Audit Scandal

QUESTION:
Compare/discuss the Enron, Worldcom and Madoff scandal. What need to be done by the Government and also your suggestion as to how to avoid the above scandal?

ENRON
Enron is an energy company based in Houston,Texas that deals with the energy trade on an international and domestic basis. It was formed in 1985 when Houstan Natural Gas merged with InterNorth. Originally Enron was an operator of interstate gas pipeline, by 1989 Enron diversified into trading energy-related commodities. The company had been spectacularly successful at persuading investors that it had found a way of making huge amounts of money out of the reliable but dull business of supplying energy. In few years, Enron becomes the largest merchant of energy in the United States and the United Kingdom. In addition to energy, Enron is already buying and selling cellulose, pulp, paper, fertilizer, plastics, metals and bandwidth. By the year 1999 Enron grew so big, that it became involved in about a quarter of all energy deals in the world.

The success of Enron was phenomenal as how did it manage to fool the regulator and Wall Street community for so long with fake off-the books corporation.   Enron grew wealthy due to largely to marketing, promoting power and its high stock price.

Enron’s reported revenue was based on its exploitation of a loophole in accounting rules that allowed it to book revenue from huge energy-derivative contracts at their gross value, not their net value by adopting mark to market accounting. In this case, Enron would build an asset such as power plant and immediately claimed that the projected profit on its books even though it hadn’t made any money yet from it. If the revenue from the plant was less than the projected amount, instead of taking the loss , the company would transfer these assets to an off-the-books corporation, where the loss would go un reported.

Part of the reason the company was able to pull of this manipulation for so long is that CEO,...
  • Auditing Scandal
    Current issues scandals in auditing Introduction For this assignment, you are required to research and report back on one of four well known scandals that...
  • The Role Of Auditing In Crown Speakers
    the objective evidence underlying the financial data as reported is called an Audit. An audit of financial statements is an exercise whose objective is to enable...
  • Ten Publicized Audit Failures
    Tohmatsu, claiming to be a victim of deceit in the Parmalat audit scandals. ii. Adelphia (2002) - Deloitte & Touche Tohmatsu Adelphia Communications was...
  • Audit
    sloppiness documented by the audit report had surely made this possible. Federal and other police investigations followed The scandal The body of the...
  • Determinants Of Internal Audit Effectiveness
    auditing. Problem statement The role of internal auditor has been enhanced and widen ever since the Asian financial crisis in 1997 and the global audit scandal...