Employees, shareholders, and regulatory agencies are increasingly sensitive to violation of accounting standards, failures to disclose substantial changes in business condition to investors, nonconformance with required health and safety practices, and production of unsafe of substandard products.
Such heightened vigilance raises the risk of financial loss for business that do not foster ethical practices or run afoul of required standards.
For example, Enron’s accounting practices hid the real value of the firm, and in late 2001 the energy company was forced to file for bankruptcy.
The case was notorious, but many other recent scandals have occurred in IT companies in spite of safeguards that were enacted as a result of Enron debacle