MEMORANDUM TO: Senior‚ Publicly Traded Company FROM: Team B (Staff I) DATE: February 4‚ 2013 SUBJECT: Audit of Share-Based Payment and Special Purpose Entities (SPE) Reporting This executive memo is a summary and analysis of our audit findings for the client‚ a publicly traded company‚ and its financial practices. Please review this correspondence in accordance with your request. We look forward to meeting in person for further discussion and to make an informed recommendation
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Enron History Special Purpose Entities (SPEs) were used and often abused by most large corporations in the late 1990’s. Enron was likely the corporation that abused the accounting treatment the most‚ but certainly not the only one. The Enron SPEs were not hidden from the auditors or the investing public‚ but were so extensive‚ invasive‚ and complex that no one‚ including primary architect‚ Andrew Fastow‚ was able to understand the total implications. The 2000 financial statements for Enron included
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Questionable Transactions 1. The special purpose entities (SPEs) got Enron into trouble. 2. It is debatable whether Enron’s directors knew how profits were being made through the SPEs. Speculation is that they did have knowledge‚ but did not question the questionable procedures. Evidence that indicates the directors knew how profits were being made includes the following: • Andrew Fastow’s role in establishing the SPEs and falsely creating 3% independent investors in each.
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One is the use of special purpose entities (SPEs). Although SPEs often serve legitimate economic purposes and are still in use today‚ Enron used several of them to hide debt and to overstate equity and earnings. Accounting standards required that third parties own at least 3 percent of the assets in SPEs. This rule was violated. Enron also represented that the SPEs helped it to hedge downside risk. This turned out not to be the case‚ because the SPEs used Enron’s stock and financial guarantees to
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commitment with Barclay Bank because outside investors were not found. Because of this‚ they restated activities of JEDI and Chewco SPEs so they could be retroactively consolidated into Enron’s accounts. The SPEs helped to hide the inaccurate accounting records. Enron’s legal department wrote contracts that helped provide a cover for misuse of funds regarding the SPEs. Future revenue was reported as current revenue. Stocks were paid with promissory notes instead of cash. They also engaged in off-the-books
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unregulated. As Enron’s business model became more complex‚ it began to push the limits of accounting. The two main financial reporting issues that Enron faced consisted of mark-to-market accounting‚ and financial reporting for special-purpose entities (SPEs) that Enron used to implement its light asset strategy and to hedge investment gains. By 2000‚ Enron has hundreds of these
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monitor the auditor’s independence and effectiveness. True and fair view With regard to issues arising from SPE‚ Raptors were not hedges in the economic sense of transferring risk to a third party‚ but rather a means of absorbing losses with a reserve of Enron shares contributed by the hedging entity. However‚ Anderson approved Enron not to consolidate Raptor because Raptor is defined as SPE that means Andersen had seriously breached the true and fair criterion. Enron avoid to put pressures on balance
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SPE 167543 Wellbore Stability Management In Depleted And Low Pressure Reservoirs Fekete Paul O.‚ Dosunmu Adewale‚ Anthony Kuerunwa‚ Ekeinde Evelyn B.‚ Anyanwu Chimaroke‚ and Odagme Baridor S.‚ Dept. of Petroleum and Gas Engineering‚ University of Port Harcourt‚ Nigeria Copyright 2013‚ Society of Petroleum Engineers This paper was prepared for presentation at the Nigeria Annual International Conference and Exhibition held in Lagos‚ Nigeria‚ 30 July–1 August 2013. This paper was selected for presentation
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Enron Corporation began as a small natural gas distributor and‚ over the course of 15 years‚ grew to become the seventh largest company in the United States. Soon after the federal deregulation of natural gas pipelines in 1985‚ Enron was born by the merging of Houston Natural Gas and InterNorth‚ a Nebraska pipeline company. Initially‚ Enron was merely involved in the distribution of gas‚ but it later became a market maker in facilitating the buying and selling of futures of natural gas‚ electricity
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obscure its true financial position? This paper attempts to answer these questions by examining the two financial reporting issues that contributed to Enron’s most significant accounting restatements: the consolidation of special purpose entities (SPEs) and the issuance of stock for notes receivable. 1 The authors gratefully acknowledge the financial support and resources provided by Villanova University’s College of Commerce and Finance. The authors also thank Noah Barsky for comments and
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