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8 Stan. J.L. Bus. & Fin. 39 (2002-2003)
Post-Enron Reform: Financial-Statement Insurance and GAAP Revisited

handle is hein.journals/stabf8 and id is 45 raw text is: Post-Enron Reform: Financial Statement Insurance, and GAAP Re-visited Joshua Ronen* Table of Contents I. Introduction II. The Role of Irrational Exuberance, Infectious Greed, and the Stock Market Bubble III. The Importance of Ethics for the Accounting Profession A. Ethics as an Economic Good B. External Audits as Substitutes for Unobserved Ethical Endowments C. The Perverse Incentives of Auditors IV. Financial Statement Insurance A. The FSI Procedure 1. The Insurer 2. The Auditor 3. The Market 4. The Company-The Insured B. A Recapitulation V. Principles vs. Rules VI. Potential GAAP Improvements VII. A Future Role for the FASB VIII. Conclusion I. Introduction On October 16, 2001, Enron Corp. announced that it was reducing its after- tax net income by $544 million and its stockholders' equity by $1.2 billion. Because of accounting errors, Enron announced on November 8 that it was restating its previously reported net income for the years 1997-2000. The result of this Professor of Accounting at the Stern School of Business, New York University; B.A., Accounting and Economics, Hebrew Univ.; Ph.D., in Business Administration, Stanford University. Professor Ronen served as Associate Director of Research for the AICPA Accounting Objective Study Group. Recently Dr. Ronen served as Director of the Vincent C. Ross Institute of Accounting Research at the Stern School of Business, New York University. He has served on as an expert witness in a variety of litigation cases, and as a consultant to law firms on numerous class action securities litigation and business and patent infringement cases.