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Accounting
Two years after Arthur Andersen was implicated in the Enron scandal, the accounting industry remains drenched in scandals and in need of reform. It also continues to exert influence in Washington, D.C. through millions of dollars in campaign donations and lobbying. Read below about the latest scandals at major firms, as well as the unfinished reform agenda.
KPMG
KPMG probably won't end up as the next Arthur Andersen -- a rare major casualty of the corporate scandals -- but every week seems to bring new accusations of further wrongdoing by the accounting giant. Already under fire for
helping Xerox inflate its earnings and engaging in shady conflict-of-interest dealings with Wachovia Bank, KPMG is now getting blasted by heavyweights on Capitol Hill for helping to set up illegal tax shelters.Read More
Reform Efforts
Summary of Sarbanes-Oxley provisions on accounting
Sections of the act that spell out new oversight mechanisms aimed at keeping accountants honest.
How Sarbanes-Oxley impacts the accounting profession
AICPA's clear summary of the various ways that the provisions of the act will change life at accounting firms, from how audits are done to what consulting services can be take on.
Chronology of reform legislation efforts
Extensive set of links from AICPA that track the legislative debate, key testimonies before Congress, etc.
Sarbanes-Oxley has been hailed as the biggest reform of the accounting industry in the 70 years. But loopholes remains.
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Loopholes in Sarbanes-Oxley: firms can offer tax services, which could create conflicts of interest |
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PCAOB chief warns that other firms could go the way of Arthur Andersen |
What When Wrong in Accounting?
The failure of independent auditing during the boom, and the resulting scandals, can be traced back to Washington politics. Regulators tried, but largely failed, during the 1990s to impose stricter rules on accounting firms to prevent conflicts of interest -- especially accounting firms auditing the same companies with whom they had lucrative consulting contracts.
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1990 - 2000: Accountants give $70 million in campaign donations |
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1997 - 2000: Accountants spent $35 million on political lobbying |
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2001: Enron's accountants were compromised by conflict of interest |
What's Wrong or Right in Accounting: Take a Quiz!
Recommended Reading
Final
Accounting:
Ambition, Greed and the Fall of Arthur Andersen
by
Barbara Ley Toffler,
Jennifer Reingold
Unaccountable:
How the Accounting Profession
Forfeited a Public Trust
by
Mike Brewster
The
Number:
How the Drive for Quarterly Earnings
Corrupted Wall Street
and Corporate America
by Alex Berenson
