ACC 557 Week 4 Individual Assignment Ethics of Penn Square Bank

May 8th, 2015
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ACC 557 Week 4 Individual Assignment Ethics of Penn Square Bank

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Ethics of Penn Square Bank and the Dow Corning BankruptcyACC/557 Accounting Ethics Ethics of Penn Square Bank and the Dow Corning BankruptcyPenn Square Bank: What were the ethical pressures on the firm concerning documentation, credit extension, and revenue recognition that lead to the final collapse? What should have been done to reduce or offset these pressures?Situated in Oklahoma City, OK, Penn Square Bank was a small commercial bank which made high-risk financial loans during the late 1970s in the oil boom. The bank ultimately collapsed during the early 1980s due to their financing practices. The bank was overestimating and valuing its customers gas and oil reserves that let at that time to fund a bigger credit line. In addition to that, the bank didn't need that to client complete proper loan paperwork or proper security to back the financial loans. Penn Square bank utilized their links with bigger banks all over the United States of America to offer the loans to them. Penn Square became a middle-man of types and was earning money from the loan application charges and loan administration charges charged to the big out of state banks. Basically by 1981 a fiscal downturn slowed down the interest in oil and Penn Square became the focus of bank investigators who started asking their portfolio (Caskey, 1985). They found out that the borrowers were not making their interes

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