Question

Select a company that has experienced a publicized accounting ethics breach in the last three years. Document your findings with an APA reference to an article from a website or other business periodical. Address the following:

• Review and summarize the ethical or financial scandal and compare it to the audit report of the independent auditor.
• Were there any criminal or regulatory investigations after the scandal?
• Follow the movement of the stock price since the incident was publicized to the current date in yahoofinance.com.
• Document any observations regarding investor market reaction. Did the stock price drop or increase, and has it recovered since the incident was publicized?

Answer 1

Answer: Due to scandals, image of the company gets demolished. Therefore, the stock price will get decreased due to such accounting ethics breach by the company.

Eron scandal is very known for this, which is as follows:

A large scandal involving the public company Enron showed the American public and its representatives in Congress that new compliance standards for public accounting and auditing were sorely needed. Enron was one of the biggest, and, it was thought, one of the most financially sound companies in the U.S.

Enron, located in Houston, Texas, was considered one of a new breed of American companies that participated in a variety of ventures related to energy. It bought and sold gas and oil futures, built oil refineries and power plants, and became one of the world's largest pulp and paper, gas, electricity, and communications companies before it filed for bankruptcy in 2001.

Several years before Enron’s bankruptcy, the government had deregulated the oil and gas industry to allow more competition, but deregulation also made it easier for companies to act fraudulently. Enron, among other companies, took advantage of this situation.

The various misdeeds and crimes that Enron's officers and employees committed were extensive and ongoing. Particularly damaging misrepresentations produced inflated earnings reports for shareholders, many of whom eventually suffered devastating losses when the company failed. Many other instances of dishonesty and fraud also occurred, including embezzlement of corporate funds by Enron executives and illegal manipulations of the energy market.

Hence the value of stock will decrease.