Accounting scandals of 2002
In 2002, a wave of accounting scandals broke in the United States. A number of leading companies have admitted to mis-stating their accounts, giving a misleading impression of their status. In public companies, this type of creative accounting can amount to fraud, and a series of investigations have been launched by the U.S. Securities and Exchange Commission. In several cases, the sums involved are in the billions of dollars.
See Also: Corporate scandal
Reported accounting scandals in
Sorted by Big Five auditor
- Arthur Andersen -- CMS, Cornell, Dynegy, Enron, Global Crossing, Halliburton, Martha Stewart Omnimedia, Merck, Peregrine, Qwest, Sunbeam, Waste Management, WorldCom
- Deloitte & Touche -- Adelphia, AES, Cendant, Duke, El Paso, Merrill Lynch, Reliant, Rite Aid
- Ernst & Young -- AOL Time Warner, Dollar General, PNC
- KPMG -- Citigroup, CA, GE, IM Clone, Peregrine, Xerox
- PricewaterhouseCoopers -- Bristol Myers, HPL, JP Morgan Chase, Kmart, Lucent, MicroStrategy, Network Associates, Phar-Mor, Tyco
- Coopers & Lybrand LLP -- Network Associates
- Gutierrez & Co. -- Vivendi
- Grant Thornton -- Parmalat
The Enron scandal has so far resulted in the criminal conviction of the Big Five auditor Arthur Andersen, and that firm has had to divest itself of its non-US partners.
There is a general perception that there are other accountancy scandals waiting to be uncovered, which has contributed to the 2002 stock market downturn.
On July 9, 2002 George W. Bush gave a speech about recent accounting scandals that have been uncovered. In spite of its stern tone, the speech did not focus on establishing new policy, but instead focused on actually enforcing current laws, which include holding CEOs and directors personally responsible for accountancy fraud.
In July, 2002, WorldCom filed for bankruptcy protection, in the largest corporate insolvency ever.
These scandals have reignited the debate over the relative merits of US GAAP, with its rules-based approach to accounting, and International Accounting Standards and UK GAAP, which favour a principles-based approach. The Financial Accounting Standards Board has announced it intends to introduce more principles-based standards. More radical means of accounting reform have been proposed but so far have very little support.
- John R. Emshwiller and Rebecca Smith, 24 Days: How Two Wall Street Journal Reporters Uncovered the Lies that Destroyed Faith in Corporate America or Infectious Greed, HarperInformation, 2003, ISBN 0060520736
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