The legislation that Altered the Self-Regulation

The Event

The collapse of Enron has been marked as one of the greatest falls of the 21st century owing to the embezzlement of funds, lack of ethical concerns and poor management. The fall of Enron was followed by other major collapses such as WorldCom all being as a result of a similar fate. In each of these collapses, the financial statements of the companies were presented to be showing a positive image hoping to show the companies to be performing well, yet after  the financial statements would later be audited, the companies were shown to be collapsing with most of the funds from shareholders being embezzled by the top management and their confidants. Most of the investments that the company claimed to have made were shams and avenues that the management would use to siphon much more of the company’s money into their own pockets (Jarque & Gaines, 2012).

The legislation that Altered the Self-Regulation

Owing to this collapse, the US government developed the Sarbanes–Oxley Act to monitor every aspect of the organizations that are not only publicly traded, but also all the organizations in the US and their respective investments. The act also established some sense of responsibility to the roles played by the auditors and the accountants. This meant that each party had a role to play and they were all viewed to be different depending on the position one took. For example, auditor’s roles were elaborated to be different from the roles that the accountants would play. Never could an organization play both roles in these two capacities as they used to before. Auditors were offered protection from acting in the capacity of presenting the financial statements to the required bodies with any form of red flags being part of these reporting. Each financial period also requires certifications with these organizations being required to present their financial statement periodically (Jarque & Gaines, 2012).

The self-regulation Process in Audit and Public