ENRON: A CASE STUDY Q.1) Give the definition of earnings management. Discuss in what instances is earnings management acceptable and in what instances is it not acceptable? Earnings management is the process by which management can potentially manipulate the financial statements to represent what they wish to have happened during the period rather than what actually happened. Reasons why management may want to manage earnings include both internal and external pressures. Perhaps the most important
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260 Week 2 The Enron and WorldCom Scandals Material A+Grade Get Tutorial by Clicking on the link below or Copy Paste Link in Your Browser https://hwguiders.com/downloads/acc-260-week-2-the-enron-and-worldcom-scandals/ For More Courses and Exams use this form ( http://hwguiders.com/contact-us/ ) Feel Free to Search your Class through Our Product Categories or From Our Search Bar (http://hwguiders.com/ ) Assignment: The Enron and WorldCom Scandals • Resource: Business & Professional
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TOP CORPORATE SCANDALS WorldCom The U.S.’s second-largest long-distance phone company at the time, WorldCom/MCI filed the largest Chapter 11 bankruptcy in American history in July 2002. The company used fraudulent accounting methods, namely underreporting expenses and inflating revenues with bogus accounting entries, to hide its declining financial condition between 1999 and 2002. An internal audit uncovered approximately $3.8 billion in fraud in June 2002, and in 2003, it was estimated that the
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He helped the company by hiding the losses with a “Tom Ponzi’s scheme”. 4. What is Sherron Watkins significance to Enron? She was the Vice President at Enron. She is considered by many to be the whistleblower that helped to uncover the Enron scandal. She wrote a concerned internal email message to Enron CEO Kenneth Lay warning him that the in the financial reports didn’t make sense. 5. Why did Wall Street wait until the collapse of Enron to investigate the company? Was there a diffusion of
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2. ANDERSON ONCE CLAIMED THAT THEIR PROBLEMS ON THE ENRON AUDIT WERE DUE TO A FEW “BAD PARTNERS” IN THE ORGANIZATION. DO YOU AGREE WITH THIS CLAIM? IF NOT, DISCUSS WHAT YOU THINK WERE THE ROOT CAUSES OF THE PROBLEM We disagree with above statement. Enron was not only Andersen’s only crisis. The claim of Arthur Andersen that their problems on Enron audit were due to a few “bad partners” in the organization is not correct. We focused on the culture problem of firms a. Arthur Andersen
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purpose of this paper is three-fold. First, it is to highlight corporate scandals that have happened in Malaysia. Second, it is to discuss some major causes of these corporate scandals; and third, it is to recommend the possible actions and preventive measures to curb these scandals. 1. Introduction In the recent years, the public and business community have been surprised with the exposure of many corporate scandals and accounting fraud by the managers of the company. It disappoints many stakeholders
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reliability of financial statements. The increasing rate of white-collar crimes demands stiff penalties and strong punishments. II. Introduction New laws and guidelines have helped reduce, but not eliminate fraud. Enron, WorldCom and HealthSouth scandals were detrimental to the public. Millions of dollars in investments the public made into those companies have been lost. The SEC (Securities and Exchange Commission) has taken a strong stance on fraud committed by
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Answer no 1 (a): How senior managers at WorldCom managed earnings: Senior manager of WorldCom (CFO, Scott Sullivan) has cooked up the earnings of the company by violating the two basic rule of accounting i.e. accrual and capitalization. They overstate the company pre-tax income by releasing the accrual balance to the income statement and by capitalizing the operating expenses in the books (Dick Thornburgh, 2004). As per the GAAP (generally accepted accounting principles), a company should required
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Score: 1. 60/100 Points 60 % Award: 10 out of 10.00 points Accounting is defined as the process by which financial information about a business is recorded, classified, summarized, interpreted, and communicated to owners, managers, and other interested parties. ✓ True False References True / False 2. Learning Objective: 01-01 Define accounting. Award: 0 out of 10.00 points Which of the following is NOT part of the process of accounting
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Business Ethics: Enron Case Study Introduction Enron was a very powerful company that was doing very well in the market. The value of its share was high and the company was enjoying an overall healthy position as a business. The employees were happy and new recruits would have killed to get a job at Enron. However, this was not to last. Enron enjoyed so much success that it got to its head and it started making all sorts of problems. Enron decided to change its organizational structure by employing
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