Enron

1252 words, 6 pages

Intro Sample...


Case 2

Plenty of Enron’s financial dealings could have been deterred if Enron did not have a weak audit committee. The audit committee is like to the last line of defense before the corporation meets with the independent auditor. Enron’s financial statement frauds probably would not have gone on for so long if the audit committee was held responsible for properly reviewing quarterly financial reports, as well as the annual financial statements (http://www.corpgov.deloitte.com/binary/com.epicentric.contentmanagement.servlet.ContentDeliveryServlet/CanEng/Documents/Financial%20Reporting/AuditCommitteesRoleInFinancialReporting.pdf). Enron presented many opportunities to commit fraud and many of those opportunities were exploited by... View More »

Body Sample...


Albrecht et al calls these factors the fraud storm. The fraud storm consist of: (1) A booming economy, (2) Decay of moral values, (3) Misplaced incentives, (4) High analysts expectations, (5) High debt levels, (6) Focus on accounting rather than principle, (7) Lack auditor independence, (8) Greed, and (9) Education Failures (Albrecht et al, pg 360 – 363). I believe the main reason financial statement fraud occurs so frequently is the decay of moral values. Regardless of any other factors that may be rationalized as reasons for committing fraud, if an executive has high moral and ethical beliefs I do not believe it likely they will commit fraud. If a corporation wants to maintain its integrity, I feel it highly unlikely they will turn a blind eye to obvious fraud symptoms such as those presented in the Enron case. Albrecht et al believes financial statement frauds can be the result of pressures put on management to succeed (pg 366). If management or employees are faced with failure or cheating, some will turn to cheating when under pressure to meet or maintain certain goals.
The relationship between financial statements numbers are predictable (Albrecht et al, pg 144). If someone who understands accounting cannot make sense of the statements, red flags should be raised. Increases or decreases in the cash flow statement that do not make sense should also serve as a red flag and be investigated (Albrecht et al, pg 183).
Financial statement auditors differ from fraud examiners. Financial statement auditors are only responsible for matching documents to see ...

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