Accounting Scandals

Paper Summary:

This paper investigates if accountants truly are responsible for fraudulent claims or if they are forced by their organizations to report high profits so investors will be enticed into buying company stock. Accounting scandals at Enron, Tyco and Adelphia corporations are reviewed with special focus on the accounting practices that enabled these frauds. Accounting scandals have led the U.S. and Canadian governments to take action to make the plight of investors less risky and to hold accounting firms to the highest standards; however, the paper states, public scrutiny and stricter guidelines by the accounting profession itself more likely will truly curtail scandals, such as Enron.

From the Paper:

"Off-balance-sheet deals and entities are "off" the balance sheet for a reason that such accounting is used by companies to hide things they don't want investors to see. If a company is determined to keep a significant aspect of its business off its books, investors should simply ask why. Investors rely on rating agency and many would say rely on it at your own risk. In the case of Enron they definitely fail the incompetence of one ratings agency analyst admitting to not having read the company's SEC filings, the shortcomings of an analyst-based ratings agency system became apparent in the fiasco."

Sample of Sources Used:

• Bowen, Jane. Attention Auditors of Small Businesses and Not-for-Profit Organizations - New Fraud Guidance Issued March 2006
• Neuman, Eric J. The Impact of the Enron Accounting Scandal on ImpressionsManagerial Control, Ross School of Business, University of Michigan Academy of Management Best Conference Paper 2005 OMT:
• McClihtock, Pamela. Adelphia Accounting: Daily Variety Gotham; 2005 April 27 pg. 4 and 9
• Pandey, Satish C. Organizational decline and Turnaround: Insights From The Worldcom Case VISION--The Journal of Business Perspective l Vol. 9 l No. 2 l April-June 2005
• Berenson, Alex. Tyco For Cash New York Times(Late Edition (East Coast)). New York, N.Y.: Dec 31, 2002. pg. C.1

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