Accounting Law Commons^™

The Screening Effect Of The Private Securities Litigation Reform Act, Stephen Choi, Karen K. Nelson, Adam C. Pritchard

Law & Economics Working Papers Archive: 2003-2009

Prior research shows that the PSLRA increased the significance of merit-related factors, such as the presence of an accounting restatement or insider selling, in determining the incidence and outcomes of securities fraud class actions. (Johnson, Nelson, and Pritchard, 2007). This result, however, is consistent with two possible hypotheses. First, the PSLRA may have reduced solely the incidence of non-meritorious litigation. Second, the PSLRA may have changed the definition of merit, effectively precluding claims that would have survived and produced a settlement pre-PSLRA. This paper tests these alternative hypotheses. We find that pre-PSLRA claims that settled for nuisance value would be …

Plea Bargaining's Survival: Financial Crimes Plea Bargaining, A Continued Triumph In A Post-Enron World, Lucian E. Dervan

Oklahoma Law Review

No abstract provided.

Fixing 404, Joseph A. Grundfest, Steven E. Bochner

Michigan Law Review

Although debate persists as to whether the costs of Sarbanes-Oxley's Section 404 regulations exceed their benefits, there is broad consensus that the rules have been inefficiently implemented. Substantive and procedural factors contribute to the rules' inefficiency. From a substantive perspective, the terms "material weakness" and "significant deficiency" are central to the implementing regulations and are easily interpreted to legitimize audits of controls that have only a remote probability of causing an inconsequential effect on the issuer's financial statements. As a quantitative matter the literature suggests that a control with a remote probability of causing an inconsequential effect has an expected …

A Complete Property Right Amendment, John H. Ryskamp

ExpressO

The trend of the eminent domain reform and "Kelo plus" initiatives is toward a comprehensive Constitutional property right incorporating the elements of level of review, nature of government action, and extent of compensation. This article contains a draft amendment which reflects these concerns.

Predatory Structured Finance, Christopher L. Peterson

ExpressO

Predatory lending is a real, pervasive, and destructive problem as demonstrated by record settlements, jury awards, media exposes, and a large body of empirical scholarship. Currently the national debate over predatory mortgage lending is shifting to the controversial question of who should bear liability for predatory lending practices. In today’s subprime mortgage market, originators and brokers quickly assign home loans through a complex and opaque series of transactions involving as many as a dozen different strategically organized companies. Loans are typically transferred into large pools, and then income from those loans is “structured” to appeal to different types of investors. …

The Equivalence Approach To Securities Regulation, Tzung-Bor Wei

ExpressO

Abstract

In the past, academics and regulators debated two competing approaches to international securities regulation, namely “harmonization” and “regulatory competition.” More recently, a third approach to securities regulation has emerged – the “equivalence” approach. Under this model, a host country exempts foreign firms from certain host country rules when the firms’ home country rules are sufficiently similar, or “equivalent.” Many regulators have come to embrace equivalence, which is rapidly becoming a key principle in international finance.

This paper studies the concept of equivalence. It begins by defining “equivalence,” highlighting that different regulators manipulate the term to give it contrasting meanings. …

Bond Repudiation, Tax Codes, The Appropriations Process And Restitution Post-Eminent Domain Reform, John H. Ryskamp

ExpressO

This brief comment suggests where the anti-eminent domain movement might be heading next.

Enron And The Special Purpose Entity. Use Or Abuse? The Real Problem - The Real Focus, Neal F. Newman

ExpressO

In December of 2001, Enron Corporation filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code; one of the largest corporate bankruptcy filings at that time. When the investigations commenced and the tangled Enron web was unraveled, it was discovered that Enron had perpetrated a very sophisticated form of accounting fraud through its repeated use of what are referred to as Special Purpose Entities (“SPEs”). In their most basic forms, SPEs are business entities formed for the purpose of conducting a well specified activity such as construction of a gas pipeline, or collection of a specific group of accounts …

Measuring And Representing The Knowledge Economy: Accounting For Economic Reality Under The Intangibles Paradigm, Olufunmilayo B. Arewa

ExpressO

Enron has become a symbol: a symbol of excess, an illustration of how a company can base its business on fraudulent, deceptive or even largely non-existent business transactions. The collapse of Enron had a significant impact on the adoption of legislation such as the Sarbanes-Oxley Act, which was intended to prevent the types of fraudulent behavior that occurred at Enron. However, Sarbanes-Oxley and other responses to the business practices of many companies during the late 1990s do not fully address some of the underlying factors that permitted and in fact encouraged the Enrons of the world to represent their companies …

Standards Of Practice For Pension Practitioners, 39 J. Marshall L. Rev. 667 (2006), David Pratt

UIC Law Review

No abstract provided.

