Ethics in accounting: the JP Morgan and the Enron scandals Essay

Ethics in accounting is of the utmost importance in regards to protecting the reputation of a company and their employees. There have been many scandals in recent years regarding big corporations on Wall Street and it has cast a shadow of mistrust. The JP Morgan Scandal is one of the most notorious scandals in history. Bernie Madoff constructed an intricate Ponzi scheme that cost shareholders billions of dollars. He was sentenced to over 100 years in prison. Meanwhile, JP Morgan is a tarnished company that was hit with a 2 billion dollar penalty to settle to incident. Thousands of individuals were affected by the Ponzi scheme and over 218 million dollars was subsequently paid to the plaintiffs involved. The Madoff Trustee alone, was paid 325 million dollars. JP Morgan in total had to deal with a 20 billion dollar legal tab.

Enron's scandal, at the time it occurred, was thought to be the biggest scandal in history. Thanks to help from politicians pushing legislation that helped pave the way for Enron, they were able to capitalize on the energy market. At one point, they implemented 35 rolling blackouts in California to increase the electricity cost for businesses and residents. The company kept substantial losses of their books to continue to bring in big investors. Arthur Anderson Accounting Firm kept Enron's books fee. In the end, thousands lost their jobs, investors lost billions of dollars, and high ranking executives were imprisoned. JP Morgan filed for bankruptcy in the early 2000's due to the substantial impact of the scandal.

World Com communications followed the path of Enron and filed for bankruptcy in 2002. The company quickly rose to prominence through multiple acquisitions in short period of time. They subsequently attempted to construct a monopoly on the communications market by merging with spring. Unfortunately for World Com they were derailed in their attempt to overtake the market by foreign communication companies. Arthur Anderson, who was involved with the Enron scandal, quickly moved away from World Com and claimed no wrong doing. 17,000 employees lost their jobs and World Com's stocks plummeted by as much as 76%.

Ethics in Accounting was manipulated to bring overwhelming profit to a few at the cost of thousands of hard working men and women. The general public has a mistrust of Wall Street and these companies. Because of these scandals, the SarbanesOxley Act of 2002 was enacted to put tougher standards on accounting. The penalty for breaking the law will have much tougher consequences for the corporations that try their luck. Ethics is important in accounting and should never be manipulated. It is far too easy to change number here and change numbers there to make a company look like they are turning a profit, but in the end, they will get caught. The economy has suffered tremendously from scandals like Enron, World Com, and JP Morgan. With tougher rules and regulations in place, it is my hope that corporations will think twice before breaking the law.