Financial Statement Fraud.Enron.AICPA

Investment these firms enjoy protection from outside

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Unformatted text preview: he AICPA Role of Law Firms Role Enron’s outside law firm was paid Enron’s substantial fees and had previously employed Enron’s general counsel employed Failed to correct or disclose problems Failed related to derivatives and special purpose entities entities Helped draft the legal documentation for Helped the SPEs the © 2003, 2005 by the AICPA Role of Credit Rating Agencies Role The three major credit rating agencies—Moody’s, The Standard & Poor’s and Fitch/IBCA—received substantial fees from Enron fees Just weeks prior to Enron’s bankruptcy filing—after most Just of the negative news was out and Enron’s stock was trading for $3 per share—all three agencies still gave investment grade ratings to Enron’s debt. investment These firms enjoy protection from outside competition These and liability under U.S. securities laws. and Being rated as “investment grade” was necessary to Being make SPEs work make © 2003, 2005 by the AICPA So Why Did Enron Happen? So Individual and collective greed—company, its Individual employees, analysts, auditors, bankers, rating agencies and investors—didn’t want to believe the company looked too good to be true looked Atmosphere of market euphoria and corporate arrogance High risk deals that went sour Deceptive reporting practices—lack of transparency in D...
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