Breaking The Bank: Revisiting Central Bank Of Denver After Enron And Sarbanes-Oxley, Celia Taylor

ExpressO

No abstract provided.

What Makes Asset Securitization "Inefficient"?, Kenji Yamazaki

ExpressO

Despite the damage caused by the recent Enron scandal , the asset securitization market has been vibrant and has become a popular financing alternative . A number of academics emphasize its merits and suggest that it is a more favorable way of financing, and Congress’s proposal to make sales of asset in securitization immune from characterization as secured transactions under the Bankruptcy Reform Act of 2001 (the “Reform Act”) almost materialized when the Enron scandal hit the scene. Conversely, there have been accusations that securitization is not a legitimate way of financing because, for example, it fosters fraudulent transactions.

Why …

The Sec And Accounting, In Part Through The Eyes Of Pacioli, Matthew J. Barrett

Journal Articles

As part of a symposium marking the seventieth anniversary of the creation of the Securities and Exchange Commission, this article pulls together two threads, namely Luca Pacioli's prominence in accounting and the importance of the Management's Discussion and Analysis (MD&A) requirements that seek to give investors an opportunity to view a public company through the eyes of management, to evaluate the SEC's record on certain accounting issues. Because writers in legal journals have largely ignored Pacioli's efforts, the article begins by highlighting some of the friar's contributions to accounting precepts. The article next applies some of those precepts in a …

A Securities Regulator Looks At Onvergence, Donald T. Nicolaisen

Northwestern Journal of International Law & Business

For many years there has been a dedicated group of practitioners, standard setters, business leaders and others from around the world who have worked to establish a single set of globally accepted accounting standards for the benefit of the capital markets. These people clearly had their hearts in the right place but, absent a binding mandate to apply the standards, it seemed largely a labor of love. Now I expect those pioneering initiatives and the many years of effort to pay off because in 2005 a large number of companies are joining what up to now has been a limited …

Expensing Isn't The Only Option: Alternatives To The Fasb's Stock Option Expensing Proposal, Benjamin A. Templin

ExpressO

This paper reviews the arguments for and against the Financial Accounting Standard Board's (FASB) proposal to require that corporations expense options. It identifies two major goals of the proposed rule -- 1) clarity in financial statements and 2) a reduction of corporate fraud by removing the incentive of options. To address these two goals, I adopt a framework of Information Reforms v. Rules of the Game Reforms. The article starts with a history of FASB Statement No. 123 Accounting for Stock-based Compensation and also analyzes the Congressional legislation that attempts to block the measure, the Stock Option Accounting Reform Act. …

A Model Financial Statement Insurance Act, Lawrence A. Cunningham

ExpressO

No abstract provided.

Revisiting The Role Of The Future In Accounting Reform, Lawrence A. Cunningham

ExpressO

Overlooked in accounting-reform debate emanating from recent financial reporting scandals is the role of forward-looking disclosure inaugurated in the late 1970s and expanded throughout the 1980s and 1990s. Debate centered on whether accounting concepts developed during this period were too rule-bound. An SEC study largely resolved this debate by characterizing US GAAP as a mix of rules and principles embedded in an objectives-based accounting system. The SEC expressed a slight preference for principles over rules in future accounting standard-setting. Some see this resolution as transformative. This Article considers how it may disguise a false dichotomy likely providing false catharsis. Underappreciated …

Choosing Gatekeepers: The Financial Statement Insurance Alternative To Auditor Liabilty, Lawrence A. Cunningham

ExpressO

Positioned in a lively current debate concerning how to design auditor incentives to optimize financial statement auditing, this Article presents the more ambitious financial statement insurance alternative. This breaks from the existing securities regulation framework to draw directly on insurance markets and law. Based on upon an evaluation of major structural and policy-related features of the concept, the assessment prescribes a framework to permit companies, on an experimental-basis and with investor approval, to use financial statement insurance as an optional alternative to the existing model of financial statement auditing backed by auditor liability.

