The company concealed huge debts off its balance sheet, which resulted in overstating earnings. Due to an understatement of debts, the company was considered bankrupt in 2001. Shareholders lost $74 billion and a lot of jobs were lost because of the bankruptcy. The share prices of Enron started falling in 2000 and in 2001 the company revealed a huge loss. Even after all this, the company’s executives told the investors that the stock was just undervalued and they wanted their investors to keep on investing.
Fraud is wrongful and a deception for personal gain. Recent history proves that major corporations in the accounting world commit fraud in their financial statements. This causes companies to pay millions in damages as well as declare bankruptcy. Companies are not the only ones responsible to ensure that the financial statements are accurate. The responsibility also falls in the hands of the accounting firms that audit the companies.
While I was trying to visit the Enron website page , there was a link to an investor relations site where the former Enron shareholders are still engaged in a lawsuit with the former executives. some of these investors are former employees who are seeking some semblance of retribution for how they hab been treated and for being lied . Another reason of the outcome of the Enron company’s scandal for line level is that the employees were the dissolution of Arthur Andersen.” The Country’s oldest accounting firm voluntarily gave up their license in the wake of handling Enron’s accounting audit function.” Over 22,000 employees at Enron have lost their jobs and the reputation of the company was still tarnished,even though it was not involved with the Enron Audit or
Accounting Fraud, the Investor and the Sarbanes Oxley Act Throughout the past several years major corporate scandals have rocked the economy and hurt investor confidence. The largest bankruptcies in history have resulted from greedy executives that “cook the books” to gain the numbers they want. These scandals typically involve complex methods for misusing or misdirecting funds, overstating revenues, understating expenses, overstating the value of assets or underreporting of liabilities, sometimes with the cooperation of officials in other corporations (Medura 1-3). In response to the increasing number of scandals the US government amended the Sarbanes Oxley act of 2002 to mitigate these problems. Sarbanes Oxley has extensive regulations that hold the CEO and top executives responsible for the numbers they report but problems still occur.
Auditing firms have been overlooking figures and hiding debt from the public for their high paying companies. This is where our corporations have gone astray and started to cheat their investors by deception because of conflicts of interest of... ... middle of paper ... ...rruption In The Auditing Profession." Review of Human Factor Studies. Jun. 2005, Vol.
Building standards of ethical behavior is essential for public company. Otherwise, it causes accounting scandals and bankrupts. Over the last decade, there were a lot of enormous bankrupts that because of unethical behavior of investors and auditors. Lehman Brothers Holding Inc. is an example of accounting scandals. In this research paper, I am going to analyze this firm.
The Enron Scandal escalated distrust amongst the shareholders, employees and government agencies. Thus, as a result the Sarbanes-Oxley Act was passed to protect the interest of all affecting parties. The Act is nearly "a mirror image of Enron: the company's perceived corporate governance failings are matched virtually point for point in the principal provisions of the Act." The Enron Scandal also revealed the unlawful practices followed by Arthur Andersen’s accounting firm. They helped Enron in altering, covering up, and destroying classified documents.
Introduction If corporate America learned anything in 2001, it was that looks can be deceiving- and also financial statements. In early 2001, Enron was highly regarded as one of the most competitive energy companies in its sector. By December of 2001, Enron collapsed; filing for bankruptcy and eventually losing it’s investors over sixty-three billion dollars, and not to mention the loss of thousands of employee pensions and/or 401 K. This gigantic fallout of Enron was a result of a series of fraudulent transactions stemming to falsifying financial documentation. Unfortunately for the US public and investors, Enron was not acting alone; many companies were found to taking part in similar fraudulent activity. The result of evident Corporate Fraud in America was devastating to the economy.
The analysis of the Lehman Brothers will show the acts of unethical financial reporting and the effect it had on this financial banking firm. The trouble for the Lehman Brothers became apparent around the time the housing bubble burst. Lehman acquired more risk, ignoring the truth and began eliminating assets that were overvalued. They did not want to lose confidence from the investors, so they reported assets that had little to no value. “Lehman Brothers balance sheet grew rapidly beginning in 2006, and included many long-term investments financed through short-term borrowing”.
The scheme involved the loss of paper money’s purchasing power as a result of asset inflation. Both WorldCom and The Mississippi Scheme were frauds involving manipulation to create higher stock prices and dubious practices within the organizations to keep the public unaware. Bernie Ebbers was the founder and CEO of WorldCom. He took a small telecommunications firm and transformed it into an industry giant before it collapsed into bankruptcy in 2002. The stock prices of WorldCom began to fall in 2000 and in order to prevent the price from falling further WorldCom made mass loans to Ebbers to stop him from selling his stock.