipulate financial statements to tailor the overall message the financial statements present to suit their needs. We curb seen deduction of this with the Enron and WorldCom scandals. This is typically described as creative story or earnings management and as we have seen in recent years this practice can have enormous economic consequences and greatly impact accounting standards.

In the past tenner there have been a number of major accounting scandals that have occurred. The most famous accounting scandal was potential with the Enron Corporation. The Enron Corporation filed for bankruptcy protection in 2001 (From collapse to convictions: a timeline, 2006). The events that led to this included years of fraudulent accounting. Although many shareholders of Enron impression that Enron?s operations had promising returns they were unaware of the true financial position that Enron was in.



Executives of Enron engaged in ?creative accounting? to skin many of their liabilities. By utilizing special purpose entities (SPE), Enron was able to entomb millions of dollars of liabilities and manipulate their financial ratios and credit ratings to what investors sought in the derivation market.

WorldCom was another major accounting scandal that took place in the last decade. When WorldCom filed for bankruptcy protection in 2001 it went down in United States history as being the largest bankruptcy to have ever been filed (The WorldCom Story, 2006).

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