Evaluate impact of regulatory changes on financial operation

Reference no: EM132835115

Discussion: Creative Accounting Debate

Getting Started

Following major scandals at U.S. firms like Enron, WorldCom, Global Crossing, and Tyco, congress passed the Sarbanes-Oxley Act ("Sarbox") in 2002. Sarbox created the Public Company Accounting Oversight Board to oversee auditors of public companies. It banned company loans to executives and established new protections for whistleblowers. It set higher requirements for the independence of corporate boards. Perhaps most importantly, it made CEOs personally liable not only for the accuracy of publicly issued financial statements but also for the robustness of the financial processes used to create them.

Two decades after the passage of Sarbanes-Oxley, there is reason to believe it has improved internal controls and the reliability of financial statements. However, this has come at a price, and the Act has been subjected to great criticism. There has been some talk of overhauling or even completely repealing the bill. Meanwhile, a new phenomenon has arisen that is causing many to once again question the veracity of public financial statements: the reporting of so-called "adjusted earnings" and other creative measures.

Upon successful completion of this discussion, you will be able to:

Question 1: Evaluate the impact of regulatory changes on financial operations.

Question 2: Analyze the appropriateness of creative accounting measures.

Reference no: EM132835115

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