There are many business events that occurred during the past 20 years and which have affected the accounting system. But the major event from all of them is Enron scandal. Enron scandal which resulted in the bankruptcy of the Enron Corporation was highlighted in later half of 2001 and was a result of complex accounting practices and loopholes of accounting policies. Misutilization of revenue recognition concept and misrepresentation of earnings to show a strong balance sheet was the major issue in that case. Ultimately the firm went bankrupt and resulted in crises in US Capital market. As a result of this in 2002 The Sarbanes Oxley Act was enacted by US government to provide protection to investors from fraudulent accounting policies of the companies and to ensure proper implement of corporate governance. Major focus of the act is on improvement of financial disclosures.

Describe the legislation that altered the self -regulation process of the accounting profession. 3. Describe the regulation process for accounting firms that audit (A) public companies and (B) non- public companies. 4. Describe how this new sel f-regulation process would affect you as an auditor working for a large public accounting firm today. Discuss the strengths and weaknesses of self -regulation in the accounting profession as a result of the historical events you described.