Summary The flexibility in accounting allows companies to adopt creative accounting and fraud techniques to bolster profits. Such techniques has seriously eroded the currency of accounting so as to hinder the development of economy. This essay introduces various parties involved in creative accounting and illustrates how they are being affected. After that‚ another cause induced by the economic environment will also be listed following by recommendations on reducing the likelihood of creative accounting
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MINI CASE: THE FILURE OF CORPORATE GOVERNANCE AT ENRON 1.Which parts of the corporate governance system‚ internal and external‚ do you believe failed Enron the most? In the evaluation of the Enron’s case; by trying to see the very big picture‚ it is not only about that the internal part of the corporate governance system was failed or but also the external part of the corporate governance system was also failed. As noted on the last paragraph of the mini case‚ many people from different positions
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increase the likelihood of material misstatements in enron’s financial statement Enron faces most of the risk ordinarily faced by any energy company‚ including price instability and foreign currency risks. Enron operated in many different areas of the world with different regulatory and political risks. Enron faced business risks such as a complex business model‚ extensive use of derivatives and special purpose entities‚ aggressive transaction structuring and accounting‚ rapid expansion of business
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Enron and its Associates Used Questionable Accounting Practices Clearly‚ there have been cases where management knowingly deceived the auditors. Then there seem to be other instances where the accounting treatment envelope was pushed just a bit too far. In the case of Enron‚ David B. Duncan‚ the former Andersen partner in charge of the Enron audit who was the government’s chief witness in the trial against Arthur Andersen‚ stood behind the decisions that resulted in the widespread use of off-balance
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information‚ Skilling became Enron’s CEO and quickly resigned six months later‚ which might be a red flag for the external agencies. 1.3. Financing: Related parties to the entity 1.3.1. SPE: Special Purpose Entities‚ which are the source of funding as well as non-financing activities of Enron‚ are organized as partnerships. Enron utilize the SPE under the 3% rule5 to give rooms to transfer loss to SPE and spin off part of the corporate debt to those SPEs‚ which had to use Enron’s stocks as collaterals
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EMPLOYEES AND SHAREHOLDERS 8 ENRON INDIA 8 AGGRESSIVE NATURE OF ENRON: PERSONAL ETHICS 8 ENRON’S ARROGANCE: PERSONAL ETHICS 9 EXECUTIVES ABANDON ENRON 9 POLITICAL DIMENSION: SYSTEMATIC EXPLANATIONS 9 ECONOMIC ISSUES 10 ENRON INDIA: DHABOL PROJECT 10 FATE AND RISKS OF OPIC 10 CALIFORNIA’S DEREGULATION AND SUBSEQUENT ENERGY CRISIS 10 PEAK AND DECLINE OF STOCK PRICE 10 EFFECT OF BANKRUPTCY ON ENRON’S RETIREMENT PLANS 11 ENVIRONMENTAL DIMENSIONS 12 BOLIVIA 12 ENRON INDIA: 12 LEGAL
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was involved in improper accounting practices that led to over $70 billion of losses and also Enron’s method that was used to able them in covering their losses. Enron’s fall and bankruptcy had affected not only the employees‚ but also the shareholders‚ U.S Citizens and also the impact that it had on other countries that Enron was affiliated with. The focus of this paper is on the creation of Enron’s business model that resulted in the fall of Enron. Also‚ how the SPEs and the Raptors come to
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Income Manipulation: Enron’s rise and fall General Introduction “Rather fail with honor than succeed by fraud1.” The importance of values and ethics has always shaped the very fabric of human society. This was evident from the era in which the author of this quote‚ the famous Greek poet Sophocles‚ lived until modern times. In my opinion‚ the famous sayings “honesty is the best policy” and “the truth shall set you free” are invaluable and should be followed by everyone. This pertains
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Chapter 7 Business Ethics Fundamentals LEARNING OUTCOMES After studying this chapter‚ you should be able to: 1. Describe how the public regards business ethics. 2. Define business ethics and appreciate the complexities of making ethical judgments. 3. Explain the conventional approach to business ethics. 4. Analyze economic‚ legal‚ and ethical aspects by using a Venn model. 5. Enumerate and discuss the four important ethics questions. 6. Identify and explain three models of management
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their jobs‚ medical insurance and average severance pay was only $4500. However‚ the top executives were paid bonuses totaling $55 million. In 2001‚ employees lost $1.2 billion in retirement funds and retirees lost $2 billion in pension funds. Yet‚ Enron’s top executives cashed in $116 million in stock. In Titanic‚ the captain went down with the ship but in Enron the captain first gave himself and his friends some bonus and live boats and higher up and told employee and stockholders everything is fine
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