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Finance & Accounting
Pages 4 (1004 words)
Finance and Accounting: Discussions (Name) (University) Discussion 1 Enron Scandal Enron Corporation was the largest natural gas dealer in North America. Enron’s stock prices rose by 311% over the 1990-98 period and on the strength of this great growth rate, the Fortune’s Most Admired Company survey chose Enron as the most innovative large company.
The Enron fraud was revealed to the public in October 2001 and this ended up in the bankruptcy of the organization. While analyzing the Enron accounting impropriety, it appears that the company executives exploited accounting limitations with intend to create a false view of the cash flows and to prepare a misleading balance sheet. This inflated the profits. Fair accounting practices and proper annual reporting might have prevented the Enron scandal. Effect of Accounting Impropriety Although improper or illegal accounting practices may assist a firm to gain short term financial benefits, such practices can have dreadful consequences on the company in the long term. Undoubtedly, accounting malpractices will reduce stakeholder confidence in management and hence investors would be reluctant to invest in the company. This situation may adversely affect the firm’s overall financial performance. Management professionals opine that active stakeholder engagement in business is inevitable to improve financial performance. Hence, in order to minimize the resulting impact of accounting impropriety on the business, making timely changes to the top management team and to publish proper annual reports is essential. ...
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