The ultimate goal is to protect investors. Reason Many acts of corporate corruption in the 1990s and early 2000s brought on this regulation. There were many loopholes that allowed for accounting errors without any legal incentive to correct the problem. Due to the accounting practices at companies such as Enron, Tyco, and WorldCom investors lost billions. The accounting practices created a scandal in which the companies were able to hide information from investors.
Their bankruptcies became inevitable as the Securities and Exchange Commission (SEC) and financial analysts began to see the signs of irregularities among numerous companies. When the SEC ordered the restatement of their financial reports in accordance with the GAAP rules, it turned out that these companies were mostly founded by inflated revenues and negative financial conditions. Short after, companies reputations and financial credibility began break like bubbles, in the wake of the ensuing investigations. The result of these action caused investors once again lost their trust and confidence in America’s publicly traded companies, which eventually led to more bankruptcies. As a result, multitudes became jobless, and the trend went from bad to worse throughout the decade.
This resulted in huge doubts being placed upon the accounting profession. Additionally, earnings restatements manifold between 1997 and 2000, and Enron reported $600 million in losses. Investors were also losing on market capitalization from audit failures. B. What major changes occurred as a result of the accounting scandals at that time?
Summary of Bigger than Enron In 2001, the nation was rocked by the collapse of Enron, a multibillion-dollar corporation that employed thousands of people and had affiliations right up to and including The White House itself. With all of the fraud and mismanagement that took place under the gilded roof of Enron, the question arises as to the involvement of others in the scandal, not the least of who is the firm of Arthur Andersen. In the 1990s, more than 700 U.S. companies were forced to correct misleading financial statements as a result of accounting failures, lapses, or outright fraud. Together with Enron -- the largest corporate bankruptcy in U.S. history -- these failures have cost investors an estimated $200 billion. What went wrong?!
Accounting – Fraud case Satyam Systems, a global IT company based in India, has just been added to a notorious list of companies involved in fraudulent financial activities, one that includes such names as Enron, WorldCom etc. The Satyam Computer Services scandal was publicly announced on 7 January 2009, when Chairman Ramalinga Raju confessed that Satyam's accounts had been falsified. The preliminary investigations by Registrar of Companies and confession by Mr. Raju revealed the balance sheet of Satyam for the year 2008 contained `cash and bank balances’ of Rs 5040 crore (US $ 1.12 billion) as against the Rs 5361 crore (US$ 1.12 billion) reflected in the books, an accrued interest of Rs 376 crore (US$ 83.85 million) which was described by Raju as `non existent’ , an understated liability of Rs. 1,230 crore (US$ 274.29 million) on account of funds was arranged by himself and an overstated debtors' position of Rs. 490 crore (US$ 109.27 million) as against Rs.
From 285.4 million to 297 million. During this year Labatt Genuine Draft percent of dollars sold went up by 152.63 percent. Released in 2011 only in the east. In 2012 released to central and west. Labatt Drys sales decreased in 2009 to 2011 by 37% of dollars sold.
These scandals cost investors billions of dollars when the share prices of affected companies collapsed, and shook the publics’ faith in the security markets. When examining the SOX act you can see that since 2002 many things have changed in the past eight years. Corporate governance is one of many things that have changed; Public companies must now have a totally separate audit committee composed of entirely independent directors and must contain one financial expert. Security fraud now has much more extreme punishments for those who commit or conspire to commit fraud. Since the introduction of SOX auditors of public companies must keep documentation of an audit for seven years, destruction of any documentation or evidence that someone has committed fraud is now punishable by jail time and fine.
Sarbanes-Oxley Act Peggy Baker Liberty University May 1, 2011 Abstract Financial statements are a means of communication between companies and investors. The information provided in financial statements has not always been true. The collapse of companies such as Enron, the scandals that followed, and the distrust from the public caused lawmakers to create the Public Company Accounting Reform and Investor Protection Act of 2002. This act is now known as the Sarbanes-Oxley Act. The Sarbanes-Oxley Act’s (SOX) main provisions include: (1) oversight board, (2) corporate executive accountability, nonaudit services, retention of work papers, auditor rotation, conflicts of interest, hiring of auditors, and internal controls.
It currently continues to play a very valuable role in society and until recently accounting had set the standards for ethical and moral behaviour in business (Guy et al. 2003). Many high profile corporate failures over the recent years (e.g. Enron, HIH, AIG and Satyam) have been associated with large public international accounting firms. Calls for increased transparency and concerns about ethical behaviour ever since the Enron debacle have led to increased regulation over the financial reporting process, with the profession having lost a great deal of its credibility and public trust.
However, the traders were fired once it was revealed that Enron's reserves were gambled away which nearly destroyed the company. After these facts were brought to light, Ken Lay denies having any knowledge of wrongdoing. Needless to say, when required to testify before the U.S. Congress on the reasons for Enron’s collapse, Ken Lay, Jeff Skilling and Andrew Fastow, sought refuge under the Fifth Amendment. Andrew Fastow, Jeffrey Skilling, and Kenneth Lay are among the most notable top-level executives implicated in the collapse of Enron’s. Kenneth Lay, the former chairman of Enron was prosecuted on 11 criminal counts of making misleading statements and fraud.