'Accounting Scandals\r'

'The even offts that followed had oecumenic implications and were analyzed ex ten dollar billsively in the media as well as In brass circles. Experts pointed their fingers at a derive of different reasons that light-emitting diode to the massive fraud in railway line and method of write up practices in the Enron collapse. One theory regularize come on by Alex Person of the New York Times was that â€Å"the boil down that analysts, Investors and executives place on quarterly pelf as a companys success indicator” began to take precession over the morality of executives and controllers (Roberts 808). In PaulCraig Roberts review of Forenoons book, he disagrees with Forenoons contention, or at least points out the holes that he sees with that logic. Roberts points out that the scapegoats Person cites as the root causes of the poops (quarterly earnings, breed options. And impairment competition between history firms) were In fact yesterdays rectifys intent upon e xtend the protection of in corporate investors (old. ). Person posits that a â€Å"cult” of the quarterly earnings developed, which in around cases caused executives and accountants to trade good method of report practice for the healthy appearance of the company.Roberts re howevertal points out that quarterly earnings were the forget of a reform that sought to provide investors with more(prenominal) successionly randomness just around the financial condition of companies. Roberts also mentioned how story had traditionally relied on â€Å"character and internal summon” to moderate fair practices. This culture was based upon a pay scale according to seniority. still in the sasss the FTC changed the invoice culture to one where partners were non paid by seniority, but by how much employment they could bring to the firm.Conflicts of interest were also introduced into this ultra when business relationship firms began to consult with the businesses they were supposed to be auditing. (old. ) Roberts makes it clear that he believes federal regulations dumbfound a lot to do with the scandals that occurred. He seems to feel that a culture of frankness and integrity in the business and write up professions Is the intimately effective way to curb shady business dealing. Roberts even analogies that â€Å"standard accounting practices be alike door locks.They keep honest people honest. simply they cannot prevent fraud any more than a door lock can prevent lucky entry. ” (old. . Another interesting perspective suggests that â€Å"executives atomic number 18 believably to commit more fraud as the anticipate appeals of committing fraud decline” (â€Å"How to Clean up… ” F-4). The article infers that in the sasss when much of the fraud was occurring, the cost of getting caught was so low that fraud plausibly change magnitude. It also analyzes the U. S. Crestless securities sedulousness In ten , wanly â€Å"grew ostentatiously… T a rate Tanat pitching outpaced the growth in resources at the arcsecond” (old. ). in that respect was also an increase in corporations with a grown amount of intangible assets such(prenominal) as telecommunications. The same editorial thinks that a companys intangible assets make it harder to descry fraud than in corporations with tangible assets alike(p) nourishment and textiles. To bolster the point of the editorial, it is further noted that closely of the high profile accounting scandals in the sasss occurred in companies with intangible assets.This editorial seems to imply that lax regulations are the reason for increased fraud, and ultimately that an increase in regulation forget decrease fraud. This conclusion is in stark contrast to Roberts article mentioned previously. But they cost opinions on two ends of the spectrum when placing blame for the accounting scandals of the sasss and sasss. (old. ) objet dart the reasons f or the accounting scandals are infinite in total, the more or less opposing viewpoints of these two articles shed light on a number of possibilities.What seems to be agreed upon end-to-end both articles is that no matter the condition of the commercialize or the regulations in place, lapses in ethical understanding are the root cause of most of these situations. This strongly suggests that the power to avoid another round of scandals like the ones experienced in the sasss lies in the individual accountant or business executive to know the ethical standards to which he is held, and to abide by them. There were a number of make that the accounting scandals caused on corporate businesses in the United States and worldwide.The main issue was that want in public companies waned. Investors polled after the Enron scandal verbalize that even after certain regulations were introduced, â€Å"they had lingering doubts almost the industry integrity (Green-Morale). This issue of publi c boldness was a serious, yet largely superficial view of the responsibility of corporate business and accounting. Some feared that an overreaction to the accounting industry would create â€Å"bad public policy (â€Å"How to Clean Up… F-4). And to this day debate goes on about the pros and cons of the Serbians-Solely set of 2002.Aside from the public policy revisions, the mart numbers hobby the Enron scandal seem to indicate that there was precise little effect on the actual market itself. One year after the Enron scandal get-go came to light, the S&P ergocalciferol declined by 28. 3 percent. Although this initially appears like a direct result of the accounting scandal, analysis of world markets at the time tell a different story. At the same time as the S&P 500 downturn, Britains FETES declined 27. 5 percent, Frances CA declined 34. 9 percent, and Germanys ADDAX declined 36. 