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Enron Fraud

In: Business and Management

Submitted By liion
Words 361
Pages 2
Q:How Enron fraud?

A:1.Stock Option Incentive motivation of fraud 2.Defective internal control mechanisms 3.Complex financial reporting.

Answer 3: Enron in financial problems are mainly reflected in four aspects:
First, to complex financial structures Enron conceal the problems. In support of Enron-like explosive growth, with Enron complex corporate networks and related transaction, Enron's management to create a very complex financial structure, not only retail investors can not understand, and even Wall Street analysts and accounting professor are difficult to interpret. Enron's use of complex financial structure, unbridled fictitious profits, hidden debt.
Second, the accounting treatment Enron pioneered a number of technologies, enabling the company to record revenue generating profit and loss information has not been long-term contracts. For example, Enron uses a technique called "MTM (Mark-to-Market) "accounting system, the accounting system to allow Enron and other energy companies to increase their current net income from the book, and these contracts in 10 years or may not be realized in the longer. Meanwhile, the accounting system also requires that a company can not disclose how the details of the valuation of the order, it may not disclose how much revenue from such non-cash benefits. There are accounting experts believe that due to the energy product orders vary greatly, and therefore does not provide a method to its valuation, which gave Enron fraud provides a lot of space.
Third , Enron custom accounting entries. In order to reduce the amount of liabilities in its financial statements, Enron through so-called "special purpose entities" (SPE), etc., are not credited to the increase in the balance sheet transactions. Fourth, the Enron drilled GAAP (GAAP) of the loopholes in the financial statements do not reflect the true liabilities.…...

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