Accounting and Reporting Fraud From 2008 To Today

Recent history has shown a major disconnect in the world of business, and it is between the ideals of profitability and ethics.  Thus far into the 21st century, we have seen dozens of major corporations fall as a direct result of accounting and reporting fraud.  Some of the most notable examples include the rise and fall of companies like Enron, WorldCom, and Tyco.  These companies' fraudulent actions, along with those of over twenty other well known companies, specifically occurred in 2002.

This was a year that was filled with panic throughout the entire financial services industry, the main reason being that there was not enough legislation to prevent and deter major corporations from committing this fraud.  However, that all changed with the enactment of the Sarbanes-Oxley Act of 2002, also known as SOX.  In a nutshell, what this federal law accomplishes can be split into two main categories.  The first part is that with the passing of the law, top management of publicly traded companies are required to sign off, and thus take responsibility for the accuracy of financial statements produced by the company.  The second part is the severe increase in penalties for fraudulent accounting practices for top management of these companies, along with the entities themselves and the public accounting firms tasked with auditing these companies.

Since the passing of SOX, accounting fraud has been much less common throughout the financial services sector, and from 2004-2007, there were only a couple of isolated incidences.  However, there has been a slight rise in the return of accounting and reporting fraud since 2008, including Lehman Brothers and Bernard L. Madoff Investment Securities among others.  My final project will focus on accounting and reporting fraud from 2008 through today.  I will discuss, with research and expert opinion from an accounting professor at the Robert H. Smith School of Business, how select companies were able to get around heightened federal security to gain large sums of profit before being caught, what led to their respective demises, and what new legislation is being put into place to further prevent and deter fraud.

Expert Questions:
1) What tactics did the federal government use to reveal the accounting and reporting scandals of Lehman Brothers and Bernard L. Madoff Investment Securities?
2) What is your opinion on the severity and strength of SOX and other more recent laws put into effect to prevent and deter this type of fraud?