Enron Case Study - 4789 Words

EXECUTIVE SUMMARY This report will analyse the groupthink’s concerns in the collapse of Enron. The collapse of Enron is less than three months, which Enron from a very prosperous company to a bankrupt enterprise. The collapse of Enron is one of the most grievous business failures in United States. This disastrous business failure had causes a large number of employees lost their jobs and retirement savings. Groupthink leads groups to make faulty judgments. Groupthink occurs when a group make wrong decisions as the pressures of group lead to deterioration of â€Å"mental efficiency, reality testing, and moral judgment†. There are several symptoms of groupthink. The issues to be resolved for Enron are collective rationalization, stereotypes†¦show more content†¦The dramatic transformation of the Enron collapse is one of the striking features, which is in less than three months, Enron from a very prosperous company to a bankrupt enterprise. Janis (1972) claimed that group members unconsciously create the illusions of superiority to share and hinder the reality testing and critical reflection is caused by groupthink. Thus, groupthink leads groups to make faulty judgments. 1.1 Purpose of the report The purpose of this report is to analyse the groupthink’s concerns in the collapse of Enron. The faulty decision that made by Enron directors, which will cause the collapse of Enron. In this report, these writers also have to analyse the symptoms, causes and solutions of the Enron collapse. 1.2 Company Background Kenneth Lay is the founder of Enron. Enron founded in 1968 at Omaha, Nebraska.Show MoreRelatedENRON Case Study1572 Words   |  7 Pages1. The Enron debacle created what one public official reported was a â€Å"crisis of confidence† on the part of the public in the accounting profession. List the parties who you believe are most responsible for that crisis. Briefly justify each of your choices. Following parties are believed to be the most responsible for the crisis. With any big organization going so bad, the blame starts with the top level executives, there was no different in this case. For Enron the blame started with Enron’sRead MoreEnron Case Study2596 Words   |  11 PagesEnron a Case Study Enron, once known as the worldwide leader in energy trading, began as a natural gas pipeline company. â€Å"At its peak, Enron brokered up to 20 percent of America’s energy transactions. These included basic contracts to deliver natural gas from wells to pipelines for distribution to homes, contracts for the purchase of electrical power facility out port, and more complex financial contracts, which allowed power companies to manage price and market risk† (Ackman)Read MoreEnron Case Study5921 Words   |  24 PagesEnron Case Study [pic] Part A: Problem Focused Analysis and Recommendations. 1. Brief Case Background. List key events, use timeline. Case Background At one time Enron was one of the world’s largest producers of natural gas, oil, and electricity. It also appeared to be one of the most profitable companies, taking shareholders from $19.10 in 1999 to $90.80 by the end of 2000. Enron’s top management answered to a Board of Directors whose responsibility was to question and challenge new partnershipsRead MoreEnron case study1195 Words   |  5 Pagesï » ¿Q 1: Evaluate Enron profit and cash flow performance during the period 1998 – 2000? Profitability Measures Enron’s reported net income grew from $703 million in 1998 to $979 million in 2000, totaling 35.1% profit growth for the three-year period. Enron was among the leading of â€Å"high performing† companies by sustaining a high earnings growth insight. However, as Table 1 indicates, Enron’s reported profits were microscopic relation to revenues. Net income did not grow at anything near the sameRead MoreEnron Case Study Analysis1699 Words   |  7 PagesBusiness Strategy Enron Case Study 09/08/12 Enron Case Study: From Company to Conspiracy 1. What is the History of Enron, and what current situation does it find itself in? Enron was created by a combination of companies. These companies were Houston Natural Gas and InterNorth. These companies were merged together in July 1985. CEO of Houston Natural Gas, Kenneth Lay became chairman and CEO of the combined company. This happened in February 1986. The company changed its name to Enron on April 10thRead MoreEnron Case Study Summary976 Words   |  4 PagesEnron Case Study The case of Enron is a fascinating one. United States is a country where auditing and accounting principles are so strong. How can something take place on such high level in the United States? The Enron case demonstrates the need to reform the accounting and corporate governance practices in the United States. Moreover, the Enron case made government officials to pay close attention to deregulated energy market. Some of the aspects that struck me are discussed below. One of theRead MoreEnron Case Study1472 Words   |  6 PagesQ 1: Evaluate Enron profit and cash flow performance during the period 1998 – 2000? Profitability Measures Enron’s reported net income grew from $703 million in 1998 to $979 million in 2000, totaling 35.1% profit growth for the three-year period. Enron was among the leading of â€Å"high performing† companies by sustaining a high earnings growth insight. However, as Table 1 indicates, Enron’s reported profits were microscopic relation to revenues. Net income did not grow at anything near the sameRead MoreEnron Tyco Case Studies2163 Words   |  9 PagesRunning head: CASE STUDIES: ENRON’S FALL AND TYCO INTERNATIONAL’S LEADERSHIP CRISIS Case Studies: Enron’s Fall and Tyco International’s Leadership Crisis Grand Canyon University BUS 604 November 4, 2009 Case Study: Enron’s Fall and Tyco International’s Leadership Crisis The tight Federal regulations now governing businesses and their accounting practices came about because one corporation, Enron, took risks their company could not withstand without taking some rather extreme measures inRead MoreEnron and Worldcom Case Study1225 Words   |  5 PagesEnron and WorldCom Case Study This report is based on the demise of Enron Corporation and WorldCom. Both the firms are demised due to the ethical lapses. These ethical lapses come into existence when managements of the firm, uses unethical practices to accomplish the goals of the firm. Maintaining financial and accounting standards in the business practices are necessary. The profession of accounting has become a mockery due to the accounting scandals that took place all over the world in theRead MoreCase Study: Accounting for Enron4415 Words   |  18 Pagesï » ¿ Case Study 9 Kim Chau California Southern University MKT 86519 Dec 19, 2014 N. Papazian Accounting for Enron Introduction In the case of Accounting for Enron, the case concerned one of the largest corporate bankruptcies in the US history at the turn of the 21st century. It was Enron Corporation, a one time seventh largest most successful US company, sixth largest energy company in the world, valued at over $70 Billion; they filed for chapter 11 on December 2, 2001. Just the year before

