The American Institute of Certified public accountants define “accounting” as “the art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof”. To put it simply, this activity involves logging of financial data, and analyzing the trends to predict future business outcomes.
Of late, many well known companies such as Sunbeam and Enron Corporation have been found guilty of financial fraud, causing companies to review their accounting standards, and auditing techniques. The Enron Scandal was the direct cause of the passing of a new act, the Sabranes-Oxley act, which severely increases the penalty an organization must incur, when it is found guilty of fraudulent behavior.
