Discuss why integrity, honesty, and transparency are essential in financial reporting.
Participate in Discussion of Accounting Ethics
Choice Hotels requires high levels of integrity, honesty, and transparency in the development of financial reports. They must ensure compliance with the standards articulated by international bodies like the Financial Accounting Standards Board, Generally Accepted Accounting Principles (GAAP), and the International Financial Reporting Standards (IFRS) Board.
Before 2002 and prior to SOX there were a number of high profile frauds in public companies. Enron, WorldCom, Tyco, and Sunbeam come to mind. These companies had CEOs prosecuted for fraud under mail fraud and securities laws.
In 2002 SOX became law. During the following 8 to 10 years, Congress and dozens of accountants claimed that SOX had dramatically increased the penalties for fraud. That was true in theory but not in the real world.
Since SOX became law in 2002, only one CEO, Richard Scrushy, has been prosecuted under SOX. He was acquitted!
None of the CEOs who participated in mortgage securities fraud during the 2008 financial crisis, went to jail or even get prosecuted.
Calendar Invite
Event: MCS Special Retreat: Ethics in Focus
Location: Executive Room
Meeting Organizer: Elisa Izuki
The managing director, Elisa Izuki, would like you and your team of MCS consultants to develop an appreciation for ethical accounting standards and the need for objectivity in your analysis. With that in mind, she invites all the consultants working on the Choice Hotels project to an offsite company retreat. During the retreat, a considerable amount of time is devoted to a discussion of topics related to accounting ethics.
Assuming you and your colleagues are attending the retreat, go to the Accounting Ethics Discussion, and complete the following tasks:
• Discuss why integrity, honesty, and transparency are essential in financial reporting. Give credit to any sources or real-world examples you use to support your statements.
• GAAP are the general rules, regulations, and guidelines that accountants in the United States follow to ensure their practices are legal and ethical. Explain to your colleagues why GAAP is so useful. Give credit to any sources or real-world examples you use to support your statements.
• Later in the week, after you are back in your office, you have a follow-up discussion with your MCS colleagues in an effort to summarize the key lessons you have learned from your discussion on ethics in finance and accounting at the past weekend’s retreat. Respond to your colleagues’ original discussion posts and give credit to any sources you use to support your statements, at least 250 words.
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