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39 Tex. J. Bus. L. 325 (2003-2004)
Enron, Sarbanes-Oxley, and the End of Earnings Management

handle is hein.journals/txjbus39 and id is 349 raw text is: ENRON, SARBANES-OXLEY, AND THE END OF EARNINGS MANAGEMENT Matthew S. Mokwat Introduction .......................................... ........326 I. Federal Securities Law............................. ........326 A. Generally Accepted Accounting Principles .............. ......327 B. Generally Accepted Auditing Standards ................. .....328 C. Antifraud Provisions ....................................330 II. Earnings Management Problem...............................331 III. Spectrum of Earnings Management.............................331 IV. Motives and Opportunities...................................334 V. Earnings Management......................................336 A. Revenue Recognition ......................... ..............337 1. Side Agreements................... .................338 2. Right of Return Policies ................... ............339 3. Channel Stuffing................... .................339 4. Unusual Gains.'....................................... 340 5. Special Purpose Entities ...................... ......... 340 B. Examples and Analysis: Improper Revenue Recognition ...........340 C. Accrual Accounting.....................................345 1. Aggressive Capitalization and Extended Amortization Policies ....346 2. Cookie Jar Reserves ......................... .........346 3. Big Bath Restructuring Charges ...................................347 4. Creative Acquisition Accounting ................... ......347 D. Examples and Analysis: Accrual Accounting Abuses ...................347 VI. Effectiveness of Earnings Management .....................................348 VII. Implications and Analysis ............................... .....349 A. Accounting Framework .. ........................... .......349 B. SEC's Division of Enforcement n.Etede.e........................s....350 C. The Sarbanes-Oxley Act of 2002 ...............................350 D. SRO Rule Changes .............................. .......352 Conclusion ..................................................353 Matthew S. Mokwa graduated from The University Texas School of Law in May 2003.

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