The collapse such as Enron scandal. Good

February 24, 2019 Criminology

The book “Barriers to Corporate Fraud” is written by the author Mark Jickling. According to the book accounting frauds can led to the worst cases of financial problems such as bankruptcies, mass layoffs, and criminal prosecutions. The barriers to corporate fraud had clearly failed to protect many investors and creditors and led to the financial collapse such as Enron scandal. Good corporate governance ensures transparency and accountability and ensures effective investment in corporate world. The author focuses on the internal controls as well as the external control of the fundamental weaknesses in law and regulation and provides the overview of anti-fraud barriers.
It is crucial to know that each of Americans future is tied to the success or failure of the corporate Americans. In times of crisis and financial collapse, the corporate governance plays an important role to prevent fraudulent schemes. The recognition of issues relating to good corporate governance is due to various frauds such as criminology, management science, business ethic, behavioral economics, and complex systems theory. After the financial collapse of Enron, the congress unsure to prevent the fraud with Sarbanes-Oxley Act of 2002. According to the book “congress responded by passing the Sarbanes-Oxley Act of 2002, strengthening regulation of auditors, directors, and corporate executives and increasing criminal penalties for fraud, and it is the most significant amendments to securities law during the worst of the scandals.” The corporate governance frameworks ensure that the board of directors oversees the management of a corporation on behalf of the stockholders. The board can fire management and take any action to protect the interests on behalf of the shareholders, and the board of directors is also subject to legislative and regulatory activity. Corporate managers and officers are also play important roles in a corporation. The ethical corporate behavior should come from the upper level management. To keep managers honest and ethical, it is important that corporate governance practice and securities law respectively. Also, corporations can eliminate the conflicts of interest by giving the financial incentives to the managers.
The role of attorneys is also crucial in preventing and detecting fraud. The author discuss about how the federal regulations regarding attorneys is important because some corporates has relied upon their attorney and attorney’s lack of accounting knowledge can led to the financial crisis for its corporate. To prevent the future financial crisis, the Sarbanes-Oxley Act of 2002 require regulation and practices of the attorney’s rules. According to the book “Section 307 of the Sarbanes-Oxley Act of 2002 requires the Commission to prescribe minimum standards of professional conduct for attorneys appearing and practicing before the Commission in any way in the representation of issuers.” Moreover, the employees take place an important role to prevent the fraud within a corporation. Employees must trust that they will be protected and take the responsibility to report the fraudulent. Sarbanes-Oxley expands the protections for the employees who against frauds within a corporate.
To conclude, the study found that the recent corporate scandals including Enron is affected by the small role regulation of federal agencies played in detecting fraud. Lack of accounting principal can lead to the financial crisis such as Enron, Tyco, and WorldCom. The author discussed the several systemic problems including the internal and external fraud. A lack of resources and expertise led to the fraudulent financial schemes.


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