SEC Takes on Accounting Fraud

Congress may join forces with the Securities and Exchange Commission (SEC) in its investigation of hundreds of companies for possible earnings manipulation.

Rep. Richard Baker (R-LA), chairman of the House Financial Services subcommittee on capital markets, has indicated that the House may call for hearings on the problem of accounting fraud in U.S. companies.

Rep. John LaFalce, (D-NY), recently noted that executives are increasingly under pressure to meet analysts’ earnings estimates. Congress and the SEC are concerned that this pressure is causing companies to violate financial reporting rules in order to produce financial statements that make the companies look healthier than they actually are.

"We're seeing an alarming shift in fraudulent financial reporting," said SEC Enforcement Director Richard Walker. “Historically, it was largely confined to smaller companies; now it has reached the Fortune 500 companies."

The SEC is currently investigating approximately 250 companies, a significant increase from recent years.

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