Practice Quiz

CLEP Business Law

Category - Legal Envrmt

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Enron Corporation was an energy trading and utility company that was at the center of one of the largest accounting scandals in U.S. history. Its executives used accounting practices that inflated the company's revenues. The result was that Enron filed for bankruptcy, its employees lost millions of dollars, and several of its top executives were prosecuted and jailed. What legislation was enacted in part as a response to the Enron scandal?
  1. Accounting Fraud Accountability Act
  2. Sarbanes-Oxley Act
  3. Securities and Exchange Act
  4. Accounting Advisors Act
  5. Skilling-Lay Act
Explanation
Answer: B. The legislation that was enacted in part as a response to the Enron scandal was the Sarbanes-Oxley Act. The Sarbanes-Oxley Act is reform legislation intended to improve financial disclosures in order to prevent accounting fraud. In addition to the Enron scandal, other large-scale accounting fraud was found at Adelphia and WorldCom.
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