During the early 2000s, the position of accounting and the auditing career modified and several accounting scandals have been uncovered.
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a.What circumstances caused accounting and the audit career role to vary during this time?The Enron scandal is considered one of the greatest from the early 2000s. Everything about this fiasco is big, including a $50 billion bankruptcy, and worker retirement accounts drained of greater than $1 billion. Enron’s auditor, Arthur Andersen, was indicted on criminal expenses in 2002 consequently. Arthur Andersen was assigned to Enron as each inside and exterior auditor.
While engaged on internal controls, they had to attest to their very own figures. This resulted in big doubts being placed upon the accounting occupation. Additionally, earnings restatements doubled between 1997 and 2000, and Enron reported $600 million in losses. Investors have been additionally shedding on market capitalization from audit failures.
b.What major modifications occurred on account of the accounting scandals at that time?The Sarbanes Oxley Act of 2002 (SOX) was created in response to the big company scandals, together with Enron.
SOX was engineered to set guidelines for compliance. The stringent new guidelines have been put in place “to shield buyers by improving the accuracy and reliability of corporate disclosures made pursuant to the securities legal guidelines, and for different purposes” (SOX, 2002). The most basic reform of SOX was the Public Company Accounting Oversight Board (PCAOB), which was created to oversee auditors of public firms so as to protect the pursuits of U.S. investors. Arthur Anderson went out of business following their decline and indictment, and this was the second major change that occurred as a result of the Enron scandal.
Byrnes, N., et. Al. (January 28, 2002). Accounting in Crisis: reform is pressing. Retrieved August 22, 2007, from BusinessWeek web site: http://www.businessweek.com/magazine/content/02_04/b3767712.htmSarbanes-Oxley Act of 2002. Retrieved August 24, 2007, from AICPA web site: http://thecaq.aicpa.org/Resources/Sarbanes+Oxley/Sarbanes-Oxley+-+The+Basics.htmSchroeder, R. G., Clark, M. W., Cathey, J. M. (2005). Financial accounting theoryand evaluation 8e. United States: John Wiley & Sons, Inc.a