How Effective Is the SEC in Identifying Financial Reporting Errors?

The Securities and Exchange Commission (SEC) Division of Corporate Finance (DCF) reviews and regulates information in public filings to “deter fraud and facilitate investor access to information necessary to make informed investment decisions.”

Commentators criticize the SEC for being an ineffective regulator, with specific concerns about its ability to identify financial reporting errors or fraud in companies such as Enron.  These concerns led to a General Accountability Office (GAO) review, new regulations codified in the Sarbanes-Oxley Act, calls for increased funding, and a renewed focus on detecting accounting errors.  Despite ample anecdotal evidence of … Read more