Posted: October 29th, 2022

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Please read each passage below, I need a few sentences in response to each part. Please use at least one source. Please cite the reference(s) properly. Part 1 and 2 PLACE THE REFERENCES UNDERNEATH EACH PASSAGE can be on the same page, however, please keep them separate by labeling them Part 1 and Part 2. No Title Page Needed DUE TOMORROW 3/7/22 by 6PM CST

PART 1

Despite the presence of regulatory agencies like the SEC, the simple reality is that there is no such thing as the “organization police”. One of the hardest realities that I had to adjust to as an administrator in a public organization was the fact that there are very few people actually watching what organizational leaders do. It is incumbent on these leaders to do the right thing for their organizations. After all, this is why they get the big paychecks! However, with this being stated and well-known, it is important to remember that executives are still only people. Objectivity can often be obscured by emotions of fear, anger, jealousy, or even greed. This is the first key in understanding how things can end up going the wrong way.

The goal of any business is to create profit. Executives within a company are tasked with creating strategies to ensure that companies are healthy and profitable. While many organizational concepts are abstract (like motivation, leadership, etc.), financial reporting should be very quantitative and straightforward. However, as mentioned in the first conversation this week, it is still possible to obscure the truth with irrelevant or missing information. An example of this scenario was seen with Enron, as financial managers “cooked the books” to ensure that stakeholders and the public had a more favorable view of the company than what was actually taking place (Epstein, 2014). Feeling the pressure of the expectation of success, it is entirely possible for business or financial managers to create these kinds of false reporting scenarios to mislead anybody who might be paying attention.

As we have seen many times throughout history, it is still entirely possible to mislead people despite the presence of regulatory agencies. As I mentioned above, this is where it is important for all leaders within an organization to hold ethical principles as one of their guiding forces. Accurate financial reporting is one area that should be very straightforward, but it is up to the person wielding the pen and calculator to do the right thing.

References:

Epstein, L. (2014). Financial Decision Making: An Introduction to Financial Reports. Zovio. Retrieved from: https://content.uagc.edu/

PART 2

The reporting principles for Generally Accepted Accounting Principles (GAAP) are developed by the Financial Accounting Standards Board (FASB). All public companies must follow these principles (Epstein, 2014). Not only do companies have to compete with competitors within their country they also have to compete internationally. Members of FASB and International Accounting Standards Board (IASB) are leading efforts to merge GAAP rules with international financial reporting rules. If those members own or invest in companies impacted by this merger that can be a conflict of interest. Investors want in as a stakeholder at the lowest rate possible while creditors want to set rate where price best matches risk.

This merger has already been in the making for some years now. Is it possible that delays could be intentional to give investors or creditors a competitive advantage? As an investor this could be beneficial whereas a creditor they could be at a disadvantage. The idea of that being a possibility and members having that level of authority can be concerning. Competitors nationally and internationally will have to adjust to new consolidated rules. They will no longer be able to undervalue their assets to benefit their bottom line. The ultimate goal for most organizations is to be profitable. Loopholes in business exist and organizational leaders leverage them where they can. Whenever this merger is official it will be critical for Securities and Exchange Commission (SEC) to closely monitor activity and do reoccurring audits to ensure all parties are adhering to GAAP. Based on lessons learned from audits, identifying opportunities to improve financial reporting process over time should be a priority.

Reference

Epstein, L., 2014, Financial Decision-Making: An Introduction to Financial Reports, Bridgepoint Education, Inc.

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