Accounting theory Major Assignment (Enron's case study).pdf

Data analysis as enrons unethical behavior in the

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6. Data analysis As Enron’s unethical behavior in the market was uncovered, the revelation of the true picture behind Enron’s operations were exposed. According to table1, as the financial statement of Enron reported an increase from 1997 to 2000, the true debt was being hidden, as Enron was exercising Mark to Market accounting which the firm was accounting for its fair value of its assets of imaginary assets. As well as, the creation of partnerships in which Enron executives were able to disguise the expenses to the partnership and remove the expenses from their financial statement. In doing that the company was able to manipulate the authorities and maintain their reputation in the market. In other words, in gaining their self interest the public are not being protected as the government was being influenced in one way of another. For that reason, Enron become a player in the market, are regulatory capture theory was being used. On the other hand, in fig 1, the highest point of the peak shows Enron’s share price tha t was above $90 per shares, the primary reasons for the share price was that that the manipulative of the financial statement in terms of Mark to Market accounting, partnership created to cover expenses etc…, due to the reputation of the firm in terms of f inancially stable and recognized by the rating agencies and poor auditing parties. As well as on fig 2, Enron political contribution was in credit terms as being represented by the blue column. In 2000, as Enron was on its highest climax, to the political environment, it’s recorded on its financial report as corporate responsibility which involves the firm large contribution in that particular year. However, in table 2, as Enron was being uncovered, the downfall of Enron has impacted the countries that have come to direct contact with Enron. Therefore the Enron crisis became a global issue, due to Enron expansion through business.
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7. Interpretation of Data Base on the analysis on stage 6, Financial reports were unclear to the shareholders, information were deceptive and incorrectly prepared, More costs spend on the Administrators and managements, Overstating of earnings or understating of expense, Manipulating of financial reports, the auditing was poorly done, as regulation capture theory was being practiced, Poor control of the financial capital, and a structure of valuing assets by the most recent market price practice that were been used (Elkind & Mclean, 2004), are explicit signs of Enron’s failure and weaknesses in the long run. Therefore, the major issue was within the financial statement. If the firm executive would neglect the private interest theory and regulation capture theory, it would be still operating in terms of its operation. As a result reputation of Enron was dominant, but the executives were more concern about higher benefits which was not valuable, and that it is recorded in the bible that reputation is important compare to money or costly benefits (Ecclesiastes 7:1, KJV).
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References: Aldrick, P. (2002).
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