According to the class pre instructors, it refers to some companies that make financial statement fraud like Enron, Worldcom, Tyco and Adelphia. They were all known as the international companies and the leader of their area. During the past years, financial statement fraud is increasing dramatically by many reasons. I think the existence of it have many unavoidable reasons so the responsibility cannot all taken by the company.

Financial statement fraud is harmful in many ways.it will undermines the reliability, quality, transparency, and integrity of the financial reporting process. it will also diminishes the confidence of capital markets and make it less efficient. Overall, it will bring adverse effects on nation’s economic growth and prosperity. However, sometimes it is also related to the government police and some company have heavy tax rates so they can only take this approach. When monopoly and oligopoly companies’ profits indicate dramatic increase in the report, it will attract more attention from the public, then government will take high tax rates to regulate enterprises. However, high tax rate is not a perfect method and it will cause many negative effects like making financial statement fraud, and an inactive factor for companies’ development. So government is devoted to detecting this kind of financial crime but also prevent to be the cause of this event. Although company needs to take most of the responsibility but government also needs to make a good balance and be fair in the business manipulations.