8 percent (old. . These numbers indicate that there was a world-wide fluctuation in the market, even in countries not beset by an accounting scandal. Other possibilities for this downturn were considered likely, such as â€Å"a slowdown in economic activity, excess capacity in the worldwide telecommunications market, and uncertainty over terrorism and Iraq” (old. ). Further try that the market was not directly affected by the scandals is leaned from the movements of stock prices in the telecommunications industry, where a large number of the scandals occurred.Before the scandals were brought to light, the Nasdaq Telecoms Index had declined by 80 percent from a high in March 2000. (old. ). This indicates that there was a prominent downturn in the telecommunications market onwards the scandals occurred. If the focus is narrowed in even Turner, piles tale upon ten actual companies Tanat suffered Trot scandals, ten numbers continue to support the idea that the market was declining forwards the scandals occurred. In August 2000, Enrons stock price peaked a t $90. By October 15, 2001 , the last avocation day before the scandal broke, Enron stock had already fallen to $33 a share.This indicates a 2/3 drop in value before any hint of scandal had reached the public. So, while it is for certain likely that the scandals had an initial effect on the market, in the long term there was already a downturn unrelated to the accounting scandals. Similar to the effects to corporate business, the effects to the accounting industry have been largely related to image. A large parturiency was made to restore the public trust in accounting. One accounting industry insider recognized that they Molted the trust and confidence of … Linens and [they] need to get that back” (Green- Morale). umteen in the accounting field expressed bear on about a â€Å"congressional rush to judging in trying to make the whole business Just an accountants problem” (Taylor old). Whether or not it was a rush to Judgment, the federal government made som e drastic changes that affect the accounting industry to this day. approximately notably is the Serbians-Solely toy of 2002, which was signed into law and created a body whose sole responsibility was the regulation of accounting firms that edited publicly traded companies.When it was initially introduced, the Serbians- Solely Act was costing companies one million millions of dollars to initiate and maintain compliance. An yearbook fall over is done by Financial Executives International to data track how much money it is costing companies to comply with Serbians-Solely, specifically section 404. There most recent visual modality of 2007 noted that compliance fees among companies with market capitalizations of $75 million were $2. 9 million during fiscal year 2006. This is a 23 percent drop from year 2005, and a 35 percent drop from the initiation of Serbians-Solely in 2002 (â€Å"FEE Survey… ). While companies are increasing their efficiency in regards to compliance wit h Serbians-Solely, it has still put a large strain on the accounting industry. The FEE Survey seems to indicate that efficiency will likely increase and then level off, with companies having an annual expense that includes compliance fees related to Serbians-Solely. Whether this Act is to a fault much government regulation is arguable on both sides. But it did accomplish a big goal, which was to begin to restore confidence in the accounting profession to the public.Another significant population that was affected by the accounting scandals was the academic side. The heads of accounting programs throughout the sylvan initially feared lower enrollments due to the accounting scandals. But figures seem to indicate that there was actually an increase in enrollment from 2002 to 2003 (Dotard 59). Many programs offered new courses as a direct result of the scandals. These courses involved such topics as fraud detection, corporate governance and ethics (old. ). Many programs also offered presentations, seminars, and lectures with an increased emphasis on professional ethics.A survey done by the American Institute of Spas sought to gauge student attitudes towards accounting after the scandals. The survey generally found that the more educated students were about the accounting scandals, the more positivistic their attitudes were. This â€Å"suggested that open communication and straight talk… Could rectify student attitudes” (old. ). It would seem that numbers wise, the accounting scandal has not affected enrollments In accounting programs In a gallants way. IT anything, ten scandals nave served to opening dialogue with students about the importance of ethical standards and fraud revelation.The firm that I work at, Crower Cheek, was not specifically effected by some of these changes implemented, but was affected in a general way by the change in business and accounting culture that occurred. The business and accounting industries as a whole came throug h the archeozoic sasss relatively unscathed. Sure there was major wrong done to the public image of both professions, but they have generally recovered and have act to comply with the new regulations resulting from the Serbians-Solely Act and other SEC provisions. But there are a number of strives that have come about as a result of the scandals and subsequent government action.More skepticism is organism brought into the audit process. Companies are considering how fraud could occur â€Å"even if theres no indication it is there. ” Also, â€Å"investors are becoming better-educated about corporate financial statements… And are not pose so much credence in the views of media pundits and analysts” (Allen 7). Students who are considering or have chosen accounting as a profession now have an increased dialogue concerning ethics, fraud, and the consequences thereof in a corporate scandal. Overall this increased dialogue seems o be the most straightforward method to prevent rising scandals.\r\n'