In 2000, the high flying company Enron completely collapsedtaking venerable accounting and audit firm...

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Accounting

In 2000, the high flying company Enron completely collapsedtaking venerable accounting and audit firm Arthur Anderson alongwith it. There were some warning signs, but right up to the end, anexamination of the company’s financial statements showed a healthycompany with no reason to be concerned. Of course, the numbers werefiction, as were many of the operations of the company itself. Thismeltdown ultimately led to passage of the Sarbanes- Oxley Act of2002, which requires the CEO, CFO, CIO and all of their supportingmanagers to certify that the financial information being reportedis correct and accurate. Penalties for failure to comply aresevere.

Plato wrote of the analogy of the Cave – prisoner’s onlyexperience of reality is what they see reflected in the shadows onthe blank wall in front of them. Think about the financialstatements discussed above. How are they real and how are theysimply reflected shadows? And if they are simply reflected shadows,what do we need to do as managers to ensure that they are anaccurate reflection of the business, and not just a shadow?

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The financial statements discussed above are simply reflected shadows of the ethics morals and principles of the managers of an organization Managers are agents of the shareholders who are the principals Managers often present a false financial picture of a company by See Answer

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In: AccountingIn 2000, the high flying company Enron completely collapsedtaking venerable accounting and audit firm Arthur...In 2000, the high flying company Enron completely collapsedtaking venerable accounting and audit firm Arthur Anderson alongwith it. There were some warning signs, but right up to the end, anexamination of the company’s financial statements showed a healthycompany with no reason to be concerned. Of course, the numbers werefiction, as were many of the operations of the company itself. Thismeltdown ultimately led to passage of the Sarbanes- Oxley Act of2002, which requires the CEO, CFO, CIO and all of their supportingmanagers to certify that the financial information being reportedis correct and accurate. Penalties for failure to comply aresevere.Plato wrote of the analogy of the Cave – prisoner’s onlyexperience of reality is what they see reflected in the shadows onthe blank wall in front of them. Think about the financialstatements discussed above. How are they real and how are theysimply reflected shadows? And if they are simply reflected shadows,what do we need to do as managers to ensure that they are anaccurate reflection of the business, and not just a shadow?