The Demise of Enron
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- Date Submitted: 09/30/2010 10:25 AM
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XACC/280 Week 8 Checkpoint: Impacts of Unethical Behavior
The nature of the controversy regarding Enron’s practices included Enron’s aggressive and creative accounting (10Se). Because Enron’s credit rating was also a necessary component a favorable earnings picture and the avoidance of excessive leverage on Enron’s balance sheet were perceived by its management as essential to maintaining the firm’s credit rating (10Se). The means used to achieve these objectives involved departures from transparency which affected the firm’s relations with investors and creditors, its own board of directors and other stakeholders of the corporation (10Se). The firm’s use of special purpose entities was part of the practices employed to manipulate the firm’s earnings figures and balance sheet, as was recourse to hedging and the use of derivatives in conflict with reporting rules, or business ethic (10Se). Many of the transactions associated with self-dealing by Enron executives leading to substantial personal enrichment (10Se). Some practices that were questioned were; FAS 140 transactions, tax transactions, non-economic hedges with related parties, share trust transactions, minority interest, prepays, and manual to market accounting (10Se).
If I had been an accountant for this company I would have been fired because I would have told the necessary people in the company of the wrong doings that was being done within the accounting firm.
Honest accounting could have been done to prevent this controversy.
This company went bankrupt due to its unethical behavior on the profitability of the company.
Reference
(n.d.). Retrieved September 29, 2010, from http://www.unctad.org/en/dos/gdsmdpbg2420046_en.pdf
The nature of the controversy regarding Enron’s practices included Enron’s aggressive and creative accounting (10Se). Because Enron’s credit rating was also a necessary component a favorable earnings picture and the avoidance of excessive leverage on Enron’s balance sheet were perceived by its management as essential to maintaining the firm’s credit rating (10Se). The means used to achieve these objectives involved departures from transparency which affected the firm’s relations with investors and creditors, its own board of directors and other stakeholders of the corporation (10Se). The firm’s use of special purpose entities was part of the practices employed to manipulate the firm’s earnings figures and balance sheet, as was recourse to hedging and the use of derivatives in conflict with reporting rules, or business ethic (10Se). Many of the transactions associated with self-dealing by Enron executives leading to substantial personal enrichment (10Se). Some practices that were questioned were; FAS 140 transactions, tax transactions, non-economic hedges with related parties, share trust transactions, minority interest, prepays, and manual to market accounting (10Se).
If I had been an accountant for this company I would have been fired because I would have told the necessary people in the company of the wrong doings that was being done within the accounting firm.
Honest accounting could have been done to prevent this controversy.
This company went bankrupt due to its unethical behavior on the profitability of the company.
Reference
(n.d.). Retrieved September 29, 2010, from http://www.unctad.org/en/dos/gdsmdpbg2420046_en.pdf