Unethical accounting practices and role of government

[Name of Client]

[Name of University]

Unethical accounting practices and role of government

Introduction:

When it comes to finance and audit fraud cases, one of the biggest question put forward is: Should the government provide financial assistance to people whose retirement funds were invested in the stock of companies that may have used unethical accounting practices? There have been a number of incidences in history of finance where people invested large amounts, sometimes even their fortunes and their life time investments in some projects that turn out to be fraud, thus taking hundreds and thousands of people towards bankruptcy and financial crippling for the rest of their lives.

In such cases, oftentimes individuals hold the government responsible for fraud and call for compensation for their losses, filing cases and appeals in the court of law. In my opinion, it is not the responsibility of the government to make up for the losses, as the schemes are not presented by the government nor are they promoted by the government. People themselves choose to invest in the scheme, and thus according to clear rules, themselves are responsible for the outcomes of that. The company, however, is entitled to compensate for the losses the investors suffer from.

A number of compensations were also made in this regard, details of which are as presented in following paragraphs. There were auctions and other measures carried out to make up for the losses that employees faced when all their retirement funds went down with the decreasing value of company's shares. Despite all these measures, the loss was not totally reversed and thousands of individuals were left hopeless. However, this does make it the responsibility of the government to make up for the losses—either the company or the employees themselves are responsible for the mishap.

Enron Scandal:

Some incidences cause alterations in the course of history, depending upon their magnitude and the number of people affected by them. The more the number individuals affected, the more impactful the incidence is. Same is the case with Enron scandal. The Enron scandal came to screen in October 2001, a case that resulted in bankruptcy of Enron Corporation. This organization was basically an American energy company situated in Houston, Texas.

The same case also resulted in termination of Arthur Anderson, which was said to be one of the five greatest audit and accounting associations in the world. Apart from being the largest bankruptcy case in the history of United States of America at that time, Enron was also recognized as the most impactful and biggest audit failure (Bratton, 2002).

Consequences of Enron's Scandal:

As a result of Enron's scandal, some disastrous statistics came to screen. According to these reports, 4500 employees have lost their jobs and the investors suffered a loss of $160 billion. This loss includes losing old age security as well as retirement funds, which the employees had invested in the company's shares. There was obliteration of the pension fund of the company's employees, as well as destruction of citizen's trust in the ...