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Why Accounting Fraud? & Possible Solutions

In: Business and Management

Submitted By brianfaanes
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Why Accounting Fraud? & Possible Solutions
Brian Faanes
Rasmussen College

Author Note
This research is being submitted on 9-12-2011 for Wendell Ellis A140 Financial Accounting 1 course at Rasmussen College by Brian Faanes

Most accountants and auditors want to be accurate and honest when it comes to the recording of financial records and statements of the company or firm they work for. However, because of tight relationships between accounting firms and their clients, auditors may unintentionally distort the numbers. In this research paper let us examine some of the conflicts with current accounting practices and possible solutions to improve the corporate accountability and the financial reports they convey to the public and investors. There have been a number of accounting fraud sandals in the last decade, some of these companies include; Enron 2001, Worldcom 2002, Tyco International 2002 and locally, Tom Peters Company 2008. As a result of these most recent accounting frauds, congress passed the Sarbanes-Oxley act in 2002. The Sarbanes-Oxley Act * Applies to publicly traded companies * Established the Public Company Accounting Oversight Board (PCAOB). The PCAOB is a private sector, nonprofit corporation that oversees the auditors of public companies. The PCAOB protects the interests of investors by helping ensure fair, independent audit reports. * Requires that external auditors report to an audit committee, rather than to an organization’s management. Prior to Sarbanes-Oxley, the external auditors often reported to the company’s upper management. * Requires that a company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO) certify all annual, or quarterly, reports filed by an organization.(Waybright & Kemp, 2010).
The Sarbanes-Oxley Act places new legal constraints on executives and gives expanded
Protections to

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