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LEGAL, ETHICAL, & TECHNOLOGICAL CONCERNS
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Introduction
Financial and accounting systems have been in existence for thousands of years in many
different forms. In today’s commercialized world, accounting systems have changed dramatically
to include large corporate accounts that require the attention of several financial officers.
Managing vast accumulations of money and balancing ledger books worth millions of dollars is
now the norm rather than the exception. The number of people handling a company’s financial
future has increased proportionately, making it more difficult to monitor each person’s specific
activity.
Legal Concerns
Fraud and deception are two of the biggest concerns in an accounting practice.
Intentionally deceiving the public about the value of a company’s assets, stocks or other financial
holdings can drastically affect financial markets in the United States and abroad. Covering up
financial losses in the hopes of keeping a company’s reputation in tact is considered fraud. In
fact, the Sarbanes-Oxley Act is legislation that was put in place in an attempt to prevent such
practices from going unnoticed. Charges can be brought against members of management,
financial officers, and those who knew about the situation and did not report it to the proper
authorities. Depending on the extent of the fraud and deception, the company may be forced to
allow a government appointed firm to assume control until the financial issues have been
resolved (Knapp, 2011).
Embezzlement is the illegal use or taking of funds. Individuals who are in charge of a
company’s cash flow, transfer money between accounts, departments, etc. on a regular basis.
Money can be removed from accounts or transferred so many times it is hard to keep track of
LEGAL, ETHICAL, & TECHNOLOGICAL CONCERNS
where cash is being spent. A company can lose hundreds of thousands of dollars if any employee
working within the accounting department decides to change a decimal point or tamper with
funds.
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In the financial world, forgery is another illegal activity that can dramatically affect a
business. Forging someone’s name on a check and cashing it leads to termination from a
company, in addition to several criminal charges. In some cases, a staff member or secretary may
be given permission to sign a person’s name to a check or other important document. If this is the
case, there has been no wrongdoing and nothing needs to be reported.
Ethical Concerns
In any company, individuals who notice discrepancies or unethical behavior are obligated
to report their findings to members of management or another authority figure within the
company as outlined in company protocol. Integrity and competence are two characteristics that
everyone who handles money or finances must have. When it is lacking, the company and all of
its employees suffer. A prime example of this is the case of Enron. When one of the financial
managers discovered a large discrepancy in the books concerning profit and loss statements and
high risk business practices, CFO Andrew Fastow and company founder, Kenneth Lay, sent out
memos trying to persuade shareholders and their accounting executives that nothing was wrong
(Sterling, 2002). In reality, the company was out of control from a financial perspective.
The business assistant who first discovered the discrepancies had reported them to Lay,
but had been told not to worry and the reporting went no further. While Lay and Fastow were
eventually reprimanded for their illegal activities, the company was forced into bankruptcy and
shareholders lost more than $11 billion dollars. The company’s stock prices plummeted and had
LEGAL, ETHICAL, & TECHNOLOGICAL CONCERNS
a devastating effect on the United States economy. Ethically, the business assistant should have
continued to pursue answers, but in this case, she chose to protect her job and accept
management’s final say in the matter. Forensic accounting was used to uncover many of the
company’s shortcomings once the initial investigation began and the proper authorities had
finally been notified (Kranacher, Riley, and Wells, 2011).
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The financial aspect of a business can be the determining factor of whether the business
will be successful. Establishing a solid code of ethics that each staff member must abide by is the
first step keeping each member accountable for their actions, as well as their mistakes. Financial
practices involving minimal risk come from sound business decisions. Combining those qualities
with the efforts of accountants who take extra effort to remain diligent in their work and
reporting even the smallest of discrepancies to their superiors, is what pushes a business forward.
As in any business, accountability must be expected from every employee from the
highest member of management to entry-level employees. Everyone can make a mistake, but it is
how the mistake is handled once it occurs that sets some people apart from the rest. A mistake
that is covered up can lead to discrepancies and imbalances that are hard to recover from. If a
mistake is made, the ethical thing to do is to bring it to the attention of someone in charge and
find a way to reduce its impact on the company and its financial standing (Duska, Duska, and
Ragatz, 2011).
Technological Concerns
Employee error can account for many mistakes or flaws within a system, but there are
other technological concerns as well. One of the biggest is security. Online financial transactions
occur each day across secure servers. Secure servers are those that offer companies the means to
LEGAL, ETHICAL, & TECHNOLOGICAL CONCERNS
transfer money and exchange important confidential information with little risk of it being
intercepted by third parties. While most of these servers remain completely secure, breaches can
occur that causes vital information to be lost or stolen.
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Technology is available allow hackers to obtain access to a system and retrieve
confidential information. IT departments are constantly upgrading their software to prevent
hackers from being able to break into secure systems and stealing such information. When
breaches occur in a large corporation, millions of dollars can be lost, in addition to the
company’s credibility. Accounting firms and financial departments normally have firewalls and
other checks and balances in place that sound an alarm or trigger an alert if someone or
something tries to access secure files (Gelinas, Dull, and Wheeler, 2010).
With the introduction of cloud computing and online data storage, many companies are
transferring the majority of their paper files to electronic documents in an attempt to save time,
money and much needed office space. The increasing efficiency of technology allows for
massive amounts of data to be stored at one time in a relatively small amount of space that can
be accessed from anywhere. Information can be retrieved and used as it is needed, using nothing
more than a computer and the few clicks of a mouse or keypad. The drawback to this is the entire
system is run electronically. Files cannot be accessed if there is no internet connection or
electricity. The problems can be corrected, however, and the information becomes available once
the internet and electricity are restored.
Likewise, files can be lost or misplaced in a technological system just like in a
conventional office system. Many companies require their computer systems to be backed up on
a regular basis to prevent such a loss due to mismanagement, operator error or the system being
LEGAL, ETHICAL, & TECHNOLOGICAL CONCERNS
damaged by a computer virus or malfunction.
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Conclusion
Legal, ethical and technological issues can have dramatic effects on any business, but can
be especially damaging when they occur in companies and departments that deal with finances.
Protecting a company’s financial resources and information is imperative to the success of any
business venture. Following the law and maintaining the highest of ethical standards are vital to
a successful outcome. Incorporating up to date technological advances will also help to reduce
the risk of financial loss and keep companies running smoothly, while helping them maintain the
integrity of their financial systems.

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