8355467HOW_FINANCIAL_MARKETS_ARE_AFFECTED_BY_SCANDALS

8355467HOW_FINANCIAL_MARKETS_ARE_AFFECTED_BY_SCANDALS -...

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Financial Markets 1 Running head: HOW FINANCIAL MARKETS ARE AFFECTED BY SCANDALS How Financial Markets Are Affected By Scandals [Author’s Name] [Institution’s Name]
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Financial Markets 2 How Financial Markets Are Affected By Scandals Financial scandals at the end of both the 19th and 20th centuries led to calls for greater corporate accountability. Ironically, perhaps, both sets of scandals increased demand for accountants and led to calls for educators to instill in students an understanding of the profession's moral obligations. Although there has been a century of debate regarding accounting education's response to these scandals, the fundamental criticisms of accounting education today remain similar to those heard at the end of the 19th and beginning of the 20th century. It seems that history does, indeed, repeat itself. At the end of the 19th century, muckraking journalists publicized egregious abuses of power by the "robber barons" and generated a public backlash that could not be ignored. A report of an investigation by the Senate into a financial scandal involving fraudulent bond issues implicated 20 prominent politicians and senior officials, in addition to 161 financial institutions. The political sector, energized by the public outcry, passed a series of reforms that stressed corporate accountability. Politicians looked to accountants as independent experts to protect the public interest. Meanwhile, Progressive reforms conferred upon accountants the necessary authority to
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Financial Markets 3 claim professional status, and early accounting practitioners (hereafter, Progressive practitioners) seized the opportunity. A popular notion as to why Enron failed is that its leaders didn't “stick to their knitting.” When Ken Lay joined Houston Natural Gas (the firm that would grow to become Enron) as its chief executive officer (CEO) in 1984, the company was an undistinguished utility whose business focused on moving natural gas through the pipelines that were its major assets, extending thousands of miles across the United States. Over time, Enron became a trading giant that would play a major role in every new market that came along, luring away some of Wall Street's top talent in the process. But in the late 1980s and early 1990s, the deregulating natural gas and electricity markets would be its bread and butter both as an energy company and as a Wall Street type trading firm. While there can be no question that Enron's hubris caused it to eventually overextend itself, entering markets where it had no business being, its initial inclination to expand was a sound business decision. From the beginning, Enron was different from other companies. Most successful companies trace their roots to a powerful innovator and the products that grew out of his or her innovation. Thomas Edison's lightbulb ultimately became the General Electric Company. Bill Gates's brilliant marketing of a personal computer operating system laid the foundation for
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This note was uploaded on 11/29/2010 for the course MBA_W MBA-147822 taught by Professor Anne during the Spring '09 term at Windsor.

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8355467HOW_FINANCIAL_MARKETS_ARE_AFFECTED_BY_SCANDALS -...

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