Financial Statement Fraud.Enron.AICPA

enron wall street took enron on its word but didnt

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Unformatted text preview: erformance Review Committee (PRC) that Created became known as the harshest employee ranking system in the country---based on earnings generated, creating fierce internal competition fierce © 2003, 2005 by the AICPA The Motivation The Enron delivered smoothly growing earnings (but not cash flows.) Enron Wall Street took Enron on its word but didn’t understand its financial statements. statements. It was all about the price of the stock. Enron was a trading company It and Wall Street normally doesn’t reward volatile earnings of trading companies. (Goldman Sacks is a trading company. Its stock price was 20 times earnings while Enron’s was 70 times earnings.) was In its last 5 years, Enron reported 20 straight quarters of increasing In income. income. Enron, that had once made its money from hard assets like pipelines, Enron, generated more than 80% of its earnings from a vaguer business known as “wholesale energy operations and services.” © 2003, 2005 by the AICPA The Role of Stock Options The Enron (and many other companies) avoided En...
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This document was uploaded on 03/29/2014.

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