Ethics in Accounting Disclosure and Practices: The Case of Lehman Brothers (Term Paper Sample)
The task was about reviewing accounting ethics of a company. The chosen company is Lehman Brothers which collapsed due to accounting fraud and manipution of financial statement to hide debt. The task looked into the company profile, acounting disclosure practices, events leading to bankruptcy of Lehman , and recommendation on what would have been done to safe the company.source..
Ethics in Accounting Disclosure and Practices: The Case of Lehman Brothers
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This research paper uses the case scenario of Lehman Brothers to analyze business ethics surrounding accounting and financial disclosure. Lehman Brothers was an American international financial institution that provided trading, brokerage, investment, banking, and other services. The company collapsed because of accounting malpractices surrounding the management of its debts, especially short-term loans raised through repurchase agreements 105 and 108. The company sold assets to financial institutions to raise money with a promise to repurchase the assets after paying the granted loans. Despite the sales, the company continued to report the repo-related assets on the balance sheet and failed to report the generated cash in the same financial statement. These were accounting malpractices and unethical business practices aimed at deceiving the company stakeholders.
Business ethics refers to a code governing how a company conducts its operations. Ethics in a business include moral principles, standards, core values, norms, and policies that guide the right or wrong way of carrying out core functions (Duska et al., 2018). Also, business ethics guides how a business interacts with the government, customers, and other businesses and how it treats its employees. When an ethical dilemma or controversy arises, a business turns to moral principles set by business ethics. The principles of business ethics include compliance, accountability, honesty, fairness, respect, corporate responsibility, avoiding conflicts, and fulfilling commitments.
Business ethics touches on accounting, legal compliance, environmental protection, employee relations, customer prioritization, social responsibility, whistleblower protection, data protection, and corporate transparency. Management plays a critical role in business ethics. The primary role of the management in a company is to provide oversight. Therefore, the way a company does its business, in a right or wrong manner, indicates the extent to which its management values business ethic (Duska et al., 2018). Managers who are ethically responsible ensure that their companies comply with legal requirements and accounting and disclosure standards, support environmental sustainability initiatives, and consider the interests of all stakeholders while conducting business. This research paper looks into business ethics regarding accounting disclosure and transparency using the case scenario of Lehman Brothers.
According to Reuters, Lehman Brothers started as a dry-goods and general store in Montgomery, Alabama, in 1844. Henry Lehman founded it after migrating from Germany to the United States. Henry was joined by his brothers, Mayer and Emanuel, in 1850, and they named the firm Lehman Brothers (Karim, 2021). The company was an American international financial institution that provided trading, brokerage, investment, banking, and other services. Before its bankruptcy in 2008, Lehman Brothers was the fourth-largest investment bank in the United States. The corporation had assets worth hundreds of billions of US dollars under management and more than 25,000 employees globally when it filed for bankruptcy. Lehman Brothers' bankruptcy became one of the largest bankruptcies in American history.
Soon after naming the company Lehman Brothers, the founders turned the business into a cotton trading firm and shifted operations to New York. The company remained a dry-goods store until the early 20th century before switching its operations to public offering and laying a foundation that made it one of the world's largest investment banks (Salin et al., 2019). In 1929, the company's founders created Lehman Corporation to transform the investment and banking industry. Lehman Brothers' mission is to show unmatched commitment to shareholders, clients, and employees. The corporation's vision was to build unrivalled partnerships with clients and serve their interests through its employees' creativity, knowledge, and dedication to maximize shareholders' returns.
Lehman Brothers made significant investments during the company's growth and expansion, including acquiring Abraham and Company in 1975. Operations
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