Essay on Mediations of First Philosophy by Descartes

Mediations of First Philosophy by Descartes In the â€Å"Mediations of First Philosophy† Descartes tries to prove the existence of God in the third meditation. He does this by coming up with several premises that eventually add up to a solid argument. First, I will explain why Descartes ask the question, does god exist? And why does Descartes think he needs such and argument at this point in the text. Secondly, I will explain, in detail, the arguments that Descartes makes and how he comes to the conclusion that God does exist. Next, I will debate some of Descartes premises that make his argument an unsound one, including circular reasoning. Finally, I will see if his unsound argument has diminished and undermined his principal goals and the†¦show more content†¦Descartes gives an example of a stone, stating that the stone can’t be made by anything that doesn’t contain everything found in a stone. Basically the premise is based on a more general one that, it is not possible for something to come fr om nothing. Descartes then applies the Causal Adequacy Principal to ideas. Descartes claims that just in the case of how objects must contain at least as much reality as what created it ,then the cause of an idea must contain at least as much reality as the idea itself. So if an idea I represents some object O as having property P then the cause of I must have as much F as O is represented as having. Descartes puts these premises together and arrives at the fact that God exists in the following way. Since my idea of God represents God has being infinite and perfect whatever causes this idea must be infinite and perfect as well. Descartes then realizes that he cannot be the cause of his idea, of God, because he is not perfect or infinite. The definition of God as being â€Å"the perfect being† shows that the only thing that can cause this idea of the perfect being is God himself. Therefore a being that is perfect and infinite exists. Since an infinite perfect being exist God m ust exist. Descartes has arrived at a conclusion and has proved his argument. There were a few smaller argument that Descartes offers throughout the third meditation. One of them suggest that it is not possible to exist without the existenceShow MoreRelatedMeditations On First Philosophy By Rene Descartes Essay839 Words   |  4 PagesPrà ©ciso of Meditations on First Philosophy Through his series of books, Meditations on First Philosophy, Renà © Descartes enlightens his philosophical ideas about knowledge in which we should discard all belief we aren’t absolute certain about and establishes what we know for sure. In the introduction he clarifying the main ideas of each of the 6 books and using to them build up to his belief. Starting with the First Meditations, he discusses about doubt. He believed that there are no real foundationsRead MoreEmerson’s Unifying Philosophy Essay1143 Words   |  5 Pageshave earnestly pursued knowledge and the attainment of truth. Historical figures such as Plato, Descartes, and Emerson sought answers to daunting questions of: ‘What is truth?’; ‘What is reality?’; ‘How is wisdom acquired?’ Many scholars believe these philosophers presented conflicting viewpoints: Plato encouraging skepticism among all previous historical, cultural, and personal perspectives; Descartes questioning definitions of reality and his very existence; Emerson encouraging self-trust and confidenceRead MoreSummary Of Descartes On The Mind-Body Distinction751 Words   |  4 Pages1 Zhiyuan Li Philosophy 3230 Short Paper Assignment Descartes on the Mind-Body Distinction In the Sixth Mediation, Descartes advances a compact argument for the idea that the mind and the body are distinct (2006, AT 78). In this essay, I’m going to present what I take Descartes’ argument to be, and very briefly evaluate it afterwards. Descartes starts with the thought the we can understand, at least, something, and we can understand something in a specific manner: clearly and distinctly; we can’tRead MoreInnate Ideas Essay653 Words   |  3 Pageswritten and discussed many topics in philosophy. Sometimes, these philosophers agree on ideas or sometimes they make their own assumptions. There are two philosophers who had different ideas concerning where innate ideas come from and how we get these types of ideas. Rene Descartes and John Locke were these two philosophers with the opposing argument on innate ideas. The place where Descartes discusses his views were in the Meditations on First Philosophy and Lockes argument is located in AnRead MoreMeditations on First Philosophy Essay examples1290 Words   |  6 Pagesâ€Å"Cogito ergo sum;† I think therefore I am. This philosophical statement stimulated a renaissance in the field of philosophy, creating modern Western philosophy as is known today. Th is important notion was dictated by Rene Descartes in his 1641 metaphysics work, Mediations on First Philosophy, and influenced all modern philosophical works written after Descartes revolutionary achievement. This work was written at a time when modern physics was being developed as a mathematization of nature. The principlesRead MoreAnalysis Of Rene Descartes869 Words   |  4 PagesRene Descartes is known as the philosopher of the modern period which starts around the time 1600’s. He is also known as the â€Å"Father of Modern Philosophy†, whereas he is also considered one of the critics of the philosophy of Aristotle. In his mediation of philosophy he has discussed different ideas about the human existence. In the mediations, he has questioned an individual’s idea of perceptions, where he develops the idea of skepticism. Unlike Aristotle, he believes that mind is the first realityRead MoreComparing Plato And Descartes The Matrix, The Allegory Of The Cave88 9 Words   |  4 PagesThe short stories, written by both authors Plato and Descartes; The Matrix, The Allegory of the Cave, and Meditations on First Philosophy, focuses on what individuals believe to be reality or not within the world. The stories bring on questions of what is in fact illusion. Overall, the stories provide a guide to the truth. According to Wachowski, A, Wachowski, L (1999) in the Matrix, Mr. Anderson questions everything in the world as he knows it. He wonders if what he is involved in a computer programRead MoreDescartes Six Meditations on First Philosophy Essay1347 Words   |  6 PagesThroughout the six meditations on First Philosophy, French philosopher Rene Descartes seeks to find a concrete foundation for the basis of