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
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