Case StudyW3 - Case Study Accounting Scandal Week 3 LaTeena...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Case Study Accounting Scandal Week 3 LaTeena Moore May 22, 2011 Forensic Accounting and the Legal Environment MAY11 Sec B Professor: Hussain Kabani
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
THE MAJOR PROBLEM The major problem for Enron was the numbers that were on the books were fixed so that the stock prices would remain high, but Enron wasn't paying high taxes. Robert Hermann, Enron’s general tax counsel during that time, was told by Jeff Skilling, Enron’s president that their accounting method allowed Enron to make money and grow without bringing in a lot of taxable cash. Of course, Enron had been buying any new venture that looked promising as a new profit center. However, the company began forming off balance sheet entities to move debt off of the balance sheet and transfer risk for their other business ventures. This was established to keep Enron's credit rating high, which was very important in their fields of business. They did this through a complex arrangement of special purpose entities they called the Raptors (Gutman, 2002). The Raptors were established to cover their losses if the stocks in their start-up businesses fell. Business analysts began trying to unravel the source of Enron's money. The Raptors would collapse if Enron stock fell below a certain point, because they were ultimately backed only by Enron stock. The deals were so complex that no one could really determine what was legal and what wasn't. Eventually, things began falling apart within the company. When Enron's stock began to decline, the Raptors began to decline as well.
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern