Week 4 discussion

Week#4 Dissusion thread

Write 5 to 6 sentences for each answers, one of my classmates already answers for those question. You can response to my answer if you have any other points related to the questions.

1) In 1999, the American Institute of Certified Public Accountants (AICPA) issued Statement of Auditing Standards No. 99 (SAS 99), “Consideration of Fraud in a Financial Statement Audit.” SAS 99 is the cornerstone of the AICPA’s comprehensive anti fraud and corporate responsibility program. Through this program, the AICPA intends to rebuild the confidence of investors in the capital markets and to reestablish audited financial statements as a clear picture in to Corporate America. SAS 99 does not change an auditor’s responsibility for detecting fraud; however, it does provide guidance to improve the auditor’s ability to identify and respond to the risks of fraud.

Class, what caused the Sarbanes-Oxley Act to come into existence, and evaluate the attitudes and behaviors that created the failure of Enron.

Answer: The amount of money that these scandals were costing the shareholders as well as the amount of negativity towards the accounting industry and the government led to the formation of SOX. The chief officers had placed their financial wants over that of the shareholders and employees. They had to know that if that were caught that everybody that had any invested interest in the company would lose big. Every chief officer wants that big payday when their company succeeds, however, in the case of Enron the pushed the legal bounds to far and greed became their main flaw. Everybody will push your financial statements to the border but these officers knew that had crossed that boundary but did not have the ethical conviction to stop. Therefore, they cost shareholders and employees to lose out because of their unethical actions

1) Countrywide mortgage scandal brought up other issues, including that of executive compensation. Should executives receive hefty compensation packages and severance pay when their companies flounder?

Answer: The simple answers is no. However, in some situations the executives are not at fault. Some times the board of directors can make a business decision that the executive might had agree with but was out voted by the board. Thus, the failure could be the result of that decision. However, if the executives had any part of a failure then no they should not be compensated. Off topic but as an example. When a college football program is put on probation and they lose scholarships the school and current players suffer, however, the coach can simple move on to another school. Same as an executive can receive a hefty payout and be financially secure but the employees left in the wake are the ones that sometimes struggle to regain their footing.