Identify the accounting scandal at the Enron corporation that resulted in a loss of reputation to the accounting profession. Explain the crime(s) Enron committed.
As a result of these accounting scandals, the AICPA recognized the need for accounting professionals to change their attitudes toward fraud detection by revising SAS 99. List at least four of the significant changes made to SAS 99 and explain.© BrainMass Inc. brainmass.com December 15, 2020, 8:44 pm ad1c9bdddf
Likely the most well-known scandal that tarnished the accounting profession was Enron. This was a fabulously successful Fortune 500 firm, just hailed as the 30th best run firm in October 2001. What was not known about Enron was that they were speculating in fuel markets and hiding their loss positions, likely with the help of the auditors. Under water futures trades (contracts to sell or buy that were under the market or over the market) were "sold" to entities that Enron set up so they could control the pricing of the transaction. As such, they could sell an unprofitable future contract at an artificial price and make it look like a good one to the main company. If the price of the trade in the spin off organization did not improve prior to contract expiration, the loss was captured in the spin off entity.
This practice sheltered Enron from loss contracts but the loans taken out in the spin offs to pay for the lousy deals eventually became due and the underlying assets were not adequate to pay them. Enron had guaranteed the debts (the assets were not adequate collateral) and so when the spin off firms were unable to repay the debts incurred to buy those deals, Enron was notified to pay. Enron could not pay those debts and so filed bankruptcy in December 2001. While it would have been a scandal that the auditor's failed to insist that such large guarantees were disclosed, it was greatly increased by the auditor's ...
Your tutorial is 991 words and two references and discusses Enron and four major changes that came with SAS 99, Consideration of Fraud in a Financial Statement Audit.