ENRON (QUESTIONABLE ACCOUNTING)

Enron: Questionable Accounting; Leads to Collapse

Table of Contents

Executive summary3

Introduction4

Background4

Aims4

Scope5

Discussion5

Question no: 15

Mark to market valuation6

Mechanism of mark to market valuation6

Role of Mark to Market in Enron's Collapse6

Question no: 27

Response to Enron Action and Its Relation to Truth and Trust7

Sarbanes-Oxley Act8

Australia's Response and Attempts to Institutionalize Ethical Behavior8

Question no: 39

Answer: A9

Answer: B9

Answer: C10

Conclusion10

Recommendations11

References12

Executive Summary

Enron artificially inflated its profits while masking its deficits by using a multitude of leading companies and falsified accounts. The goal was nothing more or less, to inflate the market value. The bubble has precipitated not only the company but also the Enron auditing firm Arthur Andersen, an accomplice. The company faced serious concerns of unethical practices relating to the financial reporting and business ethics. Plus a ton of incriminating documents were destroyed by the audit firm renowned mundane. With the collapse of Enron, the company 20,000 people lost their jobs and hundreds of millions of dollars making up the bulk of pension funds, and then the retirement of thousands of Americans went up in smoke. With the collapse of Enron, the company 20,000 people lost their jobs and hundreds of millions of dollars making up the bulk of pension funds, and then the retirement of thousands of Americans went up in smoke. In 2001, Enron reported earnings of over U.S. $ 1,000 million and, on December 2, 2001, the company filed the bankruptcy with over $ 3000 million. The bankruptcy left in ruin to thousands of its employees who lose their job proficiently collapse saw shares (U.S. $ 90 to U.S. $ 0.42) which acquired stimulated by the board of the company.

Enron: Questionable Accounting Leads To Collapse

Introduction

The Enron Corporation was one of the largest multinational U.S. working in the field of energy. Later the name was changed to Enron Creditors Recovery Corp. (ECRC) after the United States Bankruptcy Court approved the reorganization plan. The mission of the "new" society is to settle the creditors of Enron Corporation. The Enron case resulted significant effects of deregulation and unchecked excesses that can result from the market (Mark 2002, pp. 1-6). Enron, a company of US energy sector, has witnessed the biggest financial scandal of the last 20 years. Founded in 1985 by Kenneth Lay, then joined by Jeffrey Skilling, Enron has become in terms of market capitalization of the 7th US Company. Praised by the press and financial analysts as a new business model, its market capitalization was increasing (90% in one year). Fortune magazine had so elected six consecutive years as the most innovative company.

Background

The company artificially inflated its profits while masking its deficits by using a multitude of leading companies and falsified accounts. The goal was nothing more or less, to inflate the market value.

Aims

The primary rational behind the study of case study is to explore the contemporary unethical accounting practices that are being followed by the companies and to critically analyze the aspects and consequences related to these practices.

Scope

The study has provided with an in-depth analysis of the Enron case and during the course of study ...