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Finance & Accounting
Pages 4 (1004 words)
Effects of Sarbanes Oxley Name University Effects of Sarbanes Oxley The start of the twentieth century unfolded several unfortunate events for the business arena, from that of the fall of the World Trade Center to that of the collapse of WorldCom. The WorldCom debacle was something which came forward in 2002 but this was not something which was not precedential…
In 2001, Enron Corporation, a USA energy company situated in Houston, hit its investors immensely when it filed for bankruptcy as a result of major corporate accounting forgeries carried out by its senior management and its auditor. The bankruptcy resulted in an estimated loss of almost $11 billion for its shareholders and the World saw a company with almost $63 billion market capitalization, file for bankruptcy (the largest dissolution in US history at that time) (Sterling, 2002). The major reason of the collapse of Enron Corporation was because of its fabricating and dubious accounting shams. The senior management of Enron was actively involved in recording fake Revenues within its accounting records. The practice carried out at the company saw the senior management of the company record Revenues on the basis of the present value of net future cash flows. This resulted in phony accounting treatment and misleading reports which was needed to match profits and cash in order to satisfy the shareholders. The company saw its stock price of $90 in the year 2000 fall to a meager $1 per share by the end of November 2001 (Rapoport et al, 2009; Sterling, 2002). ...
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