The Enron collapse has given new meaning to the word “partnerships” and has brought to the fore somewhat controversial accounting procedures which helped the multinational company look more profitable than it actually was

The Enron collapse has given new meaning to the word “partnerships” and has brought to the fore somewhat controversial accounting procedures which helped the multinational company look more profitable than it actually was. The failures happened erosion of the public confidence. As a result, billions of dollars in market value disappeared. Investor losses caused a public outcry.
The U.S. Congress responded to declining public confidence by passing the Sarbanes-Oxley Act. The law made four fundamental changes in the relationship between auditors and public companies.
First, it sharply restricted the auditor’s ability to render consulting services to audit clients. The law separating consulting and accounting work, dividing investment banking from analysts and making disclosure of stock holdings and investment banking ties more prominent in research reports, potentially term limiting auditor contracts for individual companies, requiring outside entities be incorporated into financial disclosure statements so as not to understates liabilities and overstates earnings, and encourages diversity by employees with 401Ks.

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