ENRON'S CASE STUDY.docx - ENRON’S CASE STUDY Prepared by No Name Matric Number 1 Nur Farah Wahidah Binti Nordin 2017649466 2 Nur Nadhirah Binti Abd

ENRON'S CASE STUDY.docx - ENRON’S CASE STUDY Prepared by...

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ENRON’S CASE STUDY Prepared by: No Name Matric Number 1 Nur Farah Wahidah Binti Nordin 2017649466 2 Nur Nadhirah Binti Abd Karim 2017649422 3 Nurfatin Najwa Binti Esa 2017668394 4 Nurul Sahira Binti Roslan 2017668388 5 Siti Norhani Azwani Binti Mashudi 2017649446 6 Wan Nur Nadiah Hawa Binti Wan Ahmad 2017668382 Programme: BACHELOR OF ACCOUNTANCY(HONS.) AC220 Prepared for: MADAM YUSARINA BINTI MAT ISA Date of submission: 11 th JUNE 2019
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QUESTION 1 The Enron debacle created a “crisis of confidence” on the part of the public in the accounting profession. List three (3) parties who you believe are the most responsible for the fall of Enron. ANSWER 1.Executives of Enron Kenneth Lay as Enron’s chairman, Jeffery Skilling as CEO and Andrew Fastow as Enron’s CFO were all responsible for the crisis. The executives of Enron are the mastermind for the big earning and pushed up the stock prices for their own benefit. When misstatement and irregularities appear and were made clear to the public, the executives of Enron lost the confident of the state holders in the company and the crisis of confident spread. 2.Arthur Andersen Andersen’s job was to check that the company’s accounts were a fair reflection of what was really going on. As such, Andersen should have been the first line defence in the case of any fraud or deception. However, the auditing firm did not present itself with the professionalism and responsibilities that the audit firm should. When the firm noticed that the amount recorded on Enron financial statement was misstated, it was ignored in order to continue receiving the huge amount of fees and payment from the corporation. In doing so, the confidence that the public had in the company was diminished. 3.Securities and Exchange Commission (SEC) The government agency who allowed Enron to use Mark-to-Market accounting practise. This kind of creative accounting practise allow the Enron CEO to perform his PONZI scheme “legally” and led to the sudden collapse of Enron. A Ponzi scheme is a fraudulent investing scam promising high rates of return with little risk to investors. The
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