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Why Did Congress Pass The Sarbanes-Oxley Act Of 2000

1680 Words7 Pages

ACCOUNTING IMPACTS OF THE EARLY 2000S
CORPORATE SCANDALS

Prepared for
Craig School of Business
Department of Accountancy
CSU Fresno

Prepared by
Rachel Magdaleno
Business Accounting Major
CSU Fresno

December 6, 2017

Letter of transmittal TABLE OF CONTENTS EXECUTIVE SUMMARY INTRODUCTION: CORPORATE SCANDALS IMPACT ON THE ACCOUNTING PROFESSION

This study was designed to review the corporate scandals in the early 2000s and examine how congress passed legislation which forever changed the accounting profession. The study focuses on addressing these questions:
• What corporate scandal pushed Congress to reform the law?
• Why did Congress pass the Sarbanes-Oxley Act of 2002?
• How has the accounting profession changed due to …show more content…

William Thomas gives the back ground on Enron in his article, “The Rise and Fall of Enron” which will be used throughout the background of this report. Enron was formed in 1985 as a result of Huston Natural Gas and InterNorth merging becoming a pipeline company that started with large debt and soon lost rights to pipelines. Kenneth Lay, CEO of Enron, knew he needed to reinvent his business plan in order to recover. With the help of Jeffery Skilling, Enron was able to come back with a reinvented business strategy that set them on fire. They created a gas bank which purchased from suppliers and sold to consumers, their money was made by the fees charged for their transaction services. The plan worked so well, Lay hired Skilling and put him in charge of his finance division. Within the finance division, employees were motivated with their employment to execute deals at high cost. Trading contracts began to include confidentiality clauses and for years this shady way of business allowed the company to thrive. Enron expanded in 1997 by purchasing Portland General Electric Corp. With using the same method of practice, Enron almost quadrupled its investment in the electric company by the end of that …show more content…

Enron was Andersen’s second largest client and they extended their services beyond auditing. Andersen was in charge of internal and external audits, they provided consulting and had offices within Enron. The relationship grew closer as former Andersen employees went to work for Enron as internal accountants. The regulate yourself and honesty is key theories were dramatically taken advantage of.
DISCUSSION: SARBANES-OXLEY ACT, THE IMPACT ON ACCOUNTANTS, INDIRECT BENEFITS
The review of this research has found that implementation of the new law was necessary and its benefits outweigh the extra costs and work involved. The reflection of the research will be outlined in these categories: (a) the Sarbanes-Oxley Act, (b) the impact on accountants, and (c) indirect

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