Sarbanes-Oxley Research Paper

2807 WordsMar 5, 201112 Pages
Sarbanes-Oxley Act of 2002 Research Paper Imagine over $60 billion of shareholder value, almost $2.1 billion in pension plans, and initially 5,600 jobs - disappeared (Associated Press, 2006). One would have to wonder how that is possible. These are the consequences the investors and employees of Enron Corporation endured after the Enron scandal started to unravel. This paper will focus on the infamous accounting scandal of Enron Corporation. It will also discuss how the company was able to fool investors by producing misleading financial statements, why they were not caught sooner, and new regulations enacted in response to the scandal. Enron Corporation was a leading American energy company located in Houston, Texas. The…show more content…
One of the major items in GAAS states that auditors must remain independent in both fact and appearance. However, Arthur Andersen was not only auditing Enron, they were consulting for them as well. The consulting that Arthur Anderson was doing for Enron brought in a lot of revenue therefore, they did not appear independent. Although various auditors documented conflicts with the audit committee of Enron and several other concerns, the leading partner on the audit, David B. Duncan, overturned the issues and concerns. Due to the active role Arthur Anderson had in Enron Corporation, they overlooked many accounting concerns and the fraud was undetected for a long period of time. However, the truth about Enron was eventually brought to light for the investors, employees, and the general public. The accounting misstatements were discovered Enron told investors they were going to restate their earnings for the past few years. Shortly after Enron restated their earnings, the company declared bankruptcy. Also, Sherron Watkins, an Enron Vice President, wrote an anonymous letter to Kenneth Lay who stepped up as Enron’s CEO after Skilling left due to “personal reasons”. Sherron Watkins’ letter questioned Enron’s accounting methods and also proposed that Skilling left due to dishonest accounting and other

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