Synopsis

Between 2002 and 2018, many countries reformed their accounting and auditing procedures to correct weaknesses revealed by corporate accounting frauds. Canada required corporations to strengthen their audit committees. Australia adopted whistleblower protections and placed restrictions on auditors taking jobs with former clients. Japan enacted a law similar to Sarbanes-Oxley, requiring corporate executives and auditors to evaluate internal controls over financial reporting. The European Union limited the nonaudit services public accounting firms may perform and began requiring listed companies to rotate audit firms every ten years.

Discussion Questions

1. What accounting and auditing reforms did Canada adopt following the Enron and WorldCom accounting scandals?
2. How did Australia’s Corporate Law Economic Reform Program Act of 2004 (CLERP 9) change that country’s auditing practices?
3. What accounting and auditing reforms did Japan adopt in 2004-2006 following the Seibu, Kanebo, and Livedoor accounting scandals? What additional reforms did Japan adopt in response to the Olympus and Toshiba scandals?
4. What accounting and auditing reforms did the European Union adopt in 2014 and 2015 after concluding that auditors had not done enough in 2006 and 2007 to warn investors and regulators about the financial market’s impending collapse?
5. According to the House of Lords Economic Affairs Committee (EAC), what are the negative consequences of having only four large international accounting firms? How did British auditors’ reports change in 2014?

Additional Resources

The Real Cost of the 2008 Crisis. This September 2018 New Yorker article, marking the 10th anniversary of the global financial crisis, posits that the crisis contributed to the rise of anti-establishment political movements in the U.S. and Europe.

EU Audit Reform Summary Table. This PricewaterhouseCoopers Fact Sheet explains the auditor rotation requirements adopted by the European Union in 2014.