Enron

1 Pages 322 Words

The article on Enron states that there was not one main reason why Enron fell; however it was a corporate culture of deception that lead to the demise of this company. Enron had many loans on their books that they disguised as assets to make them look stronger and more profitable. They worked backwards by figuring out what they wanted their company to look like financially, and then made changes in the books to make it appeal to them. Since the authorities were not using checks and balances to make sure fraud was not taking place, it would have been easy for Enron to make it look like particular divisions were doing worse then they actually were, so they did not have to pay their employees as much. It was also easy for Enron to lie to their accountants because they did not check what the managers told them was truth. The auditors did not check the accountant’s books for mistakes either. There were so many mistakes in so many different areas of this company that its hard to pinpoint one thing.
The article on the Sarbanes-Oxley Act summarizes the new legislation that has been put into place to help guard against another financial disaster, such as Enron and WorldCom. Under this law, attorneys are responsible to report any illegal acts to a board of directors. If the board of directors that the attorney reports to does not pass on this information to proper authority, they will be forced to resign. When the SAS 99 became effective, it profoundly changed the relationship between businesses and auditors because if the CPA does not follow the SAS 99 rules and it comes to the attention of the AICPA, they will lose their CPA and be prosecuted. The SAS 99 coupled with the Sarbanes-Oxley Act should do a great deal to safeguard against scandals in the business world....