Assignment 1: Review of Accounting Ethics
ACC557 Financial Accounting
July 21, 2013
Introduction
Accounting ethics is necessary people financial consultants, accountants or accounting executives are privy to confidential, private and sensitive information about people, companies and their clients. One trusts an accountant with information regarding their finances or business. That’s why it is so important for ethics in accounting and in financial reporting. It is important for ANY type of business to practice ethics and not breach them.
History and background of Adelphia Communications Corporation
Adelphia Communications Corporation or “ACC, was a small family-owned cable television company. It was established in a small Pennsylvania town. John Rigas started Adelphia and turned the local cable franchise into a communications empire. (Giroux, 2008). Under the Sarbanes-Oxley, companies must disclose their financial reports and Adelphia did this in May 2002. Adelphia announced earnings restatement for the year 2000-2001 which included billions in off-balance sheet liabilities that were associated with “co-borrowing” agreements. (Giroux, 2008). What “co-borrowing” agreements were these is what got the company in hot water. The company grew into one of the largest communications corporations in the country. (Mahony, 2005)
Adelphia Communications Corporation rose to the top, but fell down due to there not being a division between the company’s property and the property of its directors. (Mahony, 2005). In 2002, Adelphia was charged with over-stating earnings and the CEO at the time John Ragas, was charged with looting the company. The company subsequently went bankrupt. This followed a Securities and Exchange Commission (SEC) suit where Adelphia and executives were charged with extensive financial fraud. (Giroux, 2008).
The charges were as follow:
"Adelphia, at the direction of the individual defendants:
(1) fraudulently excluded billions of...