ACC 260 WEEK 2 ASSIGNMENT - THE ENRON AND WORLDCOM SCANDALS

ACC 260 WEEK 2 ASSIGNMENT - THE ENRON AND WORLDCOM SCANDALS...

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Week 2 Assignment: The Enron and WorldCom Scandals Due Date: Day 7 [Individual forum] Review the accounts of the Enron and WorldCom scandals in Ch. 2 of the text: o Enron’s Questionable Transactions on pp. 96-107 o WorldCom: The Final Catalyst on pp. 114-118 Answer the following questions using complete sentences: o Enron: 1, 3, 5, 6, and 9 on pp. 106-107 o WorldCom: 1, 3, 4, and 5 on p. 118 Post your answers as an attachment. Clearly label the case and question number for each of your responses.
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Enron’s Questionable Transactions 1. Which segment of its operations got Enron into difficulties? In my opinion the segment of operations that got Enron into trouble was the management level of operations. The CFO, CEO and others in the management team made decisions to set up SPE’s to offset Enron’s losses. At first these units may have been set up innocently, but over time the management team found that they personally could gain from these SPEs and continued to form them whenever it would look like Enron would have to show a significant loss on their financials. This all started with the formation of Chewco to buy out CalPERS 50% interest in JEDI. 3. Did Enron’s directors understand how profits were being made in this segment? Why or why not? Yes I do think the directors knew how the profits were being made. They knew that setting up the SPEs as hedges was actually using Enron’s assets as startup equity (particularly Enron shares) and they continued to manipulate the funds and assets of these SPEs when Enron stock prices did not increase. They would combine SPEs into one entity to make those SPEs look
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This note was uploaded on 11/21/2011 for the course ACC 260 260 taught by Professor Riley during the Spring '11 term at University of Phoenix.

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ACC 260 WEEK 2 ASSIGNMENT - THE ENRON AND WORLDCOM SCANDALS...

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