science, one which he states can only include certain and unquestionable beliefs. Anything less concrete, he argues will be exposed to the external world and to opposition by philosophical sceptics. The sense of the Cartesian reform is the imposition of a new method of thinking. Descartes’ method to begin with is reductive, removing all knowledge acquired withoutRead MoreDescartes on the Distinction Between Body and Mind1181 Words   |  5 PagesName Tutor Course Date Descartes Premise for Distinguishing Body and Mind In the Meditations on First Philosophy, Descartes discusses the nature of the body and mind. By drawing from three lines of thought, Descartes launches a powerful premise that the body is something distinct from the mind. He conceptualizes his argument by using the uncertainty of knowledge argument, appealing to God’s omnipotence, and describing the indivisibility of the body and mind. Therefore, the purpose of this paperRead MoreDescartes Essay example757 Words   |  4 PagesDescartes Is our education complete once a degree has been earned? Have we learned all there is to know? Can we be sure of what we have come to know? Only a completely self-assured person might answer yes to these questions, but for Rene Descartes (1596-1650) the completion of his formal education left him feeling and thinking he was still ignorant about the certainties of human experience and existence. This prominent Renaissance philosopher conquered the world of uncertainty in a work

The Handmaid’s Tale free essay sample

Like many totalitarian states, the Republic of Gilead starts out as an envisioned utopia by a select few: a remade world where lower-class women are given the opportunity interact with upper-class couples in order to provide them with children, and the human race can feel confident about producing future generations with the potential to see past divisions of classes. Yet the vast majority of the characters we meet are oppressed by this world, and its strict attention to violence, death, and conformity highlight the ways in which it is a far from perfect place. Atwood is tapping into a national fear of the American psyche and playing with the idea of American culture being turned backwards and no longer standing as the dominant culture. Atwood engages the reader by recreating events that have previously happened making the ‘dystopian’ world more relatable and, therefore, more frightening. Two of the most important themes of The Handmaids Tale are the presence and manipulation of power and freedom. The ideas of power, freedom and confinement are closely entwined and constantly on Offred’s mind. It is often the case, however, that these can be muddled with what is free and what is bound. Auntie Lydia thinks ‘there is more than one kind of freedom†¦ Freedom to and freedom from. In the days of anarchy it was freedom to. Now you are being given freedom from. Don’t underrate it. ’ This suggests the belief that; despite all that the women have lost, Aunt Lydia and Gilead argue, they are free now. They have freedom from things like sexist catcalls and potential abuse from strangers. They would argue that the women of Gilead should be grateful for such freedom rather than mourning the other freedoms theyve lost. On the one hand, Gilead is a theocratic dictatorship, so power is imposed entirely from the top. There is no possibility of appeal, no method of legally protecting oneself from the government, and no hope that an outside power will intervene which suggests that the people of Gilead are not free at all and have no power to break away from the regime. The confusion between boundlessness and restraint continues as Offred reminisces of Moira – Offred’s symbol of freedom: ‘Moira had power now, shed been set loose, shed set herself loose. She was now a loose woman. I think we found this frightening. Moira was like an elevator with open sides. She made us dizzy. Already we were losing the taste for freedom, already we were finding these walls secure. ’ The repetitions of â€Å"loose† shows the prominent idea of freedom – what all people would surely desire but the regime has made them frightened of this. The pattern of three gives the impression that she is now so loose that there is nothing to hold her together and she will not survive in the world she has escaped to. This shows how successful the Center is at brainwashing women and teaching them to believe in this new regime. So while once Moira would have been seen as a motivating force – a fantasy of an escape made good – the women in the Center are already retreating from their old notions of freedom and rights. With no freedom to think, the manipulated women question whether they even need any power. It soon becomes clear, however, that Offred is frivolously trying to hold on to the few memories she has left – as she feels these giver her power. Offred tries to still recognize the fact that this regime is wrong and she desperately tries to hold onto the idea of wanting to escape. She constantly reminds herself that she ‘intend(s) to last’, but she is morally and literally becoming ‘undone’. In this society memory is resistance in a less active manner. Her memories are a place she can escape to so we question whether that is enough freedom or not. To the present day reader the idea of only being free in your memories is far too restricting – reinforcing the dystopian narrative. As Offred’s relationship with the commander develops we see and emergence of the idea that even in a powerless regime women can exploit their sexual power and we become familiar with the idea of ‘fallen women’. Offred is in her room and filled with nostalgia for the outmoded habit of falling in love; ‘Falling in love, I said. Falling into it’ which is then mirrored; ‘Falling in love, we said; I fell for him’. The underlying biblical reference to ‘The Fall’ when Adam ate the apple from the tree of knowledge in the Garden of Eden is very prominent. We are forced to consider the idea of the fall from innocence, which is presented as a paradox in this dystopian world as the women are not, by the terms of the bible, innocent. However it is also a reflection of the Gilead society because biblically ‘The Fall’ was Eve’s betrayal of Adam and the women who have been deemed â€Å"fallen† were unable to become pregnant – the ultimate betrayal of this society. The whole idea of â€Å"falling† is hugely passive and gives the impression of a very powerless action. For women in present day society I believe it would be the ultimate torment to be catapulted back in societal thinking where woman were far less than equal as it has previously been. The repetition of biblical references strongly draws in the theme of religion. The Handmaids Tale is a warning about what might happen if extreme religious ideology is followed as a solution to