Conclusion

The case of Tyco International defines what “cooking the books” actually means. Their

corporate scandal of unethical business practices just proves to show that these types of

practices can and may occur in different parts of an organization. These ethical issues usually

happen when the power of an entity is concentrated in a single or few people and as per the

case Tyco, to Dennis Kozlowski and his accomplices whose motivational drive is luxury and is

to lead an extravagant lifestyle.

The Securities and Exchange Commission launched the first investigation in 1999 and

found out that there were overstatements on expected costs for new acquisitions of companies

and these acquisitions were shown to be financially unstable for purchase. Meanwhile, the

second investigation was launched on 2002 against CEO Dennis Kozlowski and CFO Mark

Swartz who are found guilty of tax evasion, improper use of company funds used to pay

directors to cover up this unethical act, and there were undisclosed stock sales of $430 million

made by Kozlowski and Swartz.

Charges pressed to guilty parties are the following cases: overstatement of operating

income by $567 million, undervaluing acquired assets and overvaluing acquired liabilities

through improper acquisition accounting, use of reserves in order to make adjustments and

smoothen public results for the fabrication of financial statements and meet earnings forecasts,

and the intentional failure to disclose executive compensation to the board of directors and

appropriate parties, evasion of $1 million sales tax, failure to disclose forgiven loans amounting

$19 million, misappropriation of funds of $170 million, as well as non-disclosure by the CFO and

CEO of sales made by them to the public interests. As a punishment, Tyco was liable for an

amount of $5o million, the CEO and CFO were fined $240 million and to serve 8-25 years of

imprisonment.
 These practices harmed the company, the government, the integrity of executives, as

well as the reputation of the company such as their performance, stock price, its employees and

their families, other executives in good faith, their stockholders and investors, and their

stakeholders. This may be due to the failure of internal control and governance through worst-

practices of poor documentation, inadequacy of policies and procedures to prevent misconduct

from its people, inadequacy of approval procedures and documentations, lack of oversight by

the management at corporate level, and due to the aggressive accounting and improper audits.

And as a precaution, companies should closely monitor the conduct of their employees, the

government should also hold strict monitoring of accounting practices by companies, and any

people from the organization who once exhibit suspicious activities must undergo investigations.