SEC enforcement targets: a Christian virtue ethics perspective
| DOI | https://doi.org/10.1108/JFC-03-2020-0046 |
| Date | 18 May 2020 |
| Pages | 1047-1059 |
| Published date | 18 May 2020 |
| Author | Christopher J. Demaline |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial crime |
SEC enforcement targets: a
Christian virtue ethics perspective
Christopher J. Demaline
Central Arizona College, Apache Junction, Arizona, USA
Abstract
Purpose –The purpose of this paper is to provide a summary and synthesisof US Securities and Exchange
Commission accounting and auditingenforcement release (AAER)-based research on financial misreporting
firms and the firms’management. Christian virtue ethics (CVE) is used as a framework for this review.
Suggestionsfor future research are presented.
Design/methodology/approach –This is a review of the academic literature covering AAERs. The
findings areviewed through the lens of CVE.
Findings –Several financialmisconduct studies use samples developed from AAER targets.These studies
commonlyfocus on specific characteristics of AAER targets. This paperpresents and analyzes characteristics
of AAER targets and considershow CVE may mitigate fraudulent reporting.
Research limitations/implications –The main limitationof the researchis that the literaturereview is
confined to studies of financialfraud that use an AAER-based sample. Nevertheless, the sample is sufficient
to provide insight intothe common characteristics of AAER target firms and related entities.The benefits of
CVE are considered.This study has relevant implications for investors, regulators andresearchers concerned
with financialreporting quality, fraud, regulatory oversight and businessethics.
Originality/value –This paper provides a set of AAER target features and considers how CVE may
mitigate financialfraud. Financial regulators, accountingstandards setters and researchers may be interested
in the findings presentedin this study.
Keywords Virtue, Fraud, Virtue ethics, Corporate crime, AAER, Financial reporting misconduct
Paper type Literature review
1. Introduction and background
Financial reporting fraud has far reaching, negative consequences for investors, the
finance industry and corporate sectors. A primary goal of the US Securities and
Exchange (SEC) is to ensure that securities issuers release reliable financial information
(Ciesielski and Weirich, 2015). SEC agents link financial reporting related enforcement
actions brought by the SEC to a sequentially numbered accounting and auditing
enforcement release (AAER). AAERs include details on the entities involved and the
nature of the misconduct. The research mainly uses AAER target firms to represent a
financial misconduct group. Therefore, the characteristics identified in these articles
apply, predominately, to the period of the financial misconduct preceding the SEC
enforcement event.
West (2018) suggests further examination of ethical failures in accounting to highlight
the need for virtue in business. Further, Lail et al. (2017) suggest that researchers may
bolster the legitimacy of financial reporting systems by promoting the ideals of virtuous
professionalism in accounting research. Mcphail and Corderey (2019) suggest further
research exploring accounting from a biblical perspective. Most of the firms subject to SEC
AAERs are based in the USA –a majority Christionnation (Pew Research, 2019). Therefore,
the notion of Christian virtue ethics (CVE) being explored within the context of these
financial fraud events is an area worthy of examination.
SEC
enforcement
targets
1047
Journalof Financial Crime
Vol.27 No. 4, 2020
pp. 1047-1059
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-03-2020-0046
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