ABSTRACT
Business leaders should focus not only on financial metrics but also on the limits that legislation imposes on businesses and on the risk of having to pay billions of dollars in fines for non-compliance. Some observers have attributed some of the blame to the poor internal audit practices, accounting controls and risk management of the Baring Bank itself, and its lack of effective control. The reason was senior management demanded unrealistic profits that led to the adulteration of accounting, so the results match the desire of the bosses. Kenneth Lay hires Jeffrey Skilling who used mark-to-market accounting, allowing the company to record potential profits on certain projects immediately after a contract was signed, regardless of the actual profits the deal would generate. AOL Time Warner reported false profits that inflated the value of the company and in 2005 agreed with the authorities to pay US$2.5 billion to close the case.
