Accounting Scandals and Eye-Catching Frauds: USA-Japan Comparison by Considering the Role of Auditing

Abstract

It is necessary to provide confidence to financial markets, so that they can function and develop in a successful manner. Inaccurate financial statements subject to fraud which initiate accounting scandals make it difficult for financial statements users to make the right decision. In order to assure transparency, reliability, objectively and standardization, financial statements are audited by independent auditors. However, the accounting scandals experienced in the 21st century has shown that, independent auditing firms do not always fulfill their duties completely. For this reason, legislation was introduced in United States of America (USA), Europe and Asian countries, including Japan. Public oversight bodies were also established. But despite the introduced laws, regulations, arrangements and public oversight bodies, the risk of accounting scandals still continues. This is partly due to the fact that laws, regulations, arrangements and introduction of public oversight bodies are delayed and they are not completely meeting the expectations of changing market conditions. Effective pro-active policies and actions are not in order as well. This paper investigates accounting scandals and eye-cathing frauds by making a comparison between USA and Japan, while considering and discussing the role of auditing.