Fraud Examination Enron Paper

Words: 1125
Pages: 5
Open Document
1. Define the problem(s)
Enron failed to record some of its transactions. Arthur Andersen did not allow the LJM financial statement to stay unconsolidated.
2. Analyze the situation - again, take a "lessons learned" approach. You might use the following questions as guides:
A. What important internal controls were ignored when LJM1 was created? LJM1 ignored some of Enron’s entries in the books that were missing. Outsiders owned less than 3% of the Special Purpose Entities equities. There was an error made by Arthur Andersen to let LJM’s financial statement to remain unconsolidated. If the financial statements had been consolidated, some of the errors could have been found. They may have even had some time to correct these errors before …show more content…
Enron’s recurrence of negative cash flows from their daily operations should have caused the Auditor to investigate to find out the origin of the problem that caused the negative numbers. Enron was growing quick and steady as the emerged from nothing. Fortune named Enron as "America's Most Innovative Company" for six consecutive years. Enron’s management would often have to justify their inappropriate account for their funding.
3. Present solutions - here are a couple of guideline questions:
A. How could the auditors, in this case, Arthur Andersen, have performed their audits and not caught the Enron fraud?
Arthur Andersen was able to perform Enron’s audit and not caught the audit fraud because he was connected to Enron. He was not independent enough. There were transactions that were not recorded in their books. These actions caused Enron to become vulnerable to fraud. The internal audit committee and the senior management should not have a personal relationship. It is hard for the Auditor to do any type of auditing if they have a relationship that is not independent because their advise to the senior management will be susceptible to biasness. Enron did not get a fair audit because of this close relationship with the Auditor.
Is it possible for a financial statement auditor to form a GAAS-compliant audit and not catch major financial statement fraud? Has GAAS auditing changed enough since Enron to guarantee that
Show More

Related Documents: Fraud Examination Enron Paper

Internal Accountant's Report To Management

financial status review, any instances of occupational fraud or abuse will be exposed, allowing the company to prepare for the bid, as well as potentially save the company money. It is highly recommended that a full financial status review be completed before the bid to avoid the potential loss of revenue and the chance of not being awarded the bid. The effect of occupational fraud and abuse on the company Surveilligence defines occupational fraud as “an employee’s misuse or abuse of his position for…

Words 1230 - Pages 5

Mgmt Accounting Ethics Essay

the organizations for which they worked, they did so at a cost of being isolated and outcast. However, it was their willingness to raise the important issues at the Enron, WorldCom, and the FBI 9/11 investigation, that earned them the cover of Time Magazine (Brownwell, 2003). Three women were named as heroes: Sherron Watkins at Enron, Cynthia Cooper at WorldCom and Coleen Rowley of the FBI who blew the whistle about the FBI not responding to information regarding the 9/11 hijackers (Ripley 2008)…

Words 2670 - Pages 11

Analyse the Problem of Accounting Fraud in a Listed Company and Evaluate Possible Solutions Essay

Analyse the problem of accounting fraud in a listed company and evaluate possible solutions In 2001, Enron Corporation went into bankruptcy due to the disclosure of false information in its financial statements. Similarly, when Lehman Brothers collapsed there was no evidence that it had ever publicly disclosed certain detrimental accounting information. Cases of accounting fraud such as these have become increasingly serious. Accounting fraud can result in creditors and stockholders losing confidence…

Words 1770 - Pages 8

Essay on Gay Marriage

GAAP to market values for all investments in securities because it believes that market value presents a better picture of economic reality than does historical cost. Although designed to detect material fraud, it might be possible that a well-executed audit may still fail to detect fraud. 1-29 Independence means objectivity and freedom from bias. The auditor can favor neither the client nor the third party in evaluating the fairness of the financial statements. The auditor must be independent…

Words 5939 - Pages 24

Essay on Qualitative Research Methods

Question 1 Compare and contrast the following qualitative research methods: case study, phenomenological, and grounded theory. Synthesize the findings and determine which is best suited to a study on your potential dissertation topic. Analyze the issues associated with sample selection, validity, and bias in such a study. Qualitative Research Methods Introduction It is common for researchers to compare qualitative and quantitative research methods. Quantitative methods originate from…

Words 13344 - Pages 54

The Role Of The Public Accountant In The American Economy

the number of companies that restated their previously issued financial statements as a result of accounting irregularities and fraud. Especially responsible were the very visible Enron and WorldCom fraud cases. Both companies filed for bankruptcy and constituted the largest companies in American history to do so. The extent of the accounting irregularities and fraud being investigated and disclosed brought into question the effectiveness of financial statement audits. In addition, the criminal…

Words 5490 - Pages 22

Accounting Theory And Practice Final May 2014 Essay

.............................................................................. 2 MAIN ALLEGATION .................................................................................................................................. 2 TRANSPARENCY AND FRAUD ISSUES ...................................................................................................... 3 FAIR VALUE ACCOUNTING AND HISTORICAL COST ACCOUNTING COMPARED ..................................... 4 ACCOUNTING PROFESSION CHANGES ...…

Words 3561 - Pages 15

Auditing and Audit Procedures Essay

EXAM #1 STUDY GUIDE (CHAPTER 1-5) *Chapter 1—Introduction to Assurance & Financial Statement Auditing Auditing: analytical and logical skills; much more conceptual in nature; risk based assessments (RBA) Why is Auditing Necessary? House inspector analogy Provides reasonable assurance that financial statements are free from material misstatement Information asymmetry & conflicts of interest lead to information risk for the principal (absentee owner) Principal (Absentee Owner) provides capital…

Words 6939 - Pages 28

Ethical Behavior in 2008 Essay

1 Fitzgerald Griswold Introduction According to the Webster's Dictionary business ethics is defined as "the study and examination of moral and social responsibility in relation to business practices and decision-making in business". It is necessary to have to bridge of trust between the quintessential businessman and the average person trying to accomplish something. One…

Words 6142 - Pages 25