Inappropriate Reporting of Earnings – Enron Company

Inappropriate Reporting of Earnings – Enron Company

One major case of inappropriate reporting of earnings is that of Enron. Enron was an energy company that chose to enter into energy market derivatives trading. The company has been cited for leading to one of the largest accounting frauds of this century (Rashid, np). Even though the company filed for bankruptcy in 2001, it is a good example to consider when evaluating fraud cases in accounting. The company used to operate in the energy and petroleum industry, with its major products being electricity and natural gas. The company used to supply wind and solar energy products worldwide, being the largest supplier in the portfolio. Despite its huge size and success, the company filed for bankruptcy following a scandalous reporting of earnings and its operations to mislead investors.

After filing for bankruptcy in 2001, it was revealed that Enron Energy Company had committed a widespread accounting fraud that remains in news outlets. The company had inflated its reported earnings in the statement of income and assets in the stamen of financial position to influence their stock market price. As a result, investors were misled to invest in the company, and after revealing the scandal, the company went bankrupt. In committing accounting fraud, the company hid its debts using special-purpose vehicles from investors. The company’s share price fell from $90.75 to $0.26 when it was discovered. The amount misrepresented in the case was $50.1 billion, which was reported as revenues. The impact of this misrepresentation was positive, with a wave of new laws and regulations being set to enhance the truthfulness of financial reports provided by publicly traded institutions.

Work Cited

Rashid, Muhammad Mustafa. “Case Analysis: Enron; Ethics, social responsibility, and ethical accounting as inferior goods?.” Journal of Economics Library 7.2 (2020): 97-105.

ORDER A PLAGIARISM-FREE PAPER HERE

We’ll write everything from scratch

Inappropriate Reporting of Earnings – Enron Company

Module Four Discussion Question #1

Search the web for instances of possible impropriety relating to earnings management. This could be news reports, Securities and Exchange Commission violations report fraud charges or any other source of alleged financial statement judgment lapse.
In your post, include the name and industry type of the company you are discussing, describe the purported indiscretion and how it relates to misreporting earnings or shady accounting, and estimate the impact of the potential misrepresented amount.
You do not need proof that a compromise occurred, but you do need to have a source of your reporting of the potential trouble.
Make sure to provide a link to the information you found to allow accurate verification of your answers.