Market and Political/Regulatory Perspectives on the Recent Accounting Scandals

Not surprisingly, the recent accounting scandals look different when viewed from the perspectives of the political/regulatory process and of the market for corporate governance and financial reporting. We do not have the opportunity to observe a world in which either market or political/regulatory processes operate independently, and the events are recent and not well researched, so untangling their separate effects is somewhat conjectural. This paper offers conjectures on issues such as: What caused the scandalous behavior ? Why was there such a rash of accounting scandals at one time ? Who killed Arthur Andersen-the Securities and Exchange Commission, or the market ? Did fraudulent accounting kill Enron, or just keep it alive for too long ? What is the social cost of financial reporting fraud ? Does the United States in fact operate a "principles-based" or a "rules-based" accounting system ? Was there market failure ? Or was there regulatory failure ? Or both ? Was the Sarbanes-Oxley Act a political and regulatory overreaction ? Does the United States follow an ineffective regulatory model ?.