Changes Because of WorldCom

The WorldCom scandal was one of the largest in U.S. history.  This had a profound impact on the passing of the Sarbanes-Oxley Act of 2002.   Out of this act the Public Company Accounting Oversight Board was established by the SEC; to oversee the accounting and audit practices for publicly trading companies.  The act states that there are to be rules and regulations specifically set up to insure the public that these types of fraud will not occur again including but not limited to the establishment of the PCAOB, an audit committee external from the company, mandatory registration of public accounting firms, registration of companies with the SEC, regulations that working papers must be maintained for at least 7 years and second partner review of audits.  All of these regulations and more have been prompted by the recklessness of WorldCom and other fraudulent companies. (The Laws That Govern the Securities Industry , 2012)

 

 

 

Cynthia Cooper stated in her interview with Fraud Magazine in correlation to the scandal at WorldCom and how to prevent that from happening in the future; “We must find the political will to proactively institute balanced regulation, and require greater transparency and disclosure to minimize excessive market bubbles and better protect consumers and investors.” (Carozza, 2008)  Transparency in terms of a company is described as the full, accurate and timely disclosure of information.  This leads into the 2010 imposed Dodd-Frank Act that is quoted “To promote the financial stability of the United States by improving accountability and transparency in the financial system, to end ‘‘too big to fail’’, to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes (Dodd-Frank Wall Street Reform and Consumer Protection Act, 2012).”

 

 

Carozza, D. (2008, March/April). Extraordinary Circumstances: An Interview with Cynthia Cooper. Retrieved from Fraud Magazine: http://www.fraud-magazine.com/article.aspx?id=210

 Dodd-Frank Wall Street Reform and Consumer Protection Act. (2012, September 7). Retrieved from SEC.gov: http://www.sec.gov/spotlight/dodd-frank.shtml

The Laws That Govern the Securities Industry . (2012, August 30). Retrieved from SEC.gov: http://www.sec.gov/about/laws.shtml#sox2002