Enron Accounting Scandal Analysis
Added on 2020-07-23
10 Pages2486 Words243 Views
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Accounting
TABLE OF CONTENTSINTRODUCTION......................................................................................................................3Discussing the internal control procedure in the context of Enron case study......................3Identifying the control that is being violated.........................................................................3Proposing a solution for internal control process that is violated..........................................5Assessing and explaining the causes of unethical behavior in relation to the case situation.6Providing recommendations to the Board of Directors regarding policy improvement........7CONCLUSION..........................................................................................................................8REFERENCES...........................................................................................................................9BIBLIOGRAPHY....................................................................................................................10
INTRODUCTIONIn the recent times, every business unit places high level of emphasis on accountingwith the motive to present fair view of financial position and performance. This in turn helpsboth managers as well as investors in making suitable decision regarding investment. Thisproject report is based on the case situation of Enron which was one of the leading energyproviders of US. It attained leading position in the field of electricity, natural gas,communications, pulp and paper. Company creatively and systematically planned accountingfraud that is considered as an ‘Enron Scandal’. In this, report will provide deeper insightabout the aspect of internal control violation and unethical behavior performed by Enron.Further, it will also shed light on the policies that BOD should employ for makingimprovement in the position and performance. Discussing the internal control procedure in the context of Enron case study Internal control process is highly significant and required for reflecting the accurateview of financials. For controlling financial loopholes, system of auditing practiced by theEnron. On the basis of cited case situation, focus of the company in regards to internal controlreduced along with expansion. However, due to some discrepancies or mistakes done by themanagement organization faced issues. Case study of Enron clearly presents thatmanagement of the company stopped applying an existing internal control system. Further,business unit also failed to introduce effectual new control system (Bhasin, 2016). In additionto this, in some cases firm undertook old system without making evaluation of reliability andusability. Manager of Enron also relied on new system but avoided the main aspects inrelation to checking their accuracy and timeliness. Through assessment, it has been identifiedthat Enron assigned or allocated roles and responsibilities without defining reporting lines.Thus, it can be said that due to some specific issues pertaining to internal control issues suchas accounting scandal faced by Enron. Identifying the control that is being violatedBy doing investigation, it has been identified that there are several reasons due towhich internal control is violated such as:Fiduciary failure: Case study of Enron presents that Board of Directors failed tooffer protection to the shareholders. The main reasons behind this, BOD allows Enronto undertake high risk accounting practices. Along with this, due to the inappropriate
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