The Fall Of Enron Accounting Essay

Published: October 28, 2015 Words: 1161

A minor gas pipeline establishment had grown into the universe's prevailing energy, commodities, and services enterprise, but its expansion to power was placed on a planned out falsification of guidelines to spawn a misconception of security. Enron, a multibillionaire corporation, had knowingly made efforts to adjust its financial statements to make those reports seem more striking to lenders and investors. Because of these alterations, numerous amounts of contributors have been influenced. In the years to come, these contributors will continue to be affected. Who were the institutions and community groups that had fallen victim to a financial failure? First of all, Enron had an impact on its workers. For the employees of Enron, the result of the failure of the company caused their ultimate downfall. Although it was done through unethical and unwelcoming activities, the stock values of Enron almost multiplied by two in one year. By falsifying the value of their stock, Enron's own employees bought the stock in huge amounts. The employees, who had bought the stock purposely or through trickery, didn't even bother to ask any queries about how the stock grew so quickly. Furthermore, numerous amounts of workers had their pensions entrusted in the Enron stock, which if you ask financial analyst is not recommended. Employees also had their life savings invested in Enron's stock. Because of the company's fall, their life savings went down the drain. The most obvious result of the downfall of Enron is on its employees. Thousands of high skilled and well paid workers lost their jobs. Workers had to go out and find work somewhere else. Secondly, the collapse of Enron had an effect on the United States of America. The scandal created more awareness of the importance of the ethical values in business and specifically in accounting. The result of the Enron Indignity made sure that this fraudulent behavior would never occur in the upcoming future nor would it resemble anything remotely close. Lastly, the downfall of Enron had an impact on the stock market as a whole. The fall of Enron let all the stock investors know that it was very vital to take a keener look at the stocks that someone already owned and even those that were thinking about buying them in the near future. The Enron Scandal would not have been complete if it were not for Enron's accountants and most importantly the firm Arthur Anderson. Tax, auditing, and consulting services were provided by Arthur Anderson. This major corporation had to hand over its license after they were found guilty of charges relating to the auditing of Enron. When the officials of Andersen were asked if they were at fault of any transgression in the scandal, they detailed out that the fall of Enron was the direct consequence of Enron's defective business model rather than dubious accounting procedures. Many investigations had positively shown that the Andersen firm was careless. Investigations also proved that the Andersen firm was involved with Enron to make untruthful and unethical reports. Andersen had hid large amounts of debt and they also inflated stock prices more than usual. Later on investigators also found that Andersen shredded thousands of documents that showed the overall picture of how awful Enron's financial situation was. With the documents no more, the scandal was able to go on for a long time. Where were the "watchdogs", also known as the auditors? Many auditors had charges filed against them for not performing their duties at the highest possible level. An engagement executive, James Brown, did not carefully supervise audit procedures. Along with Mr. Brown, Andrew Schuleman was also charged for failing to perform audit procedures. Michael M. Lowther was found ignoring signs that showed the hazardousness of Enron's transactions. Mr. Lowther was charged with infringement rules for being involved in improper and unethical professional conduct, damaging his career. Ultimately, the trademark of the accounting profession is integrity. If this trademark is marked negatively, then both lenders and investors will lose hope in the principals of which will make them interested in the corporation.

The Problem

Financial Recording Auditing

{Restricted} {Comfortable}

What was missing: It was due to:

Many networking actions 1. Auditors successfully selected/waged

Surprising Responsibilities by the organization

Wide-ranging Discovery of 2. Evidence challenged auditor report

risk exposure

Prosecution

{Took too long}

1. Lawsuit Resolutions were not clearly told

2. Inquiry material was not released

3. The Audit reports were not fully studied

Actual/Deceptive Enron Cash Disbursement Flowchart

Consumers

Withdraw official support papers for date due

1

Receiving Report

Receiving Report

Sellers Statement

The seller's Statement

Authorize

4

2

5

3

Formulate Authorizations

Evaluate reports of many types and endorse

6

F

7

Erroneous Information

Fraud Payments

Receiving Report

Sellers Statement

Fraud Consumer Statement

Fraud Payments

8

Retailer

9

Faulty records by administration

Fake Submissions are made in journals

Mandated/Required Cash Disbursement Flowchart for Enron

Consumers

Withdraw official support papers for date due

Receiving Report

Receiving Report

The seller's Statement

Formulate Authorizations

Evaluate reports of many types and endorse

Authorize

Sellers Statement

Consumer Statement

Receiving Report

Original Payments

Sellers Statement

Accurate information

Truthful records by administration

Retailer

Original Payments

Regular/proper submissions are made in journals

Meaning of Flow Chart

The actual/deceptive Enron Flow Chart:

Basically, the flow charts are main points between the company, Enron, and mainly the consumers.

# 1 will go from withdrawing the official supporting papers for the date on which it is due.

# 2 is the receiving point plus the seller's statement which is essential

# 3 is the formulization of the authorizations by the company, in this case Enron

# 4 is the authorization by the consumers

# 5 is the evaluation of the reports of many types and the endorsing process is done by the consumer

# 6 is the most essential part in understanding the process done by Enron which is the erroneous information plus the fraud payments

#7 is the fraud consumer report

# 8 is the fraud consumer statement is with the help of the "watchdog" also known as the auditors, making the fake submissions in the journals with the help of the company's management.

ENRON, with the help of the auditors, went through a number of steps to boost its numbers. The difference between the mandated and the actual flow chart is that the "watchdogs", with the permission from its management, made fake submissions in its journals. Their trademark was and is damaged forever because the hungry company could not stay within its ethical background, thus forever destroying the once multibillionaire company known as Enron.

name used by Linotype, and the name they registered as a trademark for the design in the U.S. "Times New Roman" was and still is the name used by The Monotype Corporation. The face was developed by The Times newspaper for its own use, under the design direction of Stanley Morison. Originally cut by the Monotype Corp. in England, the design was also licensed to Linotype, because The Times used Linotype