societal problems. It suggests that allowing religious fundamentalists to run a government is a recipe for injustice, cruelty and oppression. By using the novel to specifically target fundamentalist Protestants in America, sometimes known as the Christian right because of their conservative views on social issues such as abortion, womens rights and gay rights, we know that religion is a pressing issue not only in the predicted future, but in today’s society religion is an element of life that many people hold close allowing Atwood to engage the reader in the idea that this nightmarish world could become a reality. The Handmaids Tale was written during the presidency of Ronald Regan, from 1981 to 1989 – during which political and religious conservatism was on the rise. The novel takes some of the positions advocated by religious conservative and exaggerates them. For example, it is no secret that many conservatives, both then and now, wish to re-criminalize abortion. This is mirrored in the novel as the doctors who performed abortions are hanged at the Wall. Conservatives also tend to oppose gay rights; in the novel gays are hanged for ‘gender treachery’. The novel is infused with frequent allusions to different parts of the Bible. The most obvious is the reference to Genesis 30:1-3, ‘Give me children or else I die. The Ceremony, the ritual in which a Handmaid must lie face-up on her Commanders wife and grasp the wifes hands while the Commander has sex with her, and the Birthing Ceremony, where the wife feigns labor while the Handmaid gives birth, are direct references to the Genesis story of Rachel and Jacob. Also, we learn through Offred that the actual name of the Red Center, where Handmaids are trained, is the Rachel and Leah Center. The direct quote from the bible is a method Atwood uses to unnerve the reader as it makes the Gilead dystopia more realistic. On the most obvious and superficial level, the Bible plays an important role in the naming of objects and people in the Republic of Gilead. The men, according to their role in society, are called ‘Commanders of the Faithful’ and ‘Guardians of the Faith’ are the members of the police force. ‘Angels’ or ‘Eyes of the Lord’ are the soldiers of the army, and they have names like ‘Angels of the Apocalypse’ or ‘Angels of Light’. Whereas the word â€Å"angel† suggests something innocent or holy, the â€Å"Angels† in Gilead fight in wars. The names seem to suggest that it is a religious war they fight. The ‘Eyes’ are the secret police that are supposed to spy on the people in Gilead. The most important name, namely that of the state itself, is an allusion to the Bible as well. In the Old Testament, Gilead is a very fertile and therefore very desirable region in ancient Palestine. Ironically, the Republic of Gilead in Atwoods novel is exactly the opposite of fertile and desirable, which shows how the state tries to appear clean and pure, although it is not. It is a wasteland that has been devastated by pollution and war and whose citizens are oppressed. Significantly enough, the regime only uses statements from the Bible that present the beauty and godliness of Gilead and leaves out passages that imply negative things about the biblical model. One example for the choosing of biblical passages for the purposes of the regime is a passage in Hosea that Gilead chose not to use: â€Å"Gilead is a city of wicked men, stained with footprints of blood† Throughout the novel, Atwood shows how Offred desperately desires the knowledge and language she is being denied by the Gilead regime. Right from the opening pages of the novel it is evident that Offred’s desire for language to help her communicate and keep her identity is strong. The dislocated opening emphasises the confusion and fear that characterize any totalitarian state. For instance, in the opening chapter of the novel, Offred and the other Handmaid’s learnt each other’s real names by passing messages from bed to bed when denied the opportunity to otherwise do so. Offred describes how â€Å"We learnt to lip read watching each others’ mouths†. This highlights just how important names are in constructing our identities. The women in the centre feel it important enough to know each others’ names to risk being disciplined to do so. This shows hints of the bible again, as innocence and knowledge are being challenged against each other. They can’t ‘unknow’ what they have learned. Offred frequently creates similar neologisms, for example: ‘Salvagings Prayvaganzas Birthmobile†¦ Unwomen†¦ Unbaby’ which suggest the exaggeration of the regime that in today’s society there aren’t even words to describe some events. In a society where literacy is forbidden her, Offred frequently contemplates words and their meanings. Instead of illicit sex, the commander engages her in illicit games of Scrabble. Scrabble doesn’t fully rule out the sexual tension between Offred and the Commander as the words she chooses to spell all have sexual connotations or make some kind of physical reference; ‘Larynx’; ‘Valance’; ‘Quince’; ‘Zygote’; ‘Limp’; and ‘Gorge’. These choices of words gives the impression that the whole regime is dominated by sex and reproduction – a fearful idea for the people of today’s society who have worked so hard to bring humanity to where it is today. Harriet F. Bergmann argues that the novel presents its reader with an exercise in learning how to read for survival as in order to stay alive, Offred learns to use the new language of her own time so as to seem part of the new order that the language reflects. Nighttime is where Offred feels at her safest. This irony is significant because human nature teaches us not to trust the night, as the moon is never constant. The continuous changing of the moon symbolizes Offred’s memories becoming more of a blur. Sleep; or no sleep’ the night offers freedom of a kind because Offred is more or less alone. Inside her head she can dream herself into better times: ‘the night is my time out. Where should I go? †¦ Somewhere good. ’ At other times, she lies awake grappling to make sense of the horrendous changes in her situation. Atwood repreats references to the night because Offred sees her dreams as an escape and is never once concerned about whether of not sheâ⠂¬â„¢ll have a bad dream – as she could not dream of anything worse than the situation she’s in. To conclude, in Margaret Atwood’s novel The Handmaids Tale the nightmarish scenes are created with a striking reality and continuously mirrored with present day life to create a dystopian narrative. At first, the situation in which the people of Gilead live seems completely futuristic and improbable but Atwood’s endless parallelisms to events which have already occurred gives reason to believe that history could repeat itself, as it has relentlessly done so in the past.

