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In public companies, this type of " Creative Accounting " can amount to Fraud and investigations are typically launched by government Oversight agencies, such as the Securities And Exchange Commission (SEC) in the United States. In 2002 , a wave of separate but often related accounting scandals became known to the public in the U.S. All of the leading public accounting firms— Arthur Andersen , Deloitte & Touche , Ernst & Young , KPMG , PricewaterhouseCoopers — and others have admitted to or have been charged with negligence in the execution of their duty as auditors to identify and prevent the publication of falsified financial reports by their corporate clients which had the effect of giving a misleading impression of their client companies' financial status. In several cases, the monetary amounts of the fraud involved are in the Billions of USD . LIST OF COMPANIES INVOLVED IN SCANDALS Big Four major audit firms ( Audit Firms are listed, followed by select clients ensnarled by accounting scandals)
Predecessor and other U.S. audit firms
ACCOUNTING SCANDALS BY YEAR FIRST REPORTED
Andrew Fastow '') 2002 scandals
Later scandals
OUTCOMES The Enron scandal resulted in the indictment and criminal conviction of the Big Five Auditor Arthur Andersen on June 15 , 2002 . Although the conviction was overturned on May 31 , 2005 by the Supreme Court Of The United States , the firm ceased performing audits and is currently unwinding its business operations. There was a general perception that there are other accountancy scandals waiting to be uncovered, which contributed to the Stock Market Downturn Of 2002 . 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 CEO s and directors personally responsible for accountancy fraud. In July, 2002, WorldCom filed for Bankruptcy protection, in the largest corporate Insolvency ever. These scandals reignited the debate over the relative merits of US GAAP , which takes a "rules-based" approach to accounting, versus International Accounting Standards and UK GAAP , which takes a "principles-based" approach. The Financial Accounting Standards Board announced that it intends to introduce more principles-based standards. More radical means of Accounting Reform have been proposed, but so far have very little support. The debate itself, however, overlooks the difficulties of classifying any system of knowledge, including accounting, as rules-based or principles-based. In 2005 , after a scandal on insurance and mutual funds the year before, AIG is under investigation for accounting fraud. The company already lost over 45 billion US dollars worth of market capitalisation because of the scandal. This was the fastest decrease since the WorldCom and Enron scandals. Investigations also discovered over a billion US dollars worth of errors in accounting transactions. Future outcome for the company is still pending. On a lighter note, the 2002 Ig Nobel Prize in Economics went to the CEOs of those companies involved in the corporate accounting scandals of that year for "adapting the mathematical concept of Imaginary Number s for use in the business world". SEE ALSO
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