Introduction
Accounting is an essential field that is designed with the intent of keeping track of a company’s finances and possibly changing a business strategy in case the results are unsatisfactory. While it is inevitable that every business deals with transactions, which is why accounting is absolutely necessary, it is a field that serves the users, and most of the time, only the ones who have access to funds or relevant information. Thus, users such as regular employees are often left out, which is illustrated in The Mirror Group scandal as an example of how workers were deceived through accounting fraud. As a result, based on relevant examples, accounting only serves the users, yet in specific cases, even certain users can be left out of the financial conversation.
Users of Accounting Information
The statement itself refers to the users of accounting information, which are the primary entities managing the process of reporting and managing the financial deals of a business. Thus, since certain users have a personal interest or the interest of the company itself, information can become a valuable tool to either destroy or support the company. However, some decisions correlating with accounting misrepresentation are beneficial for some users and harmful for others ones. For example, it can serve stakeholders while harming employees, or it can serve the general management yet be harmful to other stakeholders. Either way, accounting serves particular users, and which ones, in particular, depends on who is in charge of the information and what the end goals are. Those can be internal and external, yet the status does not depend on who is going to be aware of the actual financial situation of the business in question.
Enron
In order for the influence of accounting on information users to be determined, it is vital to examine examples that portray situations in which the financial satiation of a business was manipulated in terms of data given to stakeholders. Enron is a surprising illustration of how a corporation deemed one of the most innovative in the world managed to manipulate its status through the misuse of financial information, which ultimately led to bankruptcy. While not directly misusing the entirety of the financial information, Elrond has created a false image that was far from true. According to researchers, the high profits and revenue of the company were a result of cooperation with limited partnerships, which the corporation itself controlled (Petra & Spieler, 2020). Thus, the debts and monetary losses of the company were hidden, and the only available information has shown how profitable, innovative, and investment-worthy the business is. In this case, accounting served the executives and insiders who manipulated data in order for the company to keep appearing attractive to potential investors, hence benefiting from the profit. On the other hand, other users, such as investors, were not aware of the fraudulent activities, which is why they invested in a company that was only profitable on paper. This exemplifies that accounting only serves particular users’, in this case, company executives, at the expense of investors.
The Mirror Group
A scandal that has affected a large number of regular employees of an influential media corporation was The Mirror Group pension fraud. In this case, the media tycoon Ian Robert Maxwell used the employees’ pension funds to avoid bankruptcy for his companies, a decision that has led to significant losses for the people involved (Edwards & Walker, 2020). In this case, the accounting strategies involved covering the company’s economic challenges with the means of using the money that employees were entitled to, which inevitably was discovered and addressed partially with public funds. This scandal is similar to the first one in terms of the aim to hide a corporation’s financial difficulties through fraud. However, while in the previous case, the funds were manually manipulated to increase the desire of potential investors to buy shares, the second situation is fraud that directly links a corporation with the illegal management of pensions. While the circumstances differ from the perspective of the way the fraud was executed, the fact that accounting served particular users is highlighted, just as in the previous example. This scandal, in particular, showcases how accounting, if used for selfish reasons such as benefiting executives instead of examining the financial situation of the company and being transparent, can have major damaging effects on stakeholders. In this case, the employees whose funds were illegally used by the media tycoon were left out with no pension funds, a result that is directly linked to the unethical use of finances.
Conclusion
Based on the scandals examined prior and the critical evaluation of the statement, accounting serves certain users’ depending on the circumstances. The examples illustrate how executives and insiders can be the beneficiaries in spite of the damage done to the investors, while the second one refers to employees as the primary victims. In both cases, there are users of accounting information that choose to engage in fraudulent behavior with the intent of improving their personal profit or the company’s image and economic potency. Thus, it is inevitable that accounting only serves specific users.
References
Edwards, J. R., & Walker, S. P. (2020). The Routledge companion to accounting history. Routledge.
Petra, S., & Spieler, A. C. (2020). Accounting scandals: Enron, WorldCom, and Global Crossing. Corporate Fraud Exposed, 343–360. Web.