The Internal Control Weaknesses At Enron Accounting Essay Example For Students

The Internal Control Weaknesses At Enron Accounting Essay The events were eventually ensuing the filing for bankruptcy in December 2001, started manner much before fraud at Enron could be even suspected.A Andersen played a major function in the prostration of Enron.A Andersen failed two times sing audit issues merely a few old ages short clip before the prostration of Enron, at Waste Management in 1996 and at Sunbeam in 1997. The two audit failures mentioned supra should hold been immense warning marks for Andersen to protect itself against another client failure but what they had to confront sing Enron was worse than they of all time had.A Some internal memos at Andersen made it clear that several struggles existed between the hearers and the audit commission of Enron.A These memos contained several electronic mails as good which expressed concerns about accounting patterns used by Enron.A David B. Duncan as the taking spouse on the audit tipped over these concerns. Harmonizing to McNamee ( 2001 ) there is cogent evidence that Duncan s squ ad wrote memos fraudulently saying that the professional criterions group approved of the accounting patterns of Enron that hid debts and pumped up net incomes. Andersen s independency is besides extremely questionable due to the relationship between audit and non-audit fees. Harmonizing to McLean ( 2001 ) the individual who foremost spotted in 2001 that there was nt even any opportunity for Enron to do net income was Jim Chanos, the caput of Kynikos Associates. He said that that parent company had technically become nil more than a hedging entity for all of its subordinates and affiliates.A In 2001 the runing border of Enron went down significantly to 2 % from the old twelvemonth s figure of 5 % which is more than interesting because this sort of a lessening in one twelvemonth is unheard of in the public-service corporations industry. Chanos besides pointed out that Enron was still sharply selling stocks, despite there was barely any capital to endorse up the portions they were sel ling. We will write a custom essay on The Internal Control Weaknesses At Enron Accounting specifically for you for only $16.38 $13.9/page Order now To be professional and effectual, hearers must be independent of direction and measure the fiscal representations of direction for all users of fiscal statements. Less than 30 % of the fees that Andersen received from Enron came from scrutinizing, with the balance of fees coming from confer withing. Andersen acted as Enron s external hearer and as its internal hearer. Andersen s work as a adviser raises several inquiries. It appears that Andersen s audit squad, when faced with accounting issues, chose to disregard them, acquiesced in silence to unsound accounting, or embraced accounting strategies as an advocator for its client. Internal Control Weaknesses at Enron Hearers assess the internal controls of a client to find the extent to which they can trust on a client s accounting system. Enron had excessively many internal control weaknesses to be given here. Two serious failings were that the CFO was exempted from a struggles of involvement policy, and internal controls over SPEs were a fake, bing in signifier but non in substance. Many fiscal functionaries lacked the background for their occupations, and assets, notably foreign assets, were non physically secured. The trailing of day-to-day hard currency was slack, debt adulthoods were non scheduled, away balance sheet debt was ignored although the duty remained, and company-wide hazard was disregarded. Internal controls were unequal ; contingent liabilities were non disclosed ; and, Andersen ignored all of these failings. Evaluation of Accounting Materiality Hearers focus on stuff deceits. A deceit is material if cognition of the deceit would alter the determinations of the user of fiscal statements. When Enron began to repeat its fiscal statements and investors began to hold on its deceits, the response of the market is incontestable as to materiality. Many mistakes were known, but were dismissed by Andersen as immaterial. Other mistakes may non hold been known, but should hold been known if sensible enquiry would hold revealed them. Business Model, Experiences, and Organizational Culture At Enron and at Andersen, the concern theoretical account and the organisational civilization were altering. Enron was traveling to a new concern theoretical account dominated by intangible assets, the rights to purchase and sell trade goods. This alteration in assets was driven by a new organisational civilization which so sharply cultivated its ain growing. As hearers moved to go portion of a confer withing industry, their concern theoretical account and organisational civilization were altering excessively. It is likely that both the alterations at Enron and at Andersen were increasing hazards for investors. Enron s motion off from the laterality of fixed assets to the laterality of intangible assets was likely to increase volatility, and this chance was compounded by the usage of mark-to-market accounting. Besides, Andersen s motion off from the professionalisation of scrutinizing to the commercialisation of consulting was likely to weaken hearers as proctors of direction. Into t he mix of altering concern theoretical accounts and civilizations, add people who were non equipped for the alterations. The immature trading executives at Enron chased the trade for net incomes, while neglecting to hold on the hazards attached to the intangibles that were driving growing in net incomes. Likewise, immature hearers at Andersen embraced consulting, while neglecting to understand the hazard of audit failure. Many accounting houses and independent CPAs reacted to these events and implemented alterations in process voluntarily.A The biggest alteration that accounting houses made was a move made by the four staying members of the large five, KPMG, Ernst and Young, Deloitte Touche Tohmatsu, and PricewaterhouseCoopers.A These four companies decided to interrupt all ties with Andersen in an effort to avoid being dragged