Government Oversight of Corporate Finances

Essay by ghostriderngaUniversity, Bachelor'sA+, May 2004

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This subject could be debated endlessly due to the fact that politics comes into play when you discuss "government" anything. Democrats will say that this would not be necessary if a Republican was not in office and the Republicans will say that had the previous Democrat done his job we would not be at this state. Having made this point, we will try not to focus on the political aspect but on the realistic aspect of our economy's current state.

Following the collapse of Enron many people started to contemplate on how much we have confidence in companies to be straightforward and honest. Come on people! When you are at the top, who wants to admit that they got there by scamming investors and manipulating the books? No one wants to disclose their errors. Me personally, I would not want to get to the top that way, but it happens, especially to those businesses with a lower moral persuasion.

So how can this be prevented? Where was the Securities and Exchange Commission (SEC) to keep this from happening in the first place?

The SEC cannot regulate each and every business' books. The SEC is designed for analytical purposes. Something has to be noticeably wrong for there to be a need for an investigation. Since there was no obvious issue before hand, the SEC really had no reason to scrutinize Enron. Enron is not the only company to doctor their books; they are just the current one to be noticed.

Realizing this is an issue for, not only investors, but consumers and the economy as a whole, President George W. Bush decided to take action. He is right: there needs to be some type of regulating authority to keep business finances trustworthy. I, however, do not believe that it should be...