Group Assignment 1

School: Minnesota School of Business - Course: BUSINESS M BS210 - Subject: Accounting

Group Assignment 1.What caused the internet boom of the late 1990s? Why did the boom end? A combination of technological advancements, investment, and consumer optimism, contributed to the internet boom of the late 1990s. Thanks to the development of the World Wide Web and the widespread availability of personal computers, people could access the internet and use it for personal and business purposes. The tech industry experienced rapid expansion due to this, as did a growing sense of excitement and optimism regarding the internet's potential. However, several factors contributed to the end of the internet boom, such as a decline in consumer confidence, an increase in advertising revenue, and a decrease in the number of customers making online purchases. Additionally, many internet-based businesses had gone public, and their stock prices had soared quickly, raising questions about the tech industry's overall health and the viability of their business models. Investors became more cautious and pulled their money out of tech stocks due to these worries, which eventually resulted in the dot-com bubble burst and the panic of 2001. The result was a rapid decline in the value of many internet-based businesses, leading to a significant technological sector slowdown. The internet boom ended with the 2001 panic, which had a long-lasting effect on the tech industry and the economy[ CITATION Ste11 \l 1033 ]. 2.Why did Enron collapse? What effect did it have on public opinion and Congress? The manipulation of Enron's financial results, fraudulent accounting practices, and false financial statements all contributed to the company's demise. The business employed various accounting ploys to conceal its debt and exaggerate its earnings, creating an inaccurate impression of its financial well-being. As a result, investors lost faith in Enron and the company's stock lost value. When the truth about the company's financial practices came out, there were a lot of public outcries and a significant lack of confidence in the business community. The Enron scandal had a significant impact on public opinion and Congress, raising concerns regarding the accountability of executives and the accuracy of financial reporting. Congress enacted the Sarbanes-Oxley Act of 2002 as a response to the scandal. It set new standards for public companies and accounting firms to make financial reporting more accurate and transparent. Additionally, the act increased executive responsibilities and established new criminal penalties for corporate fraud. A slew of corporate scandals, including those at WorldCom, Tyco, and Adelphia, followed Enron's demise, further undermining public confidence in the financial system and corporations. Public opinion is still shaped by the Enron and other corporate scandals of the early 2000s, which continue to impact regulatory and policy decisions today[ CITATION Pet22 \l 1033 ]. 3.What issues had to be settled between Senator Sarbanes and Representative Oxley? The Sarbanes-Oxley Act of 2002, enacted in response to the corporate scandals of the early 2000s, including the collapse of Enron, was primarily sponsored by Representative Michael Oxley and Senator Paul Sarbanes. By increasing accountability, transparency, and ethical standards in corporate reporting and governance, the act aimed to restore public trust in the financial system. Sarbanes and Oxley had to collaborate on several important issues during the legislative process to reach a consensus on the final bill. The most important topics they needed to resolve included the following: The Act's Purpose:The extent to which the act would regulate corporate accounting practices and executive duties had to be agreed upon by Sarbanes and Oxley. The Securities and Exchange Commission (SEC)'s function:The two legislators had to decide how much authority the SEC would have to enforce the act censurer public companies complied. Auditing firms' responsibilities include deciding how much accountability auditing firms would have for reporting irregularities and ensuring that financial statements are accurate. Corporate fraud carries the following penalties:They had to agree to the kind of criminal penalties that should be applied to executives who engage in dishonest behaviour, such as insider trading and other forms of financial misconduct. Sarbanes and Oxley ultimately collaborated on the final bill, which both parties approved on July 30, 2002. In the United States, the Sarbanes-Oxley Act is still a significant piece of legislation and continues to influence public companies' financial reporting and corporate governance practices[ CITATION Wil22 \l 1033 ].