The Enron ScandalQuestion 1: What happened to Lay, Skilling and Fastow? Kenneth Lay created in 1985 after assimilation of InterNorth and Houston Natural Gas. He later employed Jeffrey Skilling and Andrew Fastow, who were to be implicated with him in committing serious accounting misconduct. With these men and many others, Lay hid enormous sums of money in the form of debts from unsuccessful contracts and projects. This was possible through the use of accounting loopholes, poor financial reporting and special purpose entities. Andrew Fastow, CFO, and other Enron executives frequently misled Enron's audit committee and board of directors regarding these high-risk accounting practices. Additionally, they put immense pressure on Lay so that he could not pay attention to details. It was through these projects that Enron became the main natural gas trading company on the continent in 1992. Natural gas trading became the continent's second largest benefactor. Enron's net profit. For example, Enron earned earnings before interest and taxes (EBIT) totaling $122 million from trading natural gas. The creation of the online trading model, Enron Online, in November 1999 allowed Enron to further expand and expand its capabilities for consulting and managing its trading activities. It was not until November 2001 that Enron shareholders filed a lawsuit worth $40 billion. These shareholders did not understand how Enron's stock price would fall from $90.75 per division in mid-2000 to $1 by the end of November 2001. According to these shareholders, this went beyond stock market logic, which even at the time the riskiest moments would not yield such bad results. This lawsuit prompted Securities to a...... middle of paper ...... benefits. Many studies and empirical investigations have indicated that SOX has improved the reliability of financial reporting, the effectiveness of corporate governance, the liquidity of companies and investors, and resulted in a reduction in financial statement fraud. Consistency of Financial Reporting: The innovative reason behind the efforts that produced SOX was to restore public assurance in the financial statements organized by public companies. A primary objective of internal control should be to produce reliable financial information, because the more effective the internal controls, the more reliable the information produced will be. Since one of the necessities of SOX is the maintenance of effective internal controls, it is reasonable to assume that consistent information would be produced. This expectation can be supported by several studies.