Final answer:
The notion that financial statement frauds occur mostly in large, well-established companies is false, as fraud can happen in any sized business. Emphasis on corporate governance aims to prevent such inaccuracies, with measures like the Sarbanes-Oxley Act established to enhance financial transparency and protect investors.
Step-by-step explanation:
The statement that financial statement frauds most often occur in large, well-established companies is false. Financial statement fraud can occur in businesses of any size, and they are not restricted to large corporations. Although high-profile cases involving companies such as Enron, Tyco International, and WorldCom may create the impression that such frauds are common in big businesses, these cases are notable precisely because of the companies' large scale and the severity of the consequences. Smaller businesses can also manipulate financial statements, and they may be less likely to have the same level of scrutiny that comes with regulatory compliance and public reporting requirements.
Corporate governance systems are designed to oversee the management of a company and ensure the accuracy of financial reporting. However, when they fail, as the case of Lehman Brothers illustrated, accurate information may not be available, potentially leading to fraudulent financial reporting. To address these concerns, regulations such as the Sarbanes-Oxley Act of 2002 have been implemented, aiming to increase confidence in the financial disclosures of public corporations, thereby better protecting investors from potential fraud.