Litigations, Censures & Fines on Accounting Firms

Abstract

This paper addresses the importance of the legal actions including litigations, censures and fines that have increased to an extent during the recent times. The role of the regulatory authorities with regards to the above mentioned legal actions is the key to avoid the financial issues that have hurt the economic conditions of the country. The importance of corporate ethics in the regulation of issue free financing practices is also very important. In addition to this, the importance of abiding with the ethical standards of accounting and financing is also very important for the eradication of financing and accounting irregularities. A number of examples regarding the debacles by leadership of organizations are also provided for better explanation of the ethical accounting practices. The paper also involves recommendations that would assist organizations to abide by the ethical principles and continue fair accounting practices for the betterment of the overall economy of the country.

Litigations, Censures & Fines on Accounting Firms

Introduction

Legal actions such as litigation, censures & fines have risen to a vanguard in recent times. Stakeholders are more aware of accounting proceeding and not even a slightest of error by an accounting firm goes uncaught. There has been an increase in suing accounting firms for accounting malpractices, especially after the recession. As these developments emerge, regulatory authorities and professional societies are much stricter in maintaining compliance and efficient accounting practices in accounting firms than before. There have been many cases in the recent past regarding litigation, censures and fines imposed by regulatory authorities on public accounting firms. A lot has been done and much still needs to be done by the regulatory authorities to ensure better, fair and efficient accounting practices ensue in their respective jurisdictions. This will not just help accounting profession develop, but will also help country avoiding financial irregularities which have hurt economies of several countries massively in the past.

Discussion

The basic reasons behind litigating or fining of a firm are when an accounting firm is involved in any sort of wrongdoing or accounting malpractice. To discourage that and make sure such a wrongdoing is not being carried out in the future, regulatory authorities take the offender to a court and may impose fines and censures. This is mostly done if the occurrence of any malpractice by the offender is proven and found to be intentional. Unintentional negligible misconduct may escape litigations or at most fined to give a firm a reminder to improve their conduct. One reason quite common which forms the crux of the litigation or fines are when accounting firms knowingly manipulate transactions to serve their own interests. Wall Street just recently reported that regulators in the US are looking to sue JP Morgan for around $11 billion dollars for the firms' involvement in the pre-mortgage crisis (Wall Street Journal, 2013). Such a litigation or fine can impact a firm in an extreme negative way. Even a lawsuit in which a firm's successfully defends its position cast unfavorable effects on the ...