Financial Statement Fraud.Enron.AICPA

9202000 feb 2001 analyst report from john s feb

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Unformatted text preview: o mention of a $1.2 billion charge against There shareholder’s equity, including what was described as a $1 billion correction to an accounting error. (This was learned a couple of days later.) learned © 2003, 2005 by the AICPA Didn’t Anyone See Enron’s Problems? Problems? Enron grew to be the 7th largest Fortune 100 company while media hype and the stock market euphoria reigned stock But in late 2000 negative reports began to But originate from some skeptics originate © 2003, 2005 by the AICPA The Skeptics The Jonathan Weil, “Energy traders cite gains, Jonathan but some math is missing,” The Wall Street Journal (Texas ed.) 9/20/2000 Feb. 2001 analyst report from John S. Feb. Herold, Inc. by Lou Gagliardi and John Parry Parry Bethany McLean, “Is Enron overpriced?” Bethany Fortune, 3/5/2001 Fortune © 2003, 2005 by the AICPA Enron’s Cash Flows Enron’s cash flows bore little relationship to earnings (a lot due to mark to market.) On the balance sheet, debt climbed from $3.5 billion in 1996 to $13 billion in 2001. 1996 Key Ratio Net Income (from Operations*) – Cash Flow (from Operations**) Net Income (from Operations) Net Would expect to be about zero over time *From the Income Statement © 2003, 2005 by the **From the Statement of Cash Flows AICPA Enron’s Cash Flow Ratio Enron’s 4 3 2 1998 1999 2000 2001 1 0 -1 -2 3 6 9 months months months Year Negative Cash Flows: 1st three quarters in 1999, 1st three quarters in 2000, 1st two quarters in 200...
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