ABSTRACT
This chapter examines accounting scandals over approximately the last 175 years that threaten corporate financial reporting's credibility as a viable means of protecting stakeholders from corrupt senior managers. It addresses the effectiveness of accounting as a system of governance instrumentation. The chapter analyses the responses of the state and the public accountancy profession to accounting scandals over many decades and in several jurisdictions, examining the credibility of audit as a means of protecting stakeholders from corrupt senior managers. It recounts the two paradoxes of false expectations from the history of corporate financial reporting generally and accounting scandals in particular, specifically the paradox of accounting as a governance instrument, and the paradox of auditing as a fraud detector. The circumstances surrounding scandals around the time of Enron's demise provide a template for comparison with earlier events, accounting and auditing issues, and responses to them by the state and the public accountancy profession.
