The Ethics Of The Sarbanes Oxley Act - 1497 Words

Currently, the credibility crisis in the accounting industry has become a serious worldwide problem. Especially in recent years, credibility scandals stacked, such as the Enron Scandal the company kept huge debts off the balance sheets, it makes shareholders lost $74 billion, after this there are also the WorldCom Scandal in 2002, the company underreported costs and inflated revenues with fake accounting entries, total inflated assets by $11 billion, and $3.8 billion of revenue fraud (Moberg Romar). In the United States, the recent series of scandals caused by large companies makes the society become negative toward the markets, in order to restore public confidence in the markets. Within weeks of the scandal, Congress passed the†¦show more content†¦There are three kind of financial statements for companies which the content reflected different information. Among them, the first is the balance sheet, this statement reflects the financial situation of enterprises. For examp le, some of the listed companies wants to reflect good financial position in the statement, they will want to increase total assets, decrease accrued total liabilities, and then of course increase owners equity, making investors mistakenly believe the company has great investment value, thereby misleading public opinion and investors. Beside the balance sheet the other two financial statements are the income statement and cash flow statement. These two statements reflect the business situation of enterprises. The income statement is an important indicator to measure the performance of listed companies, it is closely related to the allotment and the profit. Therefore, in order to increase the profits of listed companies, they will have to Increase revenue, earnings, decrease expenses, costs and losses (Temte, 73). It helped increase tax evasion, embezzlement and other economic criminal activities. A large number of cases being investigated, all related to the accountants making the fake accounting entries. Therefore, the accounting credibility loss has restricted the development of the market economy. In a business, accountant often times handle the tax problem, so if