Arthur Andersen: Questionable Accounting Practices Essay Example

of control, and independence standards and rules. Further, there are provisions of investigations of registered public accounting firms.

Sunbeam Corporation: "Chainsaw A1" and Greed

1. How did pressures for financial performance contribute to Sunbeam's culture here quarterly sales were manipulated to influence investors? round the company and make it profitable. The fact that he took over the company and showed a profit had two fold objectives. The first was to increase the price of the stock in the market. The second was to sell Sunbeam at an inflated price. When Dunlap took over as the CEO, he closed several plants and laid Offa large number of employees and claimed that he was restructuring Sunbeam Corporation. The firm reported profits and these received good reviews from financial analysts and they approved the performance of the business.
2. What were Dunlap's contributions to the financial and public relations embarrassments at Sunbeam that caused investors and the public to question Sunbeam's integrity? Sunbeam Corporation was embarrassed by Dunlap's actions. His actions were criticized by the SEC. The SEC pointed out that $62 million of Sunbeam Corporation's income did not comply with accounting rules. Moreover, the SEC named Dunlap that he had inflated earnings of Sunbeam Corporation. Dunlap reduced the value of its inventory so that it could record large profits when goods were sold. SEC pointed out that Dunlap had increased the sales by stuffing channels and putting inventories into books of distributors and retailers.
3. Identify ethical issues that Dunlap's management team may have created by adopting a short-run focus on financial performance. What lessons could be learned from the outcome? The ethical issue related to Dunlap's management from the
   

consequential ethics perspective is that if Sunbeam Corporation inflated the income of the company for one year, a time will come when either the scam was exposed or it became impossible to inflate the profits. At that point the consequences for the company and its employees would be disastrous. Also from the utilitarian perspective the action of firing a large number of employees is not an action of high moral worth. Such an action brought suffering to a large number of employees and their families. From the point of view of virtue ethics it was not an act of good character to show inflated income. Most importantly, when Arthur Anderson asked Sunbeam Corporation to rectify its account and it did not, Arthur Andersen should not have certified Sunbeam Corporation's financial statement.