down with the merchandising contention environing the Enron scandal.A This distancing was besides due to the major alterations mandated to Andersen as a manner to acquire back on their pess after the dirt broke, and the other houses were afraid that these alterations would be forced on them every bit good. The authorities reacted sharply when they became cognizant of the Enron dirt, and a bustle of statute law and proposals emanated from Congress and the SEC about how best to cover with this situation.A President Bush even announced one post-Enron plan.A This program was to do revelations in fiscal statements more enlightening and in the direction s missive of representation.A This program would besides include higher degrees of fiscal duty for CEOs and accountants.A Bush s end was to be tough, but non to set an undue load upon the honest comptrollers in the industry.A .ud18d314aea7d89aae929026e3e22ad3b , .ud18d314aea7d89aae929026e3e22ad3b .postImageUrl , .ud18d314aea7d89aae929026e3e22ad3b .centered-text-area { min-height: 80px; position: relative; } .ud18d314aea7d89aae929026e3e22ad3b , .ud18d314aea7d89aae929026e3e22ad3b:hover , .ud18d314aea7d89aae929026e3e22ad3b:visited , .ud18d314aea7d89aae929026e3e22ad3b:active { border:0!important; } .ud18d314aea7d89aae929026e3e22ad3b .clearfix:after { content: ""; display: table; clear: both; } .ud18d314aea7d89aae929026e3e22ad3b { display: block; transition: background-color 250ms; webkit-transition: background-color 250ms; width: 100%; opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #95A5A6; } .ud18d314aea7d89aae929026e3e22ad3b:active , .ud18d314aea7d89aae929026e3e22ad3b:hover { opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #2C3E50; } .ud18d314aea7d89aae929026e3e22ad3b .centered-text-area { width: 100%; position: relative ; } .ud18d314aea7d89aae929026e3e22ad3b .ctaText { border-bottom: 0 solid #fff; color: #2980B9; font-size: 16px; font-weight: bold; margin: 0; padding: 0; text-decoration: underline; } .ud18d314aea7d89aae929026e3e22ad3b .postTitle { color: #FFFFFF; font-size: 16px; font-weight: 600; margin: 0; padding: 0; width: 100%; } .ud18d314aea7d89aae929026e3e22ad3b .ctaButton { background-color: #7F8C8D!important; color: #2980B9; border: none; border-radius: 3px; box-shadow: none; font-size: 14px; font-weight: bold; line-height: 26px; moz-border-radius: 3px; text-align: center; text-decoration: none; text-shadow: none; width: 80px; min-height: 80px; background: url(https://artscolumbia.org/wp-content/plugins/intelly-related-posts/assets/images/simple-arrow.png)no-repeat; position: absolute; right: 0; top: 0; } .ud18d314aea7d89aae929026e3e22ad3b:hover .ctaButton { background-color: #34495E!important; } .ud18d314aea7d89aae929026e3e22ad3b .centered-text { display: table; height: 80px; padding-left : 18px; top: 0; } .ud18d314aea7d89aae929026e3e22ad3b .ud18d314aea7d89aae929026e3e22ad3b-content { display: table-cell; margin: 0; padding: 0; padding-right: 108px; position: relative; vertical-align: middle; width: 100%; } .ud18d314aea7d89aae929026e3e22ad3b:after { content: ""; display: block; clear: both; } READ: Christopher Columbus EssayBy far the biggest alteration brought approximately is the Sarbanes-Oxley Act.A The Sarbanes-Oxley Act requires companies to revaluate their internal audit processs and do certain that everything is running up to or transcending the outlooks of the auditors.A It besides requires higher degree employees, like the CEO and CFO to hold an apprehension of the workings of the companies that they head and to confirm the fact that they do nt cognize of any fraud being committed by the company.A Sarbanes-Oxley besides brought with it new demands for disclosures.A These demands included coverage of minutess called reportable transactions.A These minutess ar e broken down into several classs, which impact every facet of a business.A One of these classs is listed transactions-which are by far the worst. They are minutess that are really written out in a list, each one pertaining to one specific state of affairs. Another is minutess with a book-to-tax difference of more than ten million dollars. A There are several others, nevertheless these two will hold the greatest effect.A Attach toing these demands are rigorous punishments if these minutess are non reported and discovered later.A This act will intend important extra work for comptrollers over the following several years.A A For many old ages the SEC Chairman, so Arthur Levitt Jr. , had been naming for the separation of scrutinizing and confer withing services within one company.A However large houses like Andersen would use their proverbial weight to try to demo that confer withing did non interfere with an hearer s independence.A Since the major concern of Andersen s function in the contention Centres on their independency, and because of the big pecuniary consulting fees being paid to them by Enron, the push has been started afresh by Paul Volcker the former Federal Reserve Chairman.A Realistically, few think that the large houses will be able to deter the SEC from really implementing such a rule.A A A Many companies who use hearers believe that this is non the reply, because of the fact that it will do them to engage one house to make scrutinizing work, and another to make non-audit work like revenue enhancements and other filings. In an effort to non acquire damaged by any at hand authorities acti on, many business-including Disney and Apple Computer Inc. have already begun dividing their audit and non-audit work between different firms.A Outline1 Effectss on other Commercial Administrations2 WorldCom3 Adelphia4 Xerox5 AOL Time Warner6 Referencing Effectss on other Commercial Administrations WorldCom After the perplexing complexness of Enron s SPEs and prepays, Worldcom s fraud is simplicity itself. During the 1990s, WorldCom became a planetary telecommunication giant by geting companies such as MCI and constructing a big telecommunications web. In add-on, WorldCom entered into long-run, fixed-rate line rentals to link its web with the webs of incumbent local exchange bearers. Faced with the telecom downswing and intense force per unit areas on