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    The Enron Scandal and SOX

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    Topic: The Enron Scandal and SOX

    The Term project is a research paper on the above topic. Your paper should be Professional in appearance, at least 5 typed pages, double spaced. You should attach a bibliography page citing all sources of your information.

    Of major importance will be your own thoughts, opinions and conclusions. Your grade will be determined on the quality of research, the organization of your paper, your own input and the professional appearance of your work.

    Based on your research, you paper should at a minimum include responses to the questions below but you are not limited to these areas only.

    ? What was the Enron Scandal about? Discuss specific accounting issues related to the scandal
    ? Did Enron violate GAAP?
    ? How did the Government address this scandal?
    ? What is the Sarbanes Oxley Act?
    ? What specific provisions of the act addressed the areas on Enron accounting that caused the scandal?
    ? In your opinion, would these provisions of the Sarbanes Oxley Act prevent a similar scandal for occurring?
    ? Does SOX restore public confidence in the accounting profession?
    ? If you were a legislator, what else would you do?

    If during your research and preparation of your paper you have questions, please feel free to see me.

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    Solution Preview

    What was the Enron Scandal about? Discuss specific accounting issues related to the scandal

    Enron's main error was that it lied about its profits and stands accused of a range of shady dealings, including concealing debts so they didn't show up in the company's accounts.

    source: http://news.bbc.co.uk/1/hi/business/1780075.stm

    Enron had created offshore entities, a unit which may be used for planning and avoidance of taxes, raising the profitability of a business. This provided ownership and management with full freedom of currency movement, and full anonymity, that would hide losses that the company was taking. These entities made Enron look more profitable than it actually was, and created a dangerous spiral in which each quarter, corporate officers would have to perform more and more contorted financial wizardry to create the illusion of billions in profits while the company was actually bleeding cash. This practice drove up tard stock price to new levels at which point the executives began to work on insider information and trade millions of dollars worth of Enron stock. The executives and insiders at Enron knew about the offshore accounts that were hiding losses for the company, however, the investors knew nothing of this. Chief Financial Officer Andrew Fastow led the team which created the off-books companies, and manipulated the deals to provide himself, his family and his friends with hundreds of millions of dollars in guaranteed revenue, at the expense of the corporation he worked for and its stockholders.

    source: http://en.wikipedia.org/wiki/Enron

    ? Did Enron violate GAAP?

    Yes, Enron definately violated GAAP as the fraud was mostly concerned with illegal accounting practices.

    ? How did the Government address this scandal?

    Apart from the lawsuits and punishments for the offenders of the scandal, the government addressed the scandal with the enactment of Sarbanes Oxley Act, primarily to strengthen the quality of corporate governance and accounting practices, as well as to prevent such scandals in the future.

    Former Enron CFO Andrew Fastow, the mastermind ...

    Solution Summary

    What was the Enron Scandal about? Discuss specific accounting issues related to the scandal