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Unethical practices at Enron: nature, accounting, prevention

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Research a company that has been in the news for unethical practices, such as Enron, Tyco, Global Crossing, or WorldCom.
Summarize your ideas about the following:

What was the nature of the controversy regarding this company's practices?
How were accounting practices involved?
If you had been an accountant for this company, how would you have acted? Explain why.
What might have been done to prevent the controversy?
What was the affect of unethical behavior on the profitability of the company

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Solution Summary

Your discussion talks about Enron in 369 and two references. The nature of the fraud is described and potential reactions as an accountant are mentioned.

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What was the nature of the controversy regarding this company's practices?

Enron was selling energy securities to entities that it set up and controlled so it could sell at artificial gains. So, it was essentially self-dealing. These transactions were reported as gains on sale. The money that these "shell" entities borrowed to buy from Enron could not be repaid because these deals were way overpriced and could not be resold for enough to repay the borrowed purchase price.
How were accounting practices involved?

First, related party transactions were not reported in the footnotes and the controlled "shell" entities were not consolidated with Enron's financial results. So, the gains ...

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  • MSc, University of Virginia
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