net incomes, WorldCom undertook a series of steps to blow up earnings37. The largest and simplest of these related to line costs. WorldCom merely recharacterized its ample line costs as Prepaid Capacity and transferred them from the Company s income statements to its balance sheets. The consequence was that over $ 3.8 billion of line costs that should hold been shown as disbursal were capitalized as assets. WorldCom s income was overstated by the same sum. There were no SPEs and no complex accounting fast ones. There was merely a journal entry passed under the waies of the Chief Financial Officer, Scott Sullivan, that reclassified disbursals as assets without any back uping certification whatsoever. When this was eventually discovered by the internal audit section, Sullivan offered an every bit audacious explanation38 which is deserving citing at length: At the clip of the cost recess, direction had determined that future economic benefit would be derived from these contractual committednesss as the grosss from these service offerings reached jutting degrees. At that clip, direction to the full believed that the jutting gross additions would more than countervail the future rental committednesss and deferred costs under the understandings. Therefore, the cost recesss for the unutilized part of the contract was considered to be an appropriate stock list of this capacity and would finally be to the full amortized prior to the expiration of the contractual committedness. ( FASB CON No. 6, par. 26 ) . Adelphia In a series of disclosures40 between March 2002 and June 2002, Adelphia Communications Corporation announced that it had concealed $ 2.6 billion of its liability. At the clip, Adelphia was the 6th largest overseas telegram telecasting operator in the United States. The Rigas household that owned a commanding interest in Adelphia besides owned several other companies ( Rigas entities ) that were besides in the overseas telegram telivision concern. The Rigas entities were managed by Adelphia. Furthermore, Adelphia subordinates and the Rigas entities borrowed money under a co-borrowing understanding with that made all parties jointly and independently apt for the adoption regardless of who had drawn down the money. This meant that the debt had to be shown as a debt of the Adelphia subordinates ( and hence as portion of Adelphia s amalgamate debt ) and non as a contingent liability. The undermentioned footer in Adelphia s December 31, 2000 balance sheet would hold led everybody to believe that this liability was included in the amalgamate debt: In fact, nevertheless, this sum was non included in Adelphia s amalgamate debt. The footer was therefore calculated to hide this debt wholly. At least, if the note had disclosed a contingent liability, readers would hold known that that this debt was in add-on to the debt on the balance sheet. Of class, even that would hold been inaccurate from an accounting point of position as the co-borrowing needed to be disclosed as debt and non as a contingent liability. The SEC stated: The skip of these liabilities was a calculated strategy to under-report Adelphia s overall debt, portray Adelphia as de-leveraging, and hide Adelphia s inability to follow with debt ratios in loan compacts. In March 2002, while showing the consequences for the last one-fourth of 2001, Adelphia for the first clip disclosed the being of $ 2.3 billion of concealed debt handling it as a contingent liability: .u097efcf946af3e2006e85226b11f9e46 , .u097efcf946af3e2006e85226b11f9e46 .postImageUrl , .u097efcf946af3e2006e85226b11f9e46 .centered-text-area { min-height: 80px; position: relative; } .u097efcf946af3e2006e85226b11f9e46 , .u097efcf946af3e2006e85226b11f9e46:hover , .u097efcf946af3e2006e85226b11f9e46:visited , .u097efcf946af3e2006e85226b11f9e46:active { border:0!important; } .u097efcf946af3e2006e85226b11f9e46 .clearfix:after { content: ""; display: table; clear: both; } .u097efcf946af3e2006e85226b11f9e46 { display: block; transition: background-color 250ms; webkit-transition: background-color 250ms; width: 100%; opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #95A5A6; } .u097efcf946af3e2006e85226b11f9e46:active , .u097efcf946af3e2006e85226b11f9e46:hover { opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #2C3E50; } .u097efcf946af3e2006e85226b11f9e46 .centered-text-area { width: 100%; position: relative ; } .u097efcf946af3e2006e85226b11f9e46 .ctaText { border-bottom: 0 solid #fff; color: #2980B9; font-size: 16px; font-weight: bold; margin: 0; padding: 0; text-decoration: underline; } .u097efcf946af3e2006e85226b11f9e46 .postTitle { color: #FFFFFF; font-size: 16px; font-weight: 600; margin: 0; padding: 0; width: 100%; } .u097efcf946af3e2006e85226b11f9e46 .ctaButton { background-color: #7F8C8D!important; color: #2980B9; border: none; border-radius: 3px; box-shadow: none; font-size: 14px; font-weight: bold; line-height: 26px; moz-border-radius: 3px; text-align: center; text-decoration: none; text-shadow: none; width: 80px; min-height: 80px; background: url(https://artscolumbia.org/wp-content/plugins/intelly-related-posts/assets/images/simple-arrow.png)no-repeat; position: absolute; right: 0; top: 0; } .u097efcf946af3e2006e85226b11f9e46:hover .ctaButton { background-color: #34495E!important; } .u097efcf946af3e2006e85226b11f9e46 .centered-text { display: table; height: 80px; padding-left : 18px; top: 0; } .u097efcf946af3e2006e85226b11f9e46 .u097efcf946af3e2006e85226b11f9e46-content { display: table-cell; margin: 0; padding: 0; padding-right: 108px; position: relative; vertical-align: middle; width: 100%; } .u097efcf946af3e2006e85226b11f9e46:after { content: ""; display: block; clear: both; } READ: Creating Slave Laws EssaySubsequent revelation made it really clear that the sum of $ 2.3 billion was non merely a contingent liability but was really much a portion of Adelphia s debt. It turned out that there was non in fact any clear limit between the drawdowns by Adelphia and the Rigas Entities. The allotment of the co-borrowing between them was an arbitrary reclassification carried out every one-fourth while fixing the fiscal statements. The SEC stated: Adelphia direction