(Solution) 1111/j.1475-679X.00325.x Journal Of Accounting Research Vol. 47 No. 2 May 2009 Printed In U. Market And Political/Regulatory Perspectives On The... | Snapessays.com

(Solution) 1111/j.1475-679X.00325.x Journal of Accounting Research Vol. 47 No. 2 May 2009 Printed in U. Market and Political/Regulatory Perspectives on the...

In his 2009 paper titled “Market and Political/Regulatory Perspective on Recent Accounting Scandals”, Ray Ball discusses accounting scandals in 2001 and 2002. Provide a summary of the market consequences of misreporting and the auditors’ conflicts of interests as explained in the article.DOI: 10.1111/j.1475-679X.2009.00325.x


Journal of Accounting Research


Vol. 47 No. 2 May 2009


Printed in U.S.A.


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 Fnancial reporting. We do not have the op-


portunity to observe a world in which either market or political/regulatory


processes operate independently, and the events are recent and not well re-


searched, so untangling their separate effects is somewhat conjectural. This


paper offers conjectures on issues such as: What caused the scandalous behav-


ior? 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 Fnancial 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?


1. Introduction


The tsunami of accounting scandals at the beginning of the millen-


nium is well known. A partial list of companies involved includes AOL,




The University of Chicago Booth School of Business. Helpful comments were gratefully re-


ceived from Sudipta Basu, John Coates, Ron Dye, Bob Jensen, Clive Lennox, Steve Orpurt, Sam


Peltzman, Sarah Zechman, participants at the 2008


Journal of Accounting Research




and especially Christian Leuz (the editor). ±inancial support from the University of Chicago,


Graduate School of Business also is gratefully acknowledged.










, University of Chicago on behalf of the Institute of Professional Accounting, 2009


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