Yes, which is why the US Congress added a whole bunch of new regulations (Sarbanes-Oxley) to prevent future Enrons.
But it's shockingly easy not to and auditors couldn't possibly catch all of the instances of non-compliance
Most of the time people just aggregate values and never inspect the detail. They record those aggregates in the GL and move on. I have never seen granular recon. That is why embezzlement is only discovered by accident years later.
> They record those aggregates in the GL and move on.
what is gl?Regulations are usually backwards looking. So at least we never get Enron/GlobalCrossing/etc again.
Then another waves of crises happen, and we get new regulations.
So Fannie/Freddie happened in 2004-2007 and we got brightline guidance and application of FAS91 and EITF-9920.
So then AIG/Lehman/Bear happened in 2007/2008 and we got Dodd Frank. Again backwards looking but we end up in a better place.
The regulation stacks upon regulation, but I think this is good.
The correct way to think about it is scammers versus law makers.
Scammers are both trying to scam and also to blend in.
So it's hard at first to draw lines.
Them the lines burst onto the scene, when scammers become obvious.
So law makers write that up, and scammers have to find something new.
It just means that GIVEN that there is a law, WHEN it is found to be broken, there are DEFINED rules of accountability and punishment.