Lehman Brothers Case Study Example | Topics and Well Written Essays - 500 words

Lehman Brothers - Case Study ExampleThe transaction helps the borrower to receive cash to which security instruments be transferred to the lender. Subsequently, the securities ar returned with an excessive interest of around 2 percent. This excess amount is termed as haircut. The method of accounting form do credits a Payable Account on borrowing cash and debits the same on its repayment. However, the vestibular sense sheet entry maintained the securities as pluss even on being transferred to their owners. Lehman Brothers increased the levels of haircuts or repo grade to 5 percent and 8 percent on Fixed Income and Equity securities respectively. Transactions of these natures were accounted for by Lehman as sales of securities and the cash received was also not treated as liability. Thus, it showed an inflated pecuniary and asset position of the firm (Dutta, Kaplan & Lawson, 25 Clark). There is a continual set of the relation between the systems of accounting methods practice d in companies and ethical contexts. Ethical procedure in accounting demands the preparation of true financial statements and balance sheets to reflect the true financial position of the company. The company needs to conduct the accounting trading operations based on the moral code of conducts and must not deviate from it. An ethical accounting system evokes an interest of the investors and other stakeholders of the firm and thus helps in creating loyalty (Karthik). The accountant has diversified roles in the focus of frauds. Modern-day accounting practices demand the increasing roles of an accountant as an auditor in the financial firm. The accountants are getting trained on conducting professional audits so as to track the fraudulent practices quite easily. Moreover, the groundbreaking accountants also function through consulting bodies to track fraudulent tax practices.