allocated and reallocated co-borrowing liabilities among Adelphia s amalgamate subordinates and unconsolidated Rigas Entities at will and through a individual, quarterly hard currency direction rapp rochement of the inter-company receivables and payables outstanding at one-fourth terminal between or among Adelphia s subordinates and Rigas Entities In fact, Adelphia operated a Cash Management System ( CMS ) into which Adelphia, its subordinates and the Rigas Entities deposited their hard currency grosss ( generated from operations or obtained from adoptions ) and from which they withdrew hard currency for disbursals, capital outgo and debt refund. This resulted in the commingling of financess between Adelphia and the Rigas Entities. Adelphia s fraud was non restricted to privacy of debt. Between mid-1999 and the last one-fourth of 2001, Adelphia misrepresented its public presentation in three countries that are of import in the prosodies fiscal analysts use to measure overseas telegram companies: ( a ) the figure of its basic overseas telegram endorsers, ( B ) the per centum of its overseas telegram works rebuild, or upgrade, and ( degree Celsius ) its net incomes, including its net income and quarterly EBITDA . Most of this was accomplished by straight-out disproof or by fabricated minutess with the Rigas Entities through the CMS. Xerox Xerox restated its income for the old ages from 1997 to 2002 partially to reflect wrong accounting patterns associating to the timing and allotment of gross from bundled rentals. Xerox sells most of its merchandises and services under bundled contracts that contain multiple constituents equipment, service, and funding constituents for which the client pays a individual monthly-negotiated monetary value every bit good as a variable service constituent for page volumes in surplus of stated lower limits. The SEC claimed that Xerox s revenue-allocation methodological analysis for these contracts did non follow with the accounting criterions and forced Xerox to alter its methodological analysis. Under the original methodological analysis, Xerox estimated the just value of the funding constituent ( utilizing a discounted hard currency flow method based on the company s cost of equity and debt ) and of the service constituent ( by utilizing an estimation of service gross borders ) and att ributed the balance to equipment. In the new methodological analysis, the just value of the service constituent and the just value of the equipment ( utilizing hard currency sale monetary values ) are deducted from the entire lease payment to get at the funding constituent as a reconciliation figure and the inexplicit funding rate is determined. Interestingly, the company s old hearer, KPMG regards the original accounting as right and regards the new accounting adopted by the company and its new hearers, PricewaterhouseCoopers under force per unit area from the SEC as incorrect. KPMG stated that: KPMG remains house in its strong belief that the fiscal statements reported on by us in May 2001, including Xerox s fiscal statements for 2000 and the restated fiscal statements for 1997-1999, were reasonably presented in conformity with by and large accepted accounting rules. KPMG, Xerox and PricewaterhouseCoopers had it right the first clip, when the company and three separate squads from PwC all agreed with us that Xerox s rental accounting methodological analysis was GAAP compliant. By contrast, today s intelligence studies lead us to believe that the restated fiscal statements withstand economic world. They seemingly give Xerox the benefit of acknowledging grosss in 2002 and in future old ages that it had already recognized in anterior old ages. AOL Time Warner AOL Time Warner Inc. admitted50 in October 2002 that it had improperly inflated gross by $ 190 million and profitableness ( EBITDA ) by $ 97 million by improperly accounting for some on-line ad gross revenues and other trades between July 2000 and June 2002. While AOL Time Warner did non place the minutess involved, it is likely that these were the 1s that the Washington Post had highlighted in two articles52 in July 2002. The Post had alleged that America Online ( AOL ) resorted to questionable accounting patterns in an effort to shore up advertisement gross at a clip when it was in the procedure of geting Time Warner in a stock barter trade. From late 2000 onwards, stock markets were highly worried about the sustainability of advertisement gross for cyberspace companies. A failing in advertisement grosss could conceivably hold led to a crisp autumn in the AOL stock monetary value that could hold endangered the amalgamation with Time Warner. The Washington Post alleged: AOL convert ed legal differences into ad trades. It negotiated a displacement in gross from one division to another, bolstering its online concern. It sold ads on behalf of on-line auction giant eBay Inc. , booking the sale of eBay s ads as AOL s ain gross. AOL bartered ads for computing machine equipment in a trade with Sun Microsystems Inc. AOL counted stock rights as ad and commercialism gross in a trade with a Las Vegas house called PurchasePro.com Inc . AOL s accounting is under probe by the SEC and by the Justice Department. While the restatements are little comparative to AOL s entire grosss and net incomes, it could hold had a disproportional impact on the portion monetary value at a critical point of clip when it was clinching the amalgamation trade with Time Warner. Referencing Enron and Andersen-What Went Wrong and Why Similar Audited account Failures Could Happen Again by Matthew J. Barrett Governance, Supervision and Market Discipline: Lessons from Enron by Jayanth R. Varma, Journal of the Indian School of Political Economy published ( October-December 2002 ) , Volume 14 Number 4, 559-632 ) . Arthur Andersen and Enron: Positive Influence on the Accounting Industry byA Todd Stinson hypertext transfer protocol: //faculty.mckendree.edu/scholars/2004/stinson.htm McNamee, Mike and Harvy Pitt.A If You Violate the Law You Will Pay for it.A Business Week December 24, 2001: 33. McLean, Bethany.A Why Enron Went Bust.A Fortune December 24, 2001: 59