The financial statement insurance concept, pioneered by …

What Counts As Fraud? An Empirical Study Of Motions To Dismiss Under The Private Securities Litigation Reform Act, Adam C. Pritchard

ExpressO

No abstract provided.

Rules, Principles, And The Accounting Crisis In The United States, William Wilson Bratton

Articles

The Sarbanes-Oxley Act and the Securities Exchange Commission move too quickly when they prod the Financial Accounting Standards Board, the standard setter for US GAAP, to move immediately to a principles-based system. Priorities respecting reform of corporate reporting in the US need to be ordered more carefully. Incentive problems impairing audit performance should be solved first through institutional reform insulating the audit from the negative impact of rent-seeking and solving adverse selection problems otherwise affecting audit practice. So long as auditor independence and management incentives respecting accounting treatments remain suspect, the US reporting system holds out no actor plausibly positioned …

Comparisons Among Firms: (When) Do They Justify Mandatory Disclosure?, Sharon Hannes

ExpressO

Comparisons among firms play a major role in securities analysis. This essay asks if this fact justifies the mandatory nature of securities regulation. Once a firm approaches the public securities markets, federal securities regulations compel it to disclose financial information to the public. A seminal theory argues that firms would not otherwise commit to maintain optimal disclosure levels, since a disclosing firm bears all disclosure costs but does not gain all disclosure benefits.

This paper examines the robustness of this argument in relation to disclosure benefits which arise from comparisons among firms. Financial data of peer firms allows shareholders to …

Sec Enforcement Of Attorney Up-The-Ladder Reporting Rules: An Analysis Of Institutional Constraints, Norms And Biases, Michael A. Perino

Villanova Law Review (1956 - )

No abstract provided.

Lawyers In The Moral Maze, Mark A. Sargent

Villanova Law Review (1956 - )

No abstract provided.

Legal And Ethical Duties Of Lawyers After Sarbanes-Oxley, Roger C. Cramton, George M. Cohen, Susan P. Koniak

Villanova Law Review (1956 - )

No abstract provided.

Was Arthur Andersen Different? An Empirical Examination Of Major Accounting Firm Audits Of Large Clients, Theodore Eisenberg, Jonathan R. Macey

Cornell Law Faculty Publications

Enron and other corporate financial scandals focused attention on the accounting industry in general and on Arthur Andersen in particular. Part of the policy response to Enron, the criminal prosecution of Andersen eliminated one of the few major audit firms capable of auditing many large public corporations. This article explores whether Andersen's performance, as measured by frequency of financial restatements, measurably differed from that of other large auditors. Financial restatements trigger significant negative market reactions and their frequency can be viewed as a measure of accounting performance. We analyze the financial restatement activity of approximately 1,000 large public firms from …

Rules, Principles, And The Accounting Crisis In The United States, William W. Bratton

Georgetown Law Faculty Publications and Other Works

The Sarbanes-Oxley Act and the Securities Exchange Commission move too quickly when they prod the Financial Accounting Standards Board, the standard setter for US GAAP, to move immediately to a principles-based system. Priorities respecting reform of corporate reporting in the US need to be ordered more carefully. Incentive problems impairing audit performance should be solved first through institutional reform insulating the audit from the negative impact of rent-seeking and solving adverse selection problems otherwise affecting audit practice. So long as auditor independence and management incentives respecting accounting treatments remain suspect, the US reporting system holds out no actor plausibly positioned …

Sarbanes-Oxley 307: Trusted Counselors Or Informers, M. Peter Moser, Stanley Keller

Villanova Law Review (1956 - )

No abstract provided.

Enron, Sarbanes-Oxley And Accounting: Rules Versus Principles Versus Rents, William W. Bratton

Villanova Law Review (1956 - )

No abstract provided.

Accounting Firm Or Guarantor - The Third Circuit's Answer To Rule 10b-5'S Scienter Requirement In Accountant Liability Cases, Julie A. Boncarosky

Villanova Law Review (1956 - )

No abstract provided.

11th Biennial Midwest/Midsouth Securities Law Conference, Office Of Continuing Legal Education At The University Of Kentucky College Of Law

Continuing Legal Education Materials

Materials from the UK/CLE 11th Biennial Midwest/Midsouth Securities Law Conference held in February 2002.