Management Accountability And Corporate Responsibility

One of the failures of Enron that allowed the fraud to occur in early 2000s was management accountability or corporate responsibility. Rockness says the main cause of the corporate ethical conduct is the tone at the top, signing officers, cited by several professional sources such as American Institute of Certified Public Accountants (AICPA) and Committee of Sponsoring Organizations of the Treadway Commission (COSO). Prior to SOX, signing officers were not held responsible to anyone as long as the company showed stock increase justified by earning’s growth. Enron’s signing officers had a persuasive story to back up the increase in earnings and whoever questioned those numbers was viewed as being stupid. Hence when the time came for the†¦show more content†¦Mendez, CEO, whose role was to report and certify correct financial statements, free from all material misstatements, violated the SOX section 302 of corporate responsibility and the several laws of SECs. Men dez paid $5 million to settle the SEC’s charges, forfeited and returned $4 million bonuses that he received during the company’s fraudulent reporting period. Neil, CFO, was the one who directed an effort to manipulate the cost of walnuts and misled the Diamond’s independent auditors by providing wrong and incomplete information to justify the unusual accounting treatment for the payments. He personally profited from the fraud by receiving cash bonuses and other compensation based on the company’s reported Earnings per Share (EPS) for fiscal quarters in 2010 and 2011. When the fraud was uncovered, Diamond’s stock price dropped from $90 to $17 per share in 2011. Neil paid $125,000 in civil monetary penalties, forfeited a legal claim against Diamond’s for nearly $1 million worth stock options and shares of stock that he received during the fraudulent reporting period, and was barred from practicing as an accountant for 5 years. Point Three: Tit le IV Section 404 Managers must assess and auditors must attest to the effectiveness of its internal controls over financial reporting. SOX addresses the issue of management assessment of internal controls. This section requires both independent auditor and management opinion regarding the effectiveness of