Enron accounting scandal is one of the landmark cases pertaining to accounting and auditing ethics practices. Enron collapsed after the irregularities and misrepresentations by the company with help of their auditors Arthur Andersen were revealed.
The Enron Accounting scandal caused the government to implement some serious changes, as the damage caused by this scandal can last for a long time. The most important change that was done in this matter is the restructuring of the accounting profession. This restructuring resulted in the establishment of new accounting firms, which are more qualified and competent to tackle financial matters.
The second important change that was introduced was the creation of the new accounting firm. The establishment of this new accounting firm has led to an increase in the number of registered firms, which are now accountable for the activities of their employees. This is the biggest advantage of this restructuring of the accounting profession. This also helps to ensure that the accounting professionals are only involved in the preparation and the submission of financial statements.
The third change that was introduced was the introduction of the SOX act. The SOX act regulates the activities of all firms that deal with public sector finances. The law clearly states that each firm must be responsible for its activities, irrespective of whether they deal with financial matters or not. The law also dictates that the firm should also provide to the clients all the reports and information that are required by the clients.
The introduction of the SOX act has led to the consolidation of all the activities that are associated with the Big Four accounting firms. This consolidation led to the firm being called the Big Four. After this consolidation, the firm’s name has changed from Enron to BCG. However, this firm still maintains the same level of expertise and competencies that were maintained in the past. This firm is still considered to be a premier firm, which handles financial matters.
It has been established that the Enron accounting scandal caused huge financial losses to the firms associated with the financial matters. This resulted to the closing of down the firm, which was a big loss to the investors. However, after the restructuring of the accounting profession, this industry seems to be on its way back.
The restructuring of the accounting profession and the introduction of the SOX Act have helped in the regeneration of the Big Four accounting firms. These firms are more capable to handle the problems of financial matters and also provide better services to the clients. Therefore, it has become clear that the Enron accounting scandal did not only cause financial loss to the clients; the financial institutions but also made the accounting industry stronger.