There were several internal control issues with Arthur Andersen (AA) that contributed to the Enron disaster. Firstly‚ AA gave Enron nonaudit services as well as audit services‚ meaning that AA could advise the structuring of transactions for desired disclosure outcomes and other work and later give an audit opinion on these transactions. This resulted in a blatant conflict of interest issue that many audit professionals did not recognize. Secondly‚ the “tone at the top” of AA did not encourage ethics
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any gas sales were made. There is no doubt that the projection of the long-term income is overly optimistic and inflated. SPE—Special Purpose Entity: Enron also used SPEs and structured financing to conceal their debts off the book and camouflage their existing debts. The officers manipulated the financial analysts to rate the company as ‘the strong buy’. With the SPEs and structured financing‚ Enron was successful to hide losses even when it ventured into other markets which were in reality
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"Charges at Bear Stearns Linked to Subprime Debacle" (June 19‚ 2008) . Healy‚ P.‚ and J Himmelstein‚ L.‚ and B. Elgin. "Tech ’s Kickback Culture." Business Week (February 10‚ 2003): 74-77. Huffington‚ A Kahn‚ J.‚ "OffBalance Sheet--and Out of Control; SPEs are Ripe for Abuse‚ but Few Went as Far as Enron ’s Fastow." Fortune(February 18‚ 2002). Levitt‚ A.‚ and P Lowenstein‚ R. Origins of the Crash: The Great Bubble and Its Undoing. New York: Penguin Press‚ 2004. Mahar‚ M Maremont‚ M. "Iyco Reveals $8
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The following month the company restated earnings for the previous five years and erased $600 million in profits.2 It turned out that the October report began to reveal Enron’s gross abuse of special-purpose entities (SPEs) and the mark-to-market accounting method. The company used SPEs to keep enormous amounts of losses off its books while inflating earnings from supply contracts by booking all profits from a contract in the quarter the deal was made.3 What also became clear was that Enron did not
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recorded as related third parties‚ these partnerships were never consolidated so that debt could be getting off its balance sheet and the company itself could boost and have not had to show the real numbers to stockholders. Andrew Fastow was using SPEs to conceal some $1 billion in Enron debt. Overall‚ according to Enron‚ Fastow made about $30 million from LJM by using these partnerships to get kickbacks which were disguised as gifts from family members who invested in them and enriching himself
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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 to the creditors of the company‚ thus possessing huge
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Understanding Gas-Condensate Reservoirs How does a company optimize development of a gas-condensate field‚ when depletion leaves valuable condensate fluids in a reservoir and condensate blockage can cause a loss of well productivity? Gas-condensate fields present this puzzle. The first step must be to understand the fluids and how they flow in the reservoir. Li Fan College Station‚ Texas‚ USA Billy W. Harris Wagner & Brown‚ Ltd. Midland‚ Texas A. (Jamal) Jamaluddin Rosharon‚ Texas Jairam
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513 | $ 62.131 | 514 | $ 62.139 | 515 | $ 62.143 | Hamptonshire Express Case ------------------------------------------------- Problem 1 1a) Using the model “Hamptonshire Express: Problem 1‚” Xxx calculated the optimal stocking quantity to be 584 newspapers‚ which is expected to produce daily profit of $331.4364. A quantity of 583 newspapers produces a expected daily profit of $331.4353 and a quantity of 585 newspapers produces an expected daily profit
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Corporate Governance Issue [Writer’s Name] [Institute’s Name] [Date] Corporate Governance Issue Introduction The Purpose of the Case study is to assess the case of Enron mainly at the Corporate Governance problems. This Report will point out that why Independence of the Company’s Director is vital to clear operation of the organization; why successful Boards are compulsory for the companies to avoid the disasters like the Enron; and there must be the Working committee including the Non-Executive
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Enron’s Collapse In the case of Enron’s collapse‚ many would blame the external auditor’s collusion with the management‚ the aggressive accounting policy it had adopted to manipulate its earnings or the Special Purpose Entity (SPE) it had created as a sham to conceal its debts. However‚ everything began from an internal environment with weak controls. The internal environment is the capstone of all other components within an organization’s ERM framework‚ influencing strategy formulation‚ objective
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