Inclass Exercise:
In the past few years, more corporate scandals have been publicized causing Americans to question the ethical principles of the corporate world. Accounting scandals have been the most highly publicized and far-reaching, with the Enron scandal being the most popular. Another major accounting scandal involved the WorldCom corporation and was discovered just after the Enron scandal.
All of the scandals involved what some call "creative accounting," or "cooking the books." The accountants and auditors for the companies manipulated the accounting books to create an artificial representation of the company. They made it so the company appeared in a much better financial situation than it actually was. The Enron scandal was the first on the map and appeared in 2001. In 2002, the WorldCom scandal unravelled along with a slew of other scandals.
In response to these scandals, in 2002 Congress enacted legislation in an effort to minimize the possibility of scandal. It was called the Sarbanes-Oxley Act, or SOX for short. This was the first time in a long time that the government enacted legislation that had a major effect on the way business is done in America. The Sarbanes-Oxley Act helps keep Corporate America in check by requiring numerous sign-offs on financial statements, including personal responsibility being placed on CFOs and CEOs.
Sources:
http://en.wikipedia.org/wiki/Accounting_scandals
http://www.forbes.com/2002/06/26/0626topnews.html
http://www.worldcomfraudinfocenter.com/information.php
http://www.time.com/time/business/article/0,8599,263006,00.html
http://en.wikipedia.org/wiki/Enron_scandal
http://en.wikipedia.org/wiki/Sarbanes-Oxley_Act
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