Wharton School accounting professor compares recent history of accounting improprieties by U.S. companies to international ones.

"But just as support for accounting reforms gains momentum, Wharton accounting professor Christian Leuz points out that efforts to strengthen accounting rules and oversight may be useful, but in themselves they cannot prevent another Enron. More importantly, he says, the recent incidents of financial chicanery should not be taken as representative of Corporate America in general. Individual investors in U.S. companies, by and large, benefit from strong laws and enforcement that protects their rights. However, no system, even one with effective legal protection for outside shareholders, can prevent some of the most egregious actions from occurring.

Says Leuz: “Much of the public and academic debate tends to focus exclusively on the accounting standards.” Leuz notes that this emphasis misses the important point that managers will still have incentives to misstate financial results if there is poor corporate governance coupled with poor performance. Misleading and fraudulent accounting reports are a symptom of more fundamental governance problems. The emphasis should therefore remain on corporate governance efforts and legal protection of outsiders if the goal is to improve the quality of accounting reports."