Several accounting scams have been happening around the world daily. Be it a big scam like Enron or a small scam, which affects only a couple of people, most of the scams are subjected to misinterpretation of the accounting or financial statements. Yes, misinterpretation of the financial statements may, sometimes, lead to stock market crash and economic crisis, which affect the entire world. Though, there are numerous of accounting laws in place, nothing has been stopping the people, who intentionally misinterprets the accounting statements. GAAP demands companies to follow several rules and procedures while preparing financial statements but still unable to get the desired results. SEC has been implementing several legal acts to reduce the number of scams but could not be able to reach the desired goal. With the advanced technology, people are finding several ways to take the advantage of loopholes in the law.
After going through several rough patches and scams in its journey, SEC had come up with a unanimously approved law, Sarbanes-Oxley Act, 2002. Sarbanes-Oxley Act is all about making a company to follow good corporate governance because companies get into the scam because lack of corporate governance (Friedland 2002). The act increased the responsibility of the board members, who are actually accountable of corporate governance. Sarbanes-Oxley demands more transparency in preparing the financial statements and thus auditors started working harder to follow the good corporate governance to come up with the reliable and consistent information.
[...] Research on Sarbanes-Oxley Act Several accounting scams have been happening around the world daily. Be it a big scam like Enron or a small scam, which affects only a couple of people, most of the scams are subjected to misinterpretation of the accounting or financial statements. Yes, misinterpretation of the financial statements may, sometimes, lead to stock market crash and economic crisis, which affect the entire world. Though, there are numerous of accounting laws in place, nothing has been stopping the people, who intentionally misinterprets the accounting statements. [...]
[...] So, auditors are also responsible for major accounting scams in the world. Accounting scandals have significantly reduced since 2002 but with the major financial scandal, Lehman Brothers, which is said to be happened because of wrong interpretation of accounting details, the focus again shifted to the regulatory bodies and their role to prevent the scams. Yes, the recent scam, which made the entire world to suffer from the economic crisis, is the perfect example for the scams that happen due to misinterpretation of financial statements. References Friedland. J. (2002). [...]
[...] The Sarbanes- Oxley Act: The Corporate Governance, Financial Reporting and Economic Crisis. The Company Lawyer 384. Miller, Richard I. & Pushkoff, Paul H. (2002). Regulations Under the Sarbanes-Oxley Act. Journal of Accountancy Vol/Num (2002): 33-36. [...]
[...] A CFO also will be charged the same. In addition to the fine, there might be an imprisonment for up to 10 years. The fines would be doubled if they go these illegal activities intentionally. Yes, there is a chance of imposing a fine of around million of CEO or CFO for wrong interpretation of accounting information. The term of imprisonment also would be increased in this case. Sarbanes- Oxley will be applied to all public companies in the United States of America and other international firms that are registered with Securities & Exchange Commission and are being audited by the third party auditing agents or companies. [...]
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