Accounting Fraud

An article in Australasian Business Intelligence indicates that President Bush is serious about signing into law tougher laws to fight corporate crime and accounting fraud. New laws are needed to restore consumer and investor confidence following several recent corporate scandals. Other changes include regulations governing how independent CPA firms are expected to carry out their fiduciary responsibility to report accurately about the financial condition of their clients ("Bush to ride shotgun on corporate crime" 1008190).

Penalties for financial fraud have expanded under The Sarbanes-Oxley Act, often referred to by the acronym SOX. Constance Foster in Business Insurance writes that the goals of SOX include reducing the incidents of improper behavior; improving internal controls at every level and in eve

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. There is always some pressure on managers to engage in some type of irregular accounting practice in order to enhance profits. Aggressive accounting techniques can be used to enhance earnings. However, the problems that resulted in the bankruptcy of companies including Adelphia, Global Crossing and Enron did not involve questionable accounting practices û they involved deliberate fraud. Lucrative incentive compensation programs for senior management that are tied directly to meeting sales and earnings targets may encourage accounting manipulation. Recognizing this, members of the Board of Directors, the Audit Committee, and the company's independent auditors must be particularly vigilant against accounting transactions that cross the line between finesse and fraud. Generally Accepted Auditing Standards (GAAS) now require independent auditors to establish procedures for testing and detecting accounting fraud. Joseph Wells in Journal of Accountancy explains that Statement of Auditing Standards 99 (SAS 99) titled "Consideration of Fraud in a Financial Statement Audit" is effective for audits of financial statements for periods beginning on or after December 15, 2002. SAS 99 is a comprehensive antifraud program that defines an
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Approximate Word count = 1840
Approximate Pages = 7 (250 words per page)