CHAPTER 1
CHARACTER
COUNTS
Accounting Scandals Rock
the Financial World
CENTURY 21 ACCOUNTING
© South-Western, Cengage Learning
SLIDE 2
Chapter 1
Understanding Business
Ethics
 68 Research state and national organizations
and laws that govern the accounting profession.
 70 Identify desirable traits of professionals
 71Identify ethical considerations related to
technology
Identify characteristics of individuals who make good ethical
decisions.
CENTURY 21 ACCOUNTING
© South-Western, Cengage Learning
SLIDE 3
Chapter 1
Accounting Scandals
Rock the Financial World
 Background
 Entering the 21st century, Enron, WorldCom, and
Andersen were three of the most celebrated names
in corporate America.
 But the action of a few individuals forced financial
mammoths Enron and WorldCom into bankruptcy.
 Andersen, once one of the prestigious “Big 5”
accounting firms, was forced out of business
CENTURY 21 ACCOUNTING
© South-Western, Cengage Learning
SLIDE 4
Chapter 1
Accounting Scandals
Rock the Financial World
 Impact
 These accounting scandals caused hundreds of
thousands of employees to lose their jobs and
millions of individuals to lose billions of dollars in
investment and retirement accounts.
 The scandals rocked the public’s confidence in the
accounting profession and the stock markets.
CENTURY 21 ACCOUNTING
© South-Western, Cengage Learning
SLIDE 5
Chapter 1
Accounting Scandals
Rock the Financial World
 Ethics
 The principles of right and wrong that guide an
individual in making decisions are called ethics.
 Business ethics
 The use of ethics in making business decisions is
called business ethics.
CENTURY 21 ACCOUNTING
© South-Western, Cengage Learning
SLIDE 6
Chapter 1
Accounting Scandals
Rock the Financial World
 Making ethical business decisions is a skill you
can learn.
 Each chapter contains a feature on business ethics.
 You will explore a model that guides your evaluation
of business decisions.
 You will apply that model to make ethical business
decisions.
 You will be exposed to sources that will enable you to
continue learning about business ethics long after you
have completed this accounting course.
CENTURY 21 ACCOUNTING
© South-Western, Cengage Learning
SLIDE 7
Chapter 1
Accounting Scandals
Rock the Financial World
 Instructions
 Obtain an article that describes an accounting
scandal such as Enron, WorldCom, Adelphia,
Healthcorp South, or Parmalat.
 Write a one-paragraph summary that describes what
happened and the individuals involved.
CENTURY 21 ACCOUNTING
© South-Western, Cengage Learning
SLIDE 8
Chapter 1
What is GAAP?
 GAAP (Generally Accepted Accounting
Principles) – the standards and rules that
accountants follow while recording and reporting
financial activities.
CENTURY 21 ACCOUNTING
© South-Western, Cengage Learning
SLIDE 9
Chapter 1
What is SEC?
 SEC (Securities and Exchange Commission –
by law has the authority to establish GAAP.
CENTURY 21 ACCOUNTING
© South-Western, Cengage Learning
SLIDE 10
Chapter 1
What is FASB?
 FASB (Financial Accounting Standards Board)
was established in 1973, an organization that
has the authority to set accounting standards.
CENTURY 21 ACCOUNTING
© South-Western, Cengage Learning
SLIDE 11
Chapter 1
Exit Ticket for Chapter 1
Answer the following in a Word Document, SaveAS:
Chapter1EthicsYourName and drop a copy in my Inbox today!
 Why are ethics important?
 What is business ethics?
 Why is GAAP necessary?
 What is SEC?
 What is the responsibility of FASB?
CENTURY 21 ACCOUNTING
© South-Western, Cengage Learning
SLIDE 12
Chapter 1
Chapter 1 Assignments
on Aplia
 Complete Chapter 1 Study Guide
 Complete Mastery Problem 1-4
CENTURY 21 ACCOUNTING
© South-Western, Cengage Learning