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Essay / Research Paper Abstract
Investors are impacted when a major company, such as Enron fails due to inventive, creative or manipulative accounting supported by the corporate governance environment. This 50 page paper considers if changing the regulatory environment, as attempted in the US with the introduction of the Sarbanes-Oxley Act of 2002, will either prevent or give early warnings of companies that are presenting misleading accounts. This is achieved by looking at how and why accounts are so important to investor confidence, how they can be manipulated inside and outside the spirit and letter of the law and how this information might be used by investors to value shares and influence the demand for the shares. The case of Enron is then studied and then the paper considers if the Sarbanes-Oxley Act could have prevented the practices that lead to the collapse, or if they would have given an earlier warning. The bibliography cites 36 pages.
Page Count:
50 pages (~225 words per page)
File: TS14_TEsurenron.rtf
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Unformatted sample text from the term paper:
Market Hypothesis 27 3.2 Examining the Forms of EMH 30 3.2.1 The Evidence 33 3.3 The Implications 35 4. THE CASE OF ENRON 38 4.1 Why Enron Failed 39 4.1.1 The Regulatory Environment 40 4.1.2 Auditing Issues 41 4.1.3 Accounting Issues 44 4.1.3 Pension Issues 46 4.1.4 Corporate Governance Issues 47
4.1.5 Security Analysts 48 4.1.6 Derivatives Issues 49 4.1.7 Banking Issues 49 4.1.7 Summary of issues 50 5. SARBANES-OXLEY ACT 51 1. Introduction The stability and value placed on most economies has been long associated with the consideration
and performance of the local stock markets. When stock markets fall there is a correlation decline in the economy, when stock markets are booming anecdotal evidence appears to indicate this
is also associated with economic growth. By implication this means where investor confidence is lost and the stock market falls it is possible this sill be a trigger that
can decreased the wealth in an economy and have a negative impact on the general economic performance. If there is a high level of investor confidence then bad news may
be overcome with only a small glitch and the stock market may survive unscathed. The key to the stock market performance is the investor confidence. In the past this
has usually be high in countries such as the US and Europe, where there are long established stock markets and the general perception of the regulatory environment is one
that inspires confidence that the results and basis of the valuation accurate and reliable. However with recent indecent, such as Enron and WorldCom have dented the confidence. Other companies
have also had to restate accounts reducing the profit levels. This has impacted on the confidence of investor, looking at the stock market performance on each of the occasion where
there was dip in performance of the market as a whole, indicating at least a correlation between the event and the stock market performance. The difficulty that is faced
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