The accounting scandals of the early 2000s led many people to question the legitimacy of:
A)Ratio analysis as a means of evaluating the performance of a firm.
B)Relying on the recommendations of tax accountants to find ways of reducing the taxes owed by a business organization.
C)Publishing financial information about a firm on the Internet.
D)Allowing an accounting firm to do both consulting and auditing work for the same company.

Question

Quizplus · Accepted Answer

The accounting scandal of the early 2000s, such as Enron, led to questioning the legitimacy of allowing an accounting firm to do both consulting and auditing work for the same company. This created a conflict of interest where the accounting firm may prioritize keeping their consulting clients happy over providing accurate and unbiased audits. The Sarbanes-Oxley Act of 2002 addressed this issue by forbidding accounting firms from doing both consulting and auditing work for the same client.

The Accounting Scandals of the Early 2000s Led Many People