Accounting › Section G · Fraud, internal controls, and cash › Topic G.6

Financial statement fraud and Sarbanes-Oxley

When managers falsify the financial statements themselves, investors, lenders and employees can lose billions. The frauds at Enron and WorldCom led directly to the Sarbanes-Oxley Act of 2002, which reshaped how US public companies are governed and audited.

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In this topic

What financial statement fraud is
Why managers cook the books
Inflating revenue
Other ways to distort the statements
Enron and WorldCom
The Sarbanes-Oxley Act
Key sections of the Act
Worked example: reading the red flags
Worked example: capitalising an expense
Has it worked?
Common mistakes to avoid
Key takeaways

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