By Dr. Athar Murtuza,
Associate Professor, Accounting
Financial scandals, as seen in the case of Wells Fargo’s recent account opening debacle, cost the public a great deal.
In the past, we have seen the Savings and Loan Crisis, the Enron scandal, and of course, the recession of 2008, brought on by the sub-prime mortgages that should have never been issued.
These shenanigans continue over and over.
In a story published by “Common Dreams,” a progressive news site, the author cites the likely reason why the problem continues: the cost to Wells Fargo was “paltry.”
There was no cost resulting from the lack of accountability to a large, “too big to fail” financial institution.
Moreover, the bank fired a significant amount of employees and will very likely expense the fine, which regardless, did not amount to much of its overall profit, as a tax deduction.
Many believe that penalties such as those doled out in the aforementioned situations were not sufficient and that such measures should be reformed to be more stringent, placing harsher penalties on offenders.
These individuals are firm believers that if accounting is used correctly, it can facilitate social justice and greater accountability, and in doing so, promote a better world.
For them, accounting’s role should not be limited to preparing financial statements that help in making decisions involving financial investments.
They want the role of accounting to extend to recording, making available to stakeholders and public at-large information about how resources and assets are used not only by individuals but more importantly, organizations, and governmental units, and nations.
In terms more familiar to business students, assets used well lead to an increase in owners’ equity as well as the national wealth.
Similarly, uncontrolled expenses can decrease the profit potential.
Wealth and resources are better used if they are meant to be investments, but if resources are not well deployed and get squandered, they destroy owners’ equity, even the common good and national well-being.
A version of this article appeared in the Tuesday, October 25th print edition.
Contact Dr. Murtuza at