Sarbanes-Oxley's CEO and CFO Certification Requires Scienter to Protect Investors

Nathan S. Slavin, PhD, CPA, and Glen M. Vogel, JD, and Stuart L. Bass, JD, MPA

In December 2001, Enron—the nation's seventh-largest company, based on reported revenues—filed for Chapter 11 bankruptcy, touching off an eruption of accounting scandals that rocked the financial world. At the time, Enron's collapse was the largest corporate bankruptcy in American history, bringing down a company with approximately $33 billion in assets. Over a four-year period, Enron's executives engaged in a fraudulent accounting scheme that included overstating profits and understating debts to drive up the stock price. As the scheme unraveled, investors lost tens of billions of dollars as the stock price plummeted from a high of near $90 a share to less than $1 a share.