Consolidation of Financial Statement Analysis

Paper Summary:

This paper examines the current effort at reform of securities laws in an attempt to determine whether those reforms will be effective in avoiding another Enron-type crisis. The paper reviews literature relevant to this topic and makes an assessment as to the viability of the reforms in view of the scope of the problem. A summary of the research is provided in the conclusion.

Executive Summary and Synopsis
Introduction
Explanation of Clarke and Oliver Observation
Analysis
Financial Statement Composition Today
"Patching Up" Initiatives
Sufficiency of Initiatives to Date

From the Paper:

"However, in contrast to the "on market" exchanges, derivative transactions that are conducted "off market" (these are, in effect, non-standard direct contracts between bilateral parties), have attracted increasing attention from regulators with good reason: "Over the past decade or so, the volume of such transactions, across a wide swath of asset classes and instruments, has been extraordinary" (Warner 2001, p. 5). In the market in which Enron competed, schedules of fees for buying and selling securities are not fixed, and dealers derive their profits from the markup of their selling price over the price they paid. The investor may buy directly from a dealer willing to sell stocks or bonds that he owns or with a broker who will